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    ITC shares surge as hotel and agriculture units beat Street forecasts

    ITC shares surge as hotel and agriculture units beat Street forecasts

    ITC shares surge as hotel and agriculture units beat Street forecasts
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    By CNBCTV18.com  IST (Updated)

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    Shares of ITC surged on Tuesday after the cigarettes-to-hotels conglomerate reported robust earnings for the April to June 2022 quarter that have got a thumbs up from brokerages. 

    Shares of ITC surged on Tuesday after the cigarettes-to-hotels conglomerate reported robust earnings for the April to June 2022 quarter that have got a thumbs up from brokerages.
    ITC shares jumped almost 3 percent in early deals amid an overall negative sentiment in the market, in line with global cues. The stock, with an index contribution of more than 34 percent on BSE, is among the few fighting for the bulls.
    ITC stock was trading 0.8 percent higher at Rs 310.10 on BSE at 11:05 am. In the past year, the stock has given a return of more than 50 percent to investors as against the benchmark Sensex, which has risen over 9 percent during the period.
    While ITC’s fast-moving consumer goods (FMCG), hotels and agriculture businesses beat Street estimates, the company’s revenue for its cigarettes segment in the first quarter of the fiscal year was in line with analysts’ expectations.
    The firm’s revenue came in at Rs 17,290 crore, higher than the CNBC-TV18 poll estimate of Rs 14,950 crore. The revenue was 41 percent higher than the year-ago period's corresponding quarter.
    A look at ITC segments
    SegmentRevenuePoll
    Cigarette29%27-30%
    FMCG19.50%10-12%
    Hotels336%200-250%
    Agri83% 40-45%
    Paper43% 25-30%
    Also, profit after tax at Rs 4,169 crore for the quarter under review came in better than expected. The company posted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of Rs 5,647.5 crore, beating the poll estimate of Rs 5,150 crore.
    However, a margin of 32.7 percent, impacted by inflation, was lower than the CNBC-TV18 poll estimates.
    According to ITC’s management, robust growth was seen in discretionary/out-of-home categories while the education and stationery products business bounced back. It said the agriculture business was driven by wheat, rice and leaf tobacco exports.
    The company added that hotel average room rate and occupancy are now ahead of pre-pandemic levels, and market and outlet coverage too are two and 1.3 times those levels. Some moderation in commodities was witnessed in June, it said.
    Global brokerage Morgan Stanley has given an overweight call on ITC shares and raised the target price to Rs 330 per share. This means it foresees a 7 percent improvement in the stock.
    The brokerage said better-than-expected top-line and EBITDA were led by strong paper and agriculture business growth. It added that strong results and positive near-term earnings drivers augur well for the stock.
    CLSA has given an ‘outperform’ rating to the stock and upped its target price to Rs 330 per share. According to the brokerage, recovery in mobility helped a strong recovery in revenue and margin. It also pointed to sharp recovery in non-FMCG stages.
    ITC stock remains a preferred pick of CLSA, which has raised its earnings target for FY23-24 by 8 percent to capture recovery.
    Market expert Deven Choksey of K R Choksey Shares and Securities believes that there are two distinctly strong areas for ITC — agri and FMCG businesses.
    “This is a quarter in which it is expected to do better in agribusiness, so the numbers have been robust. More importantly, the fast-moving consumer goods part of the story is basically sustaining and sustaining very handsomely. So these two areas probably in ITC remain very convincing as far as the outlook is concerned,” he told CNBC-TV18.
    However, he believes the stock has moved a little ahead of time, so one will have to wait for some time to an extent. A correction would be the buying opportunity into the stock, he said.
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