ITC shares advanced for the second straight day on Thursday, rising 0.4% on the NSE to end at a closing high of ₹400.30 apiece. Intraday, the stock made a new high of ₹402.65.
In the process, it became the 11th Indian listed company to touch ₹5 lakh crore in market capitalisation. In the last month, the stock has risen over 6% and yielded more than 20% returns since the beginning of calendar 2023.
“ITC has structurally diversified and now more than 60% of its revenue comes from non-cigarette businesses,” said CLSA in a note to clients.
The brokerage maintained its ‘outperform’ outlook as it rolled the price target to FY25. It also increased next fiscal (FY24-25) earnings estimates by 2%-4% and stated the 4% dividend yield offered strong support to its bullish view on the stock.
The recent re-rating on ITC is due to an improved outlook for the cigarette business, better capital allocation, and the higher margin trajectory for the FMCG business (which has already played out), CLSA said.
“The potential value unlocking (like a demerger of the hotels business) is a key event to watch for,” it said.The stability in the tax structure for cigarettes has helped ITC gain market share from the unorganised sector, and CLSA believes the company will increase its presence going forward.
“Our channel checks indicate some price hikes being taken in cigarettes by ITC over the last 2-3 months. This gives confidence and visibility in volume growth, which should help ITC sustain its strong performance,” CLSA said.
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