Sensex Topper ITC reported its results for the quarter and the year ended March 31, 2023. It had reached a fresh 52-week high of ₹ 433.45 apiece on May 09, 2023, indicating an increase of 67.97% from its 52-week low of ₹ 258.05 that it had reached on June 17, 2022, on the Bombay Stock Exchange (BSE). 

At 01:03 PM, the diversified conglomerate’s shares were flat at ₹ 420.45 apiece, even though it reported slightly better than estimated quarterly and annual results. However, top brokerages have a bullish stance on the company’s share price and believe that its share price can cross ₹ 500.00. 

ITC operates through four business segments: About ITC: FMCG (fast-moving consumer goods), Hotels, Paperboards, Paper and Packaging and Agri-Business. Its products include cigarettes, branded packaged food, stationery, speciality paper and packaging, personal care products, apparel, safety matches and agarbattis, and commodities such as soya, spices, coffee, and leaf tobacco. Its Other segment includes information technology services. 

Results 

On a sequential basis, ITC’s revenue increased by 7% to ₹ 18,799.18 Crores in the January to March quarter (Q4FY23), as compared to ₹ 17,569.76 crores in the September to December quarter (Q3FY23). Its Net Profit Increased by 22.66% to ₹ 5225.02 crores in Q4FY23 as compared to ₹ 4259.68 crores in Q3FY23. 

It had reported a revenue of ₹ 18,901.76 crores in the January to March quarter last year (Q4FY22), indicating a marginal decline of 0.54% as compared to ₹ 18,799.18 crores in the same quarter this year. Its net profit increased by 3.06% to ₹ 5,225.02 crores this year, as compared to ₹ 5,070.09 crores in Q4FY22. 

For the full year (FY 2022-23), ITC reported a 17.35% increase in its revenue to ₹ 75,826.58 crores as compared to ₹ 64,618.23 reported last year (FY 2021-22). Its net profit increased by 25.46% to ₹ 19,427.68 crores in FY23 as compared to ₹ 15,485.65 crores in FY22. 

Dividend 

ITC’s board has recommended a final dividend of ₹ 6.75 and a special dividend of ₹ 2.75 per share (face value of ₹ 1), for the financial year ended March 31, 2023, subject to approval of its shareholders at the ensuing Annual General Meeting (AGM). Such dividend if declared will be paid between Monday August 14, 2023 and Thursday August 17, 2023. 

Together with an interim dividend of ₹ 6.00, declared by the board on February 03, 2023, the total dividend for the financial year ended March 31, 2023 stands at ₹ 15.50 per share. 

Targets 

Jefferies has a buy rating on the shares of ITC with a target price of ₹ 520.00. This translated to an upside of 23.68% as compared to its share price of ₹ 420.45.

Nuvama Institutional Equities (formerly Edelweiss) has a buy call on ITC’s shares with target price of ₹ 500. This indicates an upside of 18.92% as compared to its share price. 

Motilal Oswal has a buy call on the shares of ITC with a target price of ₹ 485.00. This implies an upside of 15.35% as compared to its share price. 

What are analysts saying? 

Most analysts say that ITC’s results were in line with expectations. The company’s FMCG business grew faster than expectations however, its agri business revenue declined in comparison to the street’s expectations. 

Brokerage firm Motilal Oswal said that some of the key challenges for the company- an extremely punitive tax regime of the past, Covid-related disruptions and commodity cost inflation now appear to be easing. 

“We remain positive on ITC’s FY24E revenue momentum with all of its segments doing well,” said analysts at Nuvama Institutional Equities. It added that cigarette volume shot up 12% YoY (5-year volume CAGR of 5%), implying market share gains from illegal players with ITC leading the pack. 

According to BofA securities, ITC’s core cigarettes business remained steady. Its quarterly earnings were ahead of estimates. BofA said that the company had a solid quarter for the FMCG business as well. 

Philip Capital believes that ITC is better placed versus competition at least for next few quarters as more than 80% of the company’s profits are largely protected versus FMCG peers, who are grappling with twin issues of lower volume growth and hyperinflation in raw material index. It expects cigarette volume growth of 7% in FY24 owing to minimal tax increase incidence and market share gains. 

JM Financial said that recent government actions, like the amendment to the GST Compensation Cess schedule reflect a pretty supportive policy-environment for the legal cigarettes industry. 

Written by Simran Bafna 

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