ITC stock: 4 factors that can trigger another 15% rally in Nifty's best performer

In the light of mild taxation, inexpensive valuations (22x FY24E EPS), and a 5 per cent dividend, brokerage firm Axis Securities recommended a buy rating on ITC with a target price of Rs 380, suggesting a growth potential of 15 per cent.

The stock is the best performer among the Nifty 50 stocks with a gain of 53.18 per cent year-to-date.

The brokerage cited these four growth triggers for ITC:


1. Focus on the de-risking business model by reducing dependence on the core cigarette business and scaling up the FMCG business
2. Significant potential in the ITC Infotech business
3. PLI linked incentives to help grow agribusiness and drive exports
4. High dividend yield and reasonable valuations compared to peers

“With a stable taxation regime, we believe ITC is poised to deliver encouraging performance moving forward. We also remain positive on the recovery in the cigarette segment (back to pre-COVID level on an exit basis), as well as on the structural uptick in the FMCG revenue/margin and recovery in the hotels and paper & paperboard divisions,” Axis Securities said in a report.

According to the brokerage, the company’s cigarette volumes and discretionary/out-of-home categories surpassed pre-pandemic levels in H2FY22. "The growth was driven by progressive improvement in mobility. While the hotel segment saw smart recovery driven by the domestic leisure and wedding segments, business travel also saw progressive improvement," it added.

The company’s agribusiness segment delivered a stellar performance with segment revenue and EBIT growth of 28.7 per cent and 25.6 per cent respectively. The progress was driven by strong growth in wheat, rice, spices, and leaf tobacco exports which was further supported by strong customer relationships, a robust sourcing network, and agile execution, the brokerage said.

Paperboards, paper and packaging segment, too, recorded an impressive revenue and EBIT growth of 36 per cent and 54.7 per cent respectively. This growth was aided by demand revival across most end-user segments, higher realisations, product mix enrichment, and exports, it added.

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