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Published: May 22, 2023
Updated: May 22, 2023

ITC Shares Slip 4% Following Q4 Results, Analysts Maintain Bullish Stance

ITC, a leading Indian conglomerate, witnessed a 4% decline in its share price over the past two trading days following the announcement of its Q4 results. Despite the dip, analysts remain optimistic about the stock's future performance. This article provides an overview of the company's financial performance, market reaction, dividend recommendations, and analysts' perspectives.

Market Reaction:

Shares of ITC experienced a 2% intraday decline on the BSE, reaching Rs 411.5. This decline contributed to a 4% overall decrease in the stock's value over the past two trading days. The drop came despite ITC reporting a significant 23.35% YoY increase in consolidated net profit for Q4FY23, driven by growth in its cigarettes, FMCG (non-cigarette), and hotels business segments.

Record High and Year-to-Date Performance:

ITC's market price had recently reached a record high of Rs 433.45 on May 8, 2023, but has since slipped by 4.4%. However, the stock has outperformed the market, surging 25% in the calendar year 2023, compared to a 0.55% gain in the S&P BSE Sensex.

Dividend Recommendations:

The ITC board has recommended a special dividend of Rs 2.75 per share, in addition to the final dividend of Rs 6.75 per share for the financial year ending March 31, 2023. This move is expected to further attract investors and enhance shareholder value.

Strong Financial Performance:

ITC's consolidated revenue from operations in Q4FY23 exceeded expectations, rising by 7.34% to reach Rs 19,058.29 crore. The company's operating profit grew by 18.9% to Rs 6,209 crore, accompanied by an expansion in operating margin to 36.1%. This growth was primarily driven by strong cigarette volume, softening commodity prices, and a reduced contribution from agri commodity trading.

Analysts' Optimism:

Analysts at ICICI Securities believe that ITC will be able to achieve its target of expanding operating margins by 100-150 bps annually, leveraging its strong brands across various food adjacencies. The firm also anticipates continued growth in the hotels business in the medium term. Despite the stock's recent surge, it still trades at attractive multiples compared to other FMCG companies, leading to a positive long-term growth outlook.

Motilal Oswal Financial Services noted ITC's healthy cigarette volume growth and maintained a positive outlook. With no significant increase in cigarette GST or national calamities duty, the firm expects the volume growth momentum to remain robust. They maintain a BUY rating on the stock with a target price of Rs 485 per share.

Despite a recent 4% decline in ITC's share price following the announcement of its Q4 results, analysts remain bullish on the stock. The company's robust financial performance, strong cigarette demand, impressive performance in the non-cigarette FMCG business, and positive outlook for the hotels segment contribute to analysts' optimism. Investors are advised to consider the attractive long-term growth potential of ITC as they evaluate investment opportunities in the stock.