What Should Investors Do Now After ITC Shares Reach a 3-Year High and the Stock Rises 7% in Just Two

Updated: Jul 17



ITC Shares Increase: ITC Ltd. shares kept on increasing, hitting a three-year high in the early session of Monday. The stock was up more than 2% to Rs 290 per share on the BSE, its best price since 2019. In contrast to the benchmark Sensex's 9% drop thus far in 2022, the ITC stock has increased 30% to its highest level this year, making it one of the top gainers among blue chips in a time when investors' appetite for riskier assets has been on the decline. The fast-moving consumer goods (FMCG) company's stock was trading at its highest level since May 2019, and it has increased 7% over the last two trading days.


ITC has been able to calibrate pricing rises to prevent a decline in demand due to a steady tax environment for cigarettes in recent years. Analysts anticipate that this tendency will continue, which should increase profitability visibility and cigarette volume over the medium term.

Financials ITC announced outstanding performance for the January-March 2022 quarter (Q4FY22), with an increase in cigarette volume of about 9%. Following a gradual return to normalcy in economic activity and coordinated efforts to strengthen market position through strategic portfolio interventions and enhancing product availability supported by superior on-the-ground execution, the cigarette segment recovered with volumes exceeding pre-pandemic levels.

What Should Investors Do?

According to analysts, the company that produces Gold Flake cigarettes and Bingo chips is drawing a lot of interest from investors because it is less affected by input cost inflation, has a high dividend yield, expanding consumer business, recovering hotel business, and strong growth prospects in its core business—the sale of cigarettes.


"Cigarettes account for almost 80% of profits, and this is one of the few consumer sector equities that are comparatively well insulated from commodity costs in "lation," said Gautam Duggan, Motilal Oswal Financial Services' head of institutional equity research. Although there is a robust payout and free cash flow creation, the tobacco industry is still in recovery, and the company is trading at a significant discount to the sector."

The company currently trades at a 27% discount to its January 2019 value of 25.4 times one-year projected profits per share, according to Motilal Oswal Financial, which recently upgraded the stock to buy with a target price of Rs 335.


Although Prabhudas Lilladher analysts see near-term margin pressure in the FMCG industry, ITC will be able to sustain double-digit profit growth because of strong traction in other areas. Despite long-term dangers, the brokerage firm upped the valuation of cigarettes from 15x to 16x based on better growth and stable taxes. Additionally, it has given the FMCG and paper industries bigger multiples. The share's target price is Rs 305.


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