ITC shares today ended at Rs 387 on the NSE and were up by Rs 8.10 or 2.14% from the Monday closing price. The stock is off its 52-week high of Rs 394, which it hit in February, this year.
ITC is an Indian conglomerate headquartered in Kolkata and has a diversified presence across industries such as cigarettes, FMCG, hotels, packaging & paperboards, agri-business, and Software. The company is the market leader in the domestic cigarette and PPP segments. It is also the second-largest hotel chain by revenue and has a strong distribution reach of over 7 million outlets in the FMCG space, Axis Securities said.
Technical View by Pravesh Gour of Swastika Investmart
“The year 2022 was a spectacular period for the counter. It has given a 90% return from the lower level of Rs 207 to the all-time high of Rs 394. Now it is moving in the long consolidation range between 370 and 395. The overall structure is remunerative as it trades above its all-important moving averages,” Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd said.
“It has formed higher highs and higher lows on the daily chart. On the upside, Rs 390 is facing the susceptible area; above this, one can expect the level of Rs 420 in the extended timeframe. On the downside, Rs 370 will be the important support level,” Gour said.
“MACD (Moving average convergence divergence) supports the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised,” he added.Fundamental View by Axis Securities
Axis Securities expects cigarette companies to likely see stable volume growth and increase market share from illegal cigarettes going ahead as rate hikes will be miniscule to counter the increase in NCCD (National Calamity Contingent Duty) rate.
In Budget 2023, the Finance Minister announced an increase of NCCD by 16% after a gap of two years.
“The increase in tax on cigarettes is below ours and street expectations. We believe cigarette companies will need to take 1-3% price hikes depending upon the length of the cigarette, which we believe is manageable given the nominal increase in the NCCD rate, moreover NNCD accounts only 10% of total cigarette tax,” the brokerage added.
Cigarette volume growth to remain stable, it said adding that at the industry level, the cigarette volumes have surpassed the pre-covid levels and ITC is gaining lost market share from its peers.
Over the years, ITC has strengthened its distribution reach in rural and semi-urban regions and expanded its portfolio by launching new products and adopting regional customisation. These attributes are likely to bolster ITC’s footing among its peers.
“ITC delivered 7.7% FMCG EBIT margins in FY22 which is likely to inch up further due to the initiatives such as launching of new products (110 products in FY22) and driving premiumisation agenda; leveraging technology to identity demand trend and rapidly scaling up “Unnati” and “VIRU” platform across retailers for direct ordering. Strong and stable growth in hotels as travel, wedding, and corporate activities pick up; steady and decent performance in paperboard and agri business witnessed in the last few quarters. Moreover, reasonable valuation in the entire FMCG pack provides a huge margin of safety, it said.
Axis Securities has conviction BUY on ITC with the target price of Rs 460.
a) increase in cigarette taxation
b) increase competition and
c) economy slowdown
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)