ITC shares climbed nearly 5% following robust Q2 results, driven by agribusiness and hotel sectors
ITC shares surged nearly 5% to ₹493.50, defying a broader market decline. This increase followed the company’s i
mpressive financial results for the September quarter, which met market expectations. Key drivers of this growth included strong performance in the hotel sector and significant advancements in agribusiness. Additionally, ITC’s core business demonstrated resilience, effectively navigating various challenges in the current market landscape.
With today’s rise, ITC stock snapped a seven-day losing streak. Brokerages maintained a positive outlook, with Motilal Oswal reiterating its ‘buy’ rating and raising the target price to ₹575. The firm noted that ITC’s core cigarette and fast-moving consumer goods (FMCG) segments continue to show steady growth. The FMCG division particularly excelled, outpacing peers in a largely under-penetrated market.
Following the demerger of its hotel business, ITC’s capital efficiency is expected to improve significantly. This shift will enhance operating cash flow and yield a sustainable dividend of 3-4%. Antique Stock Broking also retained its ‘buy’ rating, revising its target price upwards to ₹557 from ₹553. The brokerage acknowledged ITC’s outperformance compared to its consumer peers, highlighting a cigarette volume growth of about 3.5%, which alleviated concerns over market share loss amid rising competition.
Kotak Institutional Equities retained its ‘add’ rating on ITC with a target price that increased around 1% to ₹540 from ₹535. According to the firm, ITC has restructured trade marketing expenses in cigarettes; the main improvement is in last-mile execution. Growth in the FMCG space came partly from staples, biscuits, snacks, and home care products despite witnessing intense competition across categories.
The company’s operating revenues increase by 17% on a year-on-year basis in Q2. Thus, the company was able to garner ₹19,327.8 crore in revenues from operations against ₹16,550 crore during the corresponding period of the previous year. The total FMCG segment which includes cigarettes grew 6.1% at ₹14,463.15 crore. The hotel segment remained very good with a rise of 17%, and it stood at ₹789.16 crore. The agribusiness sector grew by 46.57% on a year-on-year basis. Leaf tobacco and value-added products are responsible for most of this growth.
Given that ITC is performing well in all of its core business segments, and broker sentiment is bullish, the company is geared to grow better. Amid the ongoing challenges and cyclicality associated with market fluctuation, strategic steps would likely prove effective in building further competitive strength in the consumer goods space.
