Reviewing ITC’s Q4 Results: Insights from 5 Top Brokerages on Investing in the FMCG Major

ITC Ltd.’s performance in the March quarter showcased a mix of results, prompting varied reactions from analysts across brokerage firms. Despite fluctuations, the consensus among several analysts remains bullish, advocating for the purchase of its stock, underpinned by the stability observed in its cigarette segment. Brokerages have assigned price targets ranging between ₹435 and ₹515 for ITC.

The stock experienced a slight decline of approximately 1 percent, reaching its day’s low at ₹436.90 in intra-day trading on Friday, May 24. Currently, it stands corrected by 12.5 percent from its peak of ₹499.60 recorded in July last year. Nonetheless, it has surged over 9 percent from its 52-week low of ₹399.30 marked on March 12, 2024.

Over the past year, the stock has demonstrated minimal growth, inching up by just 1.5 percent, and has witnessed a decline of over 5 percent in the year-to-date period of 2024. Notably, in May, it exhibited a negligible increase of only half a percent following a 1.7 percent rise in April and a 5.4 percent gain in March. However, the stock experienced setbacks in the initial months of the year, dropping by 8 percent in February and 4.4 percent in January.

Q4 Performance: During the quarter ending March 2024, ITC reported a 1.3 percent year-on-year decrease in its standalone net profit, amounting to ₹5,020.20 crore, slightly below the anticipated ₹5,150 crore as per a Bloomberg poll. Despite subdued demand, the revenue from operations saw a growth of 1.4 percent, reaching ₹17,752.87 crore, surpassing the expected ₹17,191 crore. However, revenues from agriculture, paperboards, and paper and packaging sectors witnessed a decline, while overall expenses rose by 2.4 percent year-on-year, reaching ₹12,017.71 crore.

For the entire fiscal year, the company’s gross revenue remained stagnant at ₹69,446.20 crore, whereas the profit surged by 8.9 percent to ₹20,422 crore. Additionally, the board proposed a final dividend of ₹7.50 per share.

Company’s Perspective: In its earnings statement released on Thursday, the company expressed confidence in its ability to navigate short-term challenges and generate sustained value for stakeholders. It highlighted improving macro-economic indicators, the prospect of a normal monsoon, and signs of recovery in rural demand as positive factors for the near-term consumption demand.

Brokerage Views: Emkay, while maintaining a ‘buy’ call on ITC, adjusted its target price to ₹510 per share, emphasizing the stress on cigarette margins. Motilal Oswal reiterated a ‘buy’ rating with a target price of ₹515 per share, citing the resilient nature of ITC’s core business amidst uncertainties. CLSA downgraded ITC to ‘outperform’ from ‘buy’ with a target price of ₹470 per share, reflecting subdued performance in certain sectors. Citi raised its target price to ₹515 per share, keeping a ‘buy’ rating, and Jefferies maintained a ‘hold’ rating with a target price of ₹435 per share, citing varying performance across segments.