There is a possibility of a sharp rise in the shares of ITC. According to global brokerage and research firm CLSA, the growth in ITC Limited’s FMCG business could lead to an increase of 26 per cent in its shares. According to CLSA estimates, ITC’s FMCG business will grow at a CAGR of 31 per cent during 2020-2024. The growth of the industry, margin lever and good asset utilization position will give impetus to the shares of the company.
Strong potential for growth in ITC shares
ITC shares have been under pressure so far this year. This stock has registered a decline of 1.6 percent so far and it is trading at Rs 211. It is performing well below the benchmark indices. CLSA is of the view that the valuation of ITC’s share has not yet reaped the full benefits of the positive environment of FMCG business. Its stock is currently trading at 2.5X EV/Sales. Apart from this, the company can do buyback and can also give dividend.
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Many strong brands of the company will help in earning
CLSA has given it a BUY rating with a target price of Rs 265. That is, an increase of 26 percent can be recorded in its current price of 211. With dividend, it can register an increase of 32 percent. Analysts at CLSA believe that the company’s mature brands such as Aashirvad, Sunfeast, Yippe, Bingo and Classmate can help it emerge as a new brand. However, analysts are worried about lower gross margins in its flour (Aashirvaad) business. Still, the gross margins of Sunfeast, Bingo and Yippee are increasing and can fetch good margins. ITC may make some more acquisitions in the coming days.
(Article: Kshitij Bhargava)
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