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This article is more than 2 month old.

ITC falls after Q2 profit misses Street estimates; should you buy, hold or sell shares now?

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ITC shares fell a day after the FMCG major's quarterly net profit missed Street estimates. 

ITC falls after Q2 profit misses Street estimates; should you buy, hold or sell shares now?
ITC shares were in focus on Thursday, a day after the FMCG major reported its financial results for the September quarter. Shares fell around three percent in early deals after the company's quarterly net profit missed Street estimates.
At 10 am, ITC shares were down 2.7 percent at Rs 232 on BSE, having declined as much as 3.3 percent earlier in the day.
The cigarettes-to-hotels conglomerate after market hours on Wednesday posted a 13.7 percent year-on-year rise in standalone net profit to Rs 3,697.2 crore for the three months to September 30. Its standalone revenue grew 12 percent to Rs 13,553.5 crore.
Analysts in a CNBC-TV18 poll had predicted ITC's net profit at Rs 3,725 crore over revenue of Rs 12,875 crore in the July-September period. (Read more on ITC results)
The FMCG company's cigarette volume rose nine percent, in line with analysts' estimate of 9-10 percent.
Here's what brokerages said after ITC's Q2 numbers:
Morgan Stanley
The brokerage retained an 'overweight' call on ITC with a target price of Rs 251.
The company's Q2 earnings were marginally ahead of estimates, with a weaker-than-expected topline in the cigarette business. In the company's FMCG business, growth in the topline was well below expectations, according to Morgan Stanley.
Jefferies
ITC's cigarette volumes were a bit lower, offset by a better margin, according to the brokerage, which maintained a 'buy' rating on the stock with a target price of Rs 300.
The company's FMCG business expectedly slowed down, partially due to the base issue. Union Budget will be a key event for ITC given that the expert panel is deciding on tobacco taxation, said Jefferies.
Sharekhan
The brokerage has retained a 'buy' call on the stock with a target price of Rs 280. ITC's cigarette business volumes are expected to improve in the coming quarters with the easing of lockdown restrictions in most states, according to Sharekhan.
The management’s enhanced focus and redefined growth strategies have aided scaling up of its non-cigarette FMCG
business margins, the brokerage said.
The stock is currently trading at 17.1 times and 15.3 times its FY2023 and FY2024 EPS  respectively, a stark discount to some of the large consumer goods stock, Sharekhan said. Strong earnings visibility with improving growth prospects of the core cigarette business, margin expansion in the non-cigarette FMCG business, and high cash-generation ability with strong dividend payout will reduce the valuation gap in the coming years, it added.
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