The stock of cigarettes-to-hotels conglomerate ITC Ltd became the 11th Indian listed company to hit Rs 5 trillion market capitalisation after its shares touched an all time high with surging over 21% so far this year.
Cigarettes-to-hotels conglomerate ITC Ltd became the 11th listed Indian company to cross Rs 5 trillion market capitalisation after its shares touched a record high with a 21 percent surge so far this year.
The stock hit a record high of Rs 402.60 on BSE and gained as much as 1.1 percent intraday. At 9.30am, the stock traded at Rs 402.30, up 1.2 percent from its previous close, while its market cap stood at Rs5.01 trillion.
Earlier, Reliance Industries Ltd, Tata Consultancy Services Ltd, HDFC Ltd, Infosys Ltd, ICICI Bank Ltd, Hindustan Unilever Ltd, Life Insurance Corp Of India, State Bank of India, HDFC Ltd and Bharti Airtel Ltd have achieved this milestone.
ITC's impressive performance across all its business segments, including FMCG, paper, and hotels, has made it an attractive choice for investors, especially given the current market challenges caused by high inflation, unpredictable monsoon, continued weak rural sales, and delay in commodity costs decline.
Investors see ITC as a defensive option due to its stable cash flow and dividends. Moreover, the company's strong operational performance, backed by double-digit growth in cigarette volume and a robust recovery in its hotels business, has further enhanced its appeal from a fundamental standpoint
performance in the last couple of years and in FY24 shines like a beacon. The brokerage house expects ITC has demonstrated a healthy 23 percent EPS growth in FY23 and we expect a likely EPS CAGR of 15 percent over the next two years as well. ITC’s earnings outlook is better than other large-cap staples players both on a two-year CAGR ending FY23 as well as FY24 earnings growth expectations.
The Finance Bill 2023 has recently been amended, capping the maximum compensation cess on tobacco products at Rs 4,170 per 1,000 sticks plus 290 percent ad-valorem. Fortunately, ITC's cigarette business is not expected to be adversely affected by this change, analysts added.
"We expect volume growth momentum in the cigarette business to continue in the quarters ahead. Going ahead, the non-cigarette FMCG business is expected to grow in double digits and its OPM (10 percent in Q3) is expected to consistently improve, while the hotel business will benefit from strong industry tailwinds in the coming years. Hence, compared to other large peers, ITC has much better earning visibility (15 percent CAGR over FY2022-FY2025)," Sharekhan said in a recent note.
Analysts said the ITC is predicted to sustain its volume growth momentum in the cigarette business due to the absence of any price hikes in the foreseeable future and the government's efforts to curb illicit cigarette sales. Additionally, the company's non-cigarette FMCG business is expected to continue its robust growth, the hotel business is set to experience a remarkable recovery, and the PPP business will maintain steady growth. As a result, ITC is anticipated to achieve double-digit revenue and PAT growth over the next two years.
"The stock currently trades at 25.5x, 22.8x, and 20.6x its FY2023, FY2024, and FY2025 EPS, which is at a discount to some large consumer goods companies. With an improving growth outlook for its core cigarette business and margin expansion in the non-cigarette FMCG business, combined with strong cash-generation ability and robust dividend payouts, ITC is expected to enjoy a strong earnings visibility. These factors are likely to result in consistent improvement in the company's valuations over the next few years," the Sharekhan report added.
