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Buy, sell or hold: What should investors do with ITC post June quarter results?

has surged more than 40 per cent so far in the year 2022 and the rally may not be over amid positive commentary coming from most brokerage firms tracking the diversified FMCG major.

The stock rallied from Rs 218 as on 31 December 2021 to Rs 307 on 1 August 2022 which translates into an upside of more than 40 per cent so far in 2022.

Most brokerage firms tracking ITC have maintained their rating and could see over 10 per cent upside in the next 12 months which could take the stock to a fresh 52-week high.

FMCG major net profit jumped 38 per cent to Rs 4,169.4 crore for the first quarter ended June, while revenue from operations surged 41 per cent to Rs 18,320.2 crore on Monday.

The conglomerate attributed the performance, including sequential improvement, to robust performance across all businesses, its focus on accelerated digital adoption and agility.
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Long-term investors can look to buy the stock now or on dips for a possible target of Rs 350, suggest brokerage reports.

After the steep rally, the stock is now trading near the overbought zone and a pullback could be in the offing. It is trading above all the crucial short and long-term moving averages of 5,10,20,30,50,100 and 200-DMA.

The Relative Strength Index (RSI) is at 75.7. RSI above 70 is considered overbought. This implies that stock may show pullback, Trendlyne data showed. MACD is above its centre and signal Line, which is a bullish indicator.

We have collated a list of recommendations from various brokerage post Q1 results:

CLSA: Buy| Target Rs 330| Upside 7%
CLSA maintained its buy rating on ITC post June quarter results with a target price of Rs 330 which translates into an upside of over 7 per cent from Rs 307 recorded on 1 August.

Recovery in mobility helps strong recovery in revenue and margins. The cigarette business registered 25 per cent volume growth. Margins are stable at 74 per cent.

ITC remains our preferred pick in staples, said the note.

JP Morgan: Overweight| Target Rs 350| Upside 14%
JPMorgan maintained its overweight rating on ITC post June quarter results with a target price of Rs 350 which translates into an upside of over 14 per cent from Rs 307 recorded on 1 August.

“Q1 beat most estimates and the company is firing on all cylinders. ITC reported a strong Q1FY23 operating performance as well,” the brokerage said.

ITC continues to strengthen its competitive position across categories, it added. The global investment bank increased FY23E PAT by ~2 per cent.

Sharekhan: Buy| Target Rs 350| Upside 14%
Sharekhan maintained its buy rating on ITC post June quarter results with a target price of Rs 350 which translates into an upside of over 14 per cent from Rs 307 recorded on 1 August.

“We expect growth momentum in cigarette sales volumes to sustain with government actions on curbing illicit cigarette sales. Hotels business will maintain strong growth momentum due to higher demand for domestic leisure travel,” it said.

Non-cigarette FMCG revenues would grow in double digits while margins might improve sequentially in the coming quarters, it added.

Elara Global: Accumulate| Target Rs 338 | Upside 10%
Elara Global maintained its Accumulate rating on ITC post June quarter results with a target price of Rs 338 which translates into an upside of about 10 per cent from Rs 307 recorded on 1 August.

“We upgrade our earnings estimates by 4.5 per cent for FY23 and 6 per cent for FY24 to factor in higher sales growth, partially offset by a lower margin due to inflation impact and change in mix,” it said.

The stock is better placed in the short term, given a high dividend yield (~5.0 per cent), less impact of higher input prices, and recovery in cigarette volume, the brokerage added

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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