Shares of 5-star hotel chain operator and country's largest cigarette maker - ITC are hitting fresh 52-week highs for quite some time now. ITC stock has outperformed the Nifty 50 index by rising 30 per cent since the start of this year compared with 6.5 per cent decline in the Nifty 50 index. The surge in ITC stock price has come after a long period of underperformance when Nifty 50 index was hitting record highs during September-October last year the ITC shares were massively underperforming the markets.
ITC is firing on all cylinders as its cigarette, hotels, paper, FMCG and apparel business are all doing well. ITC’s revenue grew 16.8 per cent annually to Rs 15,530 crore in March quarter against Motilal Oswal's estimate of Rs 13,840 crore.
Its operating profit also known as earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to Rs 5,220 crore.
Segment wise ITC's FMCG business' sales grew 12.3 per cent to Rs 4,140 crore. Cigarette revenue grew 11 per cent annually to Rs 5,550 crore, with volume growth of 9 per cent.
“The cigarette business progressively recovered on the back of improved mobility and easing of restrictions, surpassing the pre-pandemic levels in the latter half of the year,” Motilal Oswal said in a report.
The hotels segment also witnessed smart recovery driven by the domestic leisure and wedding segments. Business travel also saw progressive improvement, albeit, remaining below the pre-pandemic levels.
During the year, ITC added nine new properties toward its portfolio, including four in the Welcomhotel portfolio at Bhubaneswar and Guntur which are company owned properties.
The company added hotels at Katra and Chail which are being managed by ITC and ITC Narmada project in Ahmedabad is progressing well and the hotel is expected to be commenced shortly.
ITC has been witnessing buying interest ever since the volatility rose in the markets as it is considered as a safe bet during the volatile times, analysts said.
ITC has not moved in last 10 years and with market capitalisation of Rs 3.41 lakh crore it has deep value as it has retail, hotels, paper, cigarettes and fashion retail businesses, explains Vijay Chopra of Enoch Ventures
“They were late entrants in FMCG business and they have given tough competition to Hindustan Unilever. There have been talks of demerger of the company and when that happens there will great value unlocking for investors,” Chopra said.
“There were no negatives in this year’s budget for cigarettes, with removal of lockdowns their hotel business is also doing well and in paper business ITC made strong earnings owing to price rise in the sector and FMCG business also did well… ITC has deep value and it can go up to 5 times. ITC’s dividend have given better returns than fixed deposits. The company has strong corporate governance, majority in cigarette business and all these factors make ITC a good long term investment bet,” Chopra added.
Investors who are holding ITC shares should keep on holding them, he advises.
"As we have seen with ITC results, there is growth in every segment. Hotel, agriculture, paper, cigarette, and FMCG are all doing well. Palm oil imports are also set to begin, and the FMCG segment will perform even better in the coming quarter," said Ravi Singhal, Vice Chairman, GCL Securities.
