Key Points of ITC 5 Trillion Club Milestone Achievement:
- ITC Ltd has become the 11th Indian listed company to achieve a market capitalisation of over Rs 5 trillion.
- The company’s shares have surged 21% this year, hitting a record high of Rs 402.60 on the Bombay Stock Exchange.
- ITC has demonstrated a resilient performance across all its business segments, despite facing challenges such as high inflation and weak rural sales.
- Strong operational performance and robust recovery in the hotels business have enhanced ITC’s appeal from a fundamental standpoint.
- ITC’s earnings performance in the last couple of years and in FY24 has been impressive, with a likely EPS CAGR of 15 percent over the next two years.
- ITC’s cigarette business is not expected to be adversely affected by the recent amendment to the Finance Bill 2023.
- ITC is anticipated to achieve double-digit revenue and PAT growth over the next two years, driven by growth in the cigarette and non-cigarette FMCG businesses, as well as the hotel and PPP businesses.
- ITC’s improving growth outlook and robust dividend payouts are expected to result in consistent improvement in the company’s valuations over the next few years.
Details of ITC 5 Trillion Club Milestone Achievement:
ITC Ltd, a conglomerate with interests in cigarettes, FMCG, paper, and hotels, has become the 11th Indian listed company to achieve a market capitalisation of over Rs 5 trillion. The company’s shares have surged 21% this year, hitting a record high of Rs 402.60 on the Bombay Stock Exchange. ITC’s market cap now stands at Rs 5.01 trillion.
ITC’s impressive performance across all its business segments, along with the challenges posed by high inflation, unpredictable monsoons, weak rural sales, and delayed commodity cost declines, has made it an attractive investment option. The company’s stable cash flow and dividends make it a defensive choice for investors. Moreover, strong operational performance and robust recovery in the hotels business have enhanced its appeal from a fundamental standpoint.
ITC has demonstrated a resilient performance in the past few quarters despite facing an uncertain demand environment and persistent inflationary pressures on margins. Successful recovery of its core cigarette business in the post-Covid era, consistent double-digit growth in the non-cigarette FMCG business, and accelerated expansion in the hotel and paperboard, paper, and packaging business are factors that contributed to its resilience.
According to Motilal Oswal Securities, ITC’s earnings performance in the last couple of years and in FY24 has been impressive. The brokerage house expects a likely EPS CAGR of 15 percent over the next two years. 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.
ITC’s cigarette business is not expected to be adversely affected by the recent amendment to the Finance Bill 2023, which caps the maximum compensation cess on tobacco products at Rs 4,170 per 1,000 sticks plus 290 percent ad-valorem. The company’s volume growth momentum in the cigarette business is predicted to continue, while its non-cigarette FMCG business is expected to grow in double digits. The hotel business will benefit from strong industry tailwinds in the coming years, while 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.
ITC’s improving growth outlook for its core cigarette business, combined with margin expansion in the non-cigarette FMCG business, strong cash-generation ability, and robust dividend payouts, is expected to result in consistent improvement in the company’s valuations over the next few years. The stock currently trades at a discount to some large consumer goods companies, with its FY2023, FY2024, and FY2025 EPS trading at 25.5x, 22.8x, and 20.6x, respectively.
About ITC:
Headquartered in Kolkata, ITC Ltd is an Indian conglomerate with diversified interests in five segments, including FMCG, hotels, software, packaging, paperboards, specialty papers, and agribusiness. The company operates across 13 businesses and exports its products to 90 countries.
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