ITC Shares Surge After Record Profit In Q2, Analysts Hike Target Price

Analysts remained bullish on ITC Ltd. while a few hiked target prices as the cigarettes-to-hotels conglomerate reported its highest ever quarterly profit.

Net profit rose 36.2 percent year-on-year to Rs 4,023.1 crore in the quarter ended September, according to an exchange filing. That was mainly aided by a lower tax expense and higher other income.

Its total tax expenses fell by nearly half over the year-ago period to Rs 784.60 crore. Other income rose 30 percent to Rs 654.3 crore.

The company’s margin also expanded at a time Indians are curbing spends on everything from consumer goods to cars.

On Friday, ITC shares rose as much as 3.3 percent to Rs 257.20 apiece compared with a 0.54 percent gain in the NSE Nifty FMCG Index. The stock is the second-best performer on the Sensex and Nifty.

Here’s what analysts have to say about ITC Q2 Results 2019-20

Credit Suisse

• Maintains ‘Outperform’ and hikes target price to Rs 330 apiece from Rs 320.
• Second quarter steady, broad-based EBIT growth.
• ITC staying away from large price hikes to give more room for cigarette volumes to recover.
• FMCG growth impacted by slowdown, but strong margin expansion continues to play out.

Emkay

• Maintains ‘Hold’ and hikes target price to Rs 274 apiece from Rs 267.
• Second-quarter results were in line, but cigarette performance continues to be subdued.
• FMCG growth was slower though margins showed further improvement.
• Downsides appear to be limited after the significant underperformance but growth triggers still missing.

UBS

• Maintains ‘Buy’ with a target price of Rs 350 apiece.
• Cigarettes steady; rural slowdown hurts FMCG.
• ITC cigarettes: volume and margins improve.
• Margin outlook, environment, social and corporate governance concerns have kept stock range bound.

Prabhudas Lilladher

• Maintains ‘Buy’ with a target price of Rs 344 apiece.
• Another steady quarter in a challenging environment.
• Uptick in consumer demand holds key to volume recovery in FMCG.
• Risk reward remains favorable, although uncertainty on cigarette taxation remains a drag.

Edelweiss

• Maintains ‘Buy’ with a target price of Rs 345 apiece.
• Second-quarter performance along expected lines.
• Slowdown mars FMCG revenue growth, but margins improve.
• Other business clock steady performance.