ITC inch toward 52-week high; Inventory up 17% in one month

International Trade Center shares continued their movement towards the north, and recorded their highest level in five months at 253.25 rupees, a rise of 1.3 percent on the Bahrain Stock Exchange in trading on Wednesday during Wednesday amid expectations of achieving good profits. The stock of cigarettes to Fast Moving Consumer Goods (FMCG) is now heading towards a 52-week high of Rs 265.30 on October 18, 2021.

ITC outperformed the market, rising 17 percent last month. By comparison, the S&P BSE Sensex Index and the S&P BSE FMCG Index were up 1.6 percent and 0.63 percent, respectively.

For the October-December first quarter (FY22 third quarter), ITC reported a strong overall revenue performance led by a strong recovery across markets due to an uptick in mobility and an efficient distribution system.

The company’s cigarette business, which has been one of the worst affected in the past two years by the Covid-19 disruptions, posted a strong recovery in the third quarter. The company’s paperboard reported record volumes and the strong performance was supported by reviving demand across most end-user segments, exports and top deliveries. Regardless, the easing of travel restrictions, leisure travel pickup and the start of the holiday/wedding season boosted average room revenue (ARR) and occupancy levels for the hotel business.

The company’s agribusiness revenue increased 100 percent driven by strong revenue growth in exports of wheat, rice, spices and tobacco leaf, which resulted in strong customer relationships, strong sourcing network and rapid execution. The company has recorded strong growth in its value-added portfolio.

Analysts at ICICI Securities believe that stable taxes on cigarettes will lead to significant growth in cigarette volumes in the medium term. Moreover, we believe that the trajectory of the upswing in FMCG business will continue (after higher commodity prices return to normal). “We are optimistic about FMCG growth, potential for margin expansion, and better company policy for capital allocation (higher dividend payouts and no additional capital expenditures on the hotel business),” the brokerage firm said in its third-quarter results update.

ITC’s performance for the third quarter was better than that of other commodities. An analyst at Emkay Global Financial Services said a cigarette recovery from stable taxes and lower inflation may continue to improve earnings expectations.

The growth in the cigarette trade has been encouraging and largely driven by volume, reaching levels above pre-Covid levels. ITC continued to see an improvement in its market position, with innovation and interventions to address gaps. The brokerage said stability in taxes remains key for the industry to maintain steady growth in volume and earnings from illegal trading, with a target price of Rs 270 per share.

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