ITC tops Rs 400, analysts see 10% upside while investors eye Rs 500

ITC has gained 48 percent over the year, making it the best-performing Nifty50 stock. After hitting a low of 28 percent in June 2020, the company’s operating margins steadily improved to 38 percent in the December quarter of FY23

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Diversified conglomerate ITC shares finally went past the Rs 400 mark on April 17, having gained more than 20 percent in 2023. Meme community’s favourite and a darling of investors, ITC’s 48 percent rise over the past year has made it the best-performing Nifty 50 stock.

At 1.45 pm, the stock was quoting at Rs 401 on the NSE, higher by 1.3 percent from the previous close even as the benchmarks were down almost a percent each with IT stocks pulling down the market.

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ITC is above all its key moving averages. Strong cigarette sales, a rebound in the hotel segment’s earnings and a consistent performance by the FMCG portfolio have kept the stock upbeat.

After hitting a low of 28 percent in June 2020, ITC’s operating margins have steadily improved to 38 percent as of December 2022.

The stock did take a beating on February 1 intraday when the budget hiked the National Calamity Contingent Duty (NCCD) on cigarettes by 16 percent. The reaction was overdone as the Street soon realised that the total tax component (of which NCCD is a small part) on a cigarette stick would go up by only 1-2 percent, said analysts.

Analysts at JM Financial said, “We expect ITC to accordingly adopt an approach that could also drive its premiumisation agenda and further increase its relative positioning in the industry.”

For Q4 FY23, Kotak Institutional Equities is modelling a 15 percent year-on-year cigarette volume growth and 17 percent cigarette EBIT growth. The FMCG segment revenue is expected to grow at 21.8 percent and hotels’ revenue by 72 percent.

Technical view

Soon after ITC topped the Rs 400 mark, calls for Rs 500 started getting louder on Twitter. “Investors’ dream!!,” tweeted a user.

“No major bearish reversal pattern visible yet. Hence, we suggest a Hold with a closing stop loss below Rs 350 levels. Higher resistance is placed around Rs 435,” said Awanish Chandra of SMIFS, a research-based financial services firm.

Anuj Dixit of Sovereign Global agrees. “A 10 percent upside in the coming three months is possible. Meanwhile, Rs 360-375 looks like a good support level,” he said.

For AR Ramachandran of Tip2Trades, an upmove to Rs 410 should be used by investors to book profits. “Then, wait for a dip near support levels of 360 to initiate fresh buy positions for much better returns in the months ahead.”

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