ITC Q4 results review: Should you buy, sell or hold the FMCG major? (2024)

The stock declined around 1 percent to its day's low of ₹436.90 in intra-day deals today, Friday, May 24. It has now corrected 12.5 percent from its peak of ₹499.60, hit in July last year but has advanced over 9 percent from its 52-week low of ₹399.30, hit on March 12, 2024.

The stock has been mostly flat, up just 1.5 percent in the last 1 year, and has fallen over 5 percent in 2024 YTD. The stock has been completely flat, up only half a percent in May, after a 1.7 percent rise in April and a 5.4 percent gain in March. However, it was in the red in the first two months of the year, down 8 percent in February and 4.4 percent in January.

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Q4 results

ITC reported a 1.3 percent YoY decline in its standalone net profit to ₹5,020.20 crore for the quarter ending March 2024, slightly below the ₹5,150 crore estimated by analysts in a Bloomberg poll.

Despite weak demand, revenue from operations grew by 1.4 percent to ₹17,752.87 crore, surpassing the expected ₹17,191 crore. However, revenues from the agriculture, paperboards, and paper and packaging sectors declined, while overall expenses rose by 2.4 percent to ₹12,017.71 crore year-on-year.

For the full year, the company’s gross revenue remained flat at ₹69,446.20 crore, while profit was up 8.9 percent to ₹20,422 crore.

Its board also recommended a final dividend of ₹7.50 per share.

Read here: ITC Q4 profit down 1.3% on subdued demand

“While consumption demand remained subdued in Q4 FY24, improving macro-economic indicators, prospects of a normal monsoon and green shoots witnessed in rural demand recovery after several quarters, augur well for revival in consumption demand in the near-term. With its focus on consumer centricity, purposeful innovation, agility, and execution excellence, the company remains confident of navigating the short-term challenges and creating sustained value for all stakeholders," the company said in its earnings statement released Thursday.

What brokerages say:

Emkay: The domestic brokerage has a ‘buy’ call on ITC but adjusted its target price to ₹510 per share (17 percent upside), considering the stress on cigarette margins.

Emkay is bullish on ITC, citing better execution and supportive macro conditions for its diversified businesses, despite near-term cyclical pressures. Emkay noted that FY25 could be challenging due to inflationary stress in cigarettes, a muted outlook for the agriculture business, and a down cycle in the paper business. The brokerage believes that better monsoons could enhance prospects for ITC's agriculture business and improve its cigarette margin outlook for FY26.

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Motilal Oswal: The brokerage has reiterated a 'buy' rating with a target price of ₹515 per share, indicating an 18 percent potential upside.

In a report, it said the resilient nature of ITC's core business, amid an uncertain industry environment, and its 3-4 percent dividend yield make the company a good defensive bet in the ongoing volatile interest rate environment. There are no material changes to its EPS estimates for FY25 and FY26.

CLSA: The brokerage has downgraded ITC to 'outperform' from 'buy' and set a target price of ₹470 per share, implying a 7.5 percent upside. While the March quarter was steady for the cigarette segment, the paper and agriculture sectors remained subdued. Profitability in other FMCG segments was impacted by a one-time gain in the base quarter, though these segments are maintaining an upward margin trajectory on a full-year basis. Consequently, CLSA has reduced its near-term earnings estimates by 2-3 percent.

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Citi: The brokerage has raised its target price for ITC to ₹515 (18 percent upside) per share from ₹500, maintaining a 'buy' rating. The brokerage will monitor potential changes in taxation or other regulatory pronouncements in the Union Budget post elections, which could affect volumes and the ability to mitigate cost pressures. "Q4 below; near-term headwinds to cigarette EBIT," Citi noted.

Jefferies: The brokerage maintains a 'hold' rating on ITC with a target price of ₹435 per share, marginally below the intra-day low. The brokerage noted that the cigarette business performed better than expected, particularly in volumes, driving a beat on segmental EBIT. However, acute pressures in the agriculture and paperboard sectors led to an earnings miss for Q4 FY24. Jefferies views the upcoming Union Budget as crucial for ITC's share price performance.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 24 May 2024, 12:22 PM IST