ITC Q1 Results: Brokerages Stay Bullish; Shares Rise

Most brokerages have maintained their bullish investment recommendations on ITC Ltd. after the company beat estimates in the first quarter of the ongoing fiscal, and expect its margin to improve aided by price hikes to offset inflation.

The cigarettes-to-hotel conglomerate saw net profit fall 16% over the preceding quarter, while revenue declined 8% in the three months ended June. While the earnings meet the Bloomberg consensus estimate, the top line surpassed it by 12%.

“Localised lockdowns and mobility restrictions imposed by states to contain the sharp increase in daily Covid-19 infections in the second wave rendered the operating environment during the quarter extremely challenging, and impacted the strong recovery momentum witnessed in recent quarters,” ITC said in a statement. But there’s been a week-on-week improvement since mid-June, it said, “with most markets returning to normalcy and witnessing faster recovery compared to first wave”.

Jefferies, in a downside scenario, forecasts a 7% compounded annual growth rate in cigarette EBIT over FY21-24E (low base) and 9% growth in FMCG revenue. “Cigarette margins are expected to remain flat over FY21-24E as increase in consumer prices just offsets tax hikes, but at the cost of lower volumes,” the research firm said in its post-earnings report.

Shares of ITC rose as much as 1.6% in early trade on Monday compared with a flat NSE Nifty 50 index. Of the 39 analysts tracking ITC, 29 have a ‘buy’ rating, nine suggest a ‘hold’ and one recommends a ‘sell’. The average of the 12-month consensus price target implies an upside of 17.9%.

Here’s what brokerages have to say about ITC’s first-quarter performance:


  • Retains ‘buy’ rating with a target price at Rs 275 per share.

  • With better-than-expected results along with better commentary, it raises EPS forecasts by 2-4%.

  • In base case, the research firm forecast c.12% annual growth in cigarette EBIT over FY21-24E on a low base and c.11% growth in FMCG revenue.

  • Given Covid-19 related concerns, Jefferies finds consumer staple firms better placed given the defensive nature of the business.


  • Maintains ‘buy’ rating with a target price of Rs 270 apiece.

  • Margin gains are on track and are likely to improve further as more pricing kicks in to offset inflation.

  • The step-up in IT business (subsidiary) performance with a 4.3x rise in profitability in two years is notable. Its rising contribution to earnings (3%+ in FY21) can offer more value.

  • Lower lockdown impact and the faster recovery trends seen in cigarettes are positives and improve earnings growth visibility.

IDBI Capital

  • Maintains ‘buy’ rating with a target price of Rs 275 apiece.

  • Inflationary raw material prices contributed towards gross margin contraction but operating profit remained healthy due to cost savings and judicious price hikes.

  • Demand in FMCG and agri business remained resilient.

  • Trims EPS estimate to factor in inflation. Has factored in the impact of above expected inflation in estimates. Accordingly, it has trimmed EPS estimate for FY22E by 5%.

Motilal Oswal

  • Maintains ‘neutral’ rating with a target price of Rs 225 apiece.

  • Despite valuing ITC at a 10% premium to the global peer average and rolling forward to September 2023 multiples (targeting 15x Sep’23E EPS), the upside on target price of Rs 225 per share is limited.

  • Cigarettes business likely to contribute over 82% to ITC’s overall EBIT even in FY23E (from 85% in FY20). There is no material reduction in the dependence on this segment, which is beset by concerns of weak EBIT growth for several years now, the overhang of a possible GST increase and ESG-related issues over tobacco, leading to a reduction in valuation multiples.


  • Retains ‘hold’ with a sum-of-the parts based target price of Rs 241 apiece.

  • Price hike (in cigarette) may lead to better GST collections, but its impact on volumes needs to be monitored.

  • Ebitda margin expansion is on the right trajectory; management estimates double-digit Ebitda margin over the next few quarters.

  • For the FMCG business, the company would like to see market share gains across most categories.

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