ITC Limited, a diversified FMCG conglomerate, is currently recommended as a “BUY” by IIFL Securities following a 9.2% price correction from its 52-week high of ₹528.55. IIFL is optimistic about ITC’s growth prospects in both its Cigarette and FMCG segments, citing improved consumption trends and the company’s focus on innovative products and expanding distribution networks. However, IIFL has pointed out that inflationary pressures, particularly in palm oil prices, could squeeze margins in the FMCG segment in the near term. It anticipates a 7% year-on-year decline in FMCG EBIT in the second half of FY25.
IIFL has set a target price of ₹510 for ITC, suggesting an 8% upside from its current price of ₹480.05 (as of November 5, 2024). The stock’s strong fundamentals are bolstered by a healthy return on equity (ROE) of 28.22%. ITC has consistently rewarded shareholders through dividends and bonus issues, with the latest dividend payout being ₹13.75 per share over the past year, yielding 2.63%.
In its Q2 FY25 results, ITC posted a solid performance, with gross revenue growing 16% year-on-year to ₹20,360 crore, while profit before tax (PBT) stood at ₹6,755 crore and profit after tax (PAT) reached ₹5,078 crore. Despite the challenges, ITC’s resilient performance across various sectors—including its dominant position in the Indian cigarette market, FMCG, hotels, and packaging—supports its growth outlook.
Additionally, ITC is undergoing a demerger of its hotel business, which includes consolidating its shareholding in rival hospitality chains like Oberoi and Leela. This move is not expected to significantly affect earnings but could help unlock additional value by attracting strategic investors. Overall, while there may be short-term pressures, ITC’s diversified portfolio and strategic initiatives position it well for future growth.
Disclaimer: The information provided here is for informational purposes only and should not be construed as financial or investment advice. Please consult with a qualified financial advisor before making any investment decisions.
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