1:10 Split, 3 Bonuses, 29 Dividends: FMCG Stock ITC Is Rs 66 Away From 1-Yr High; BUY For 20% Potential Gains

FMCG giant stock ITC traded around Rs 400 mark for quite some time now. Despite holding low PE ratio of 14.40x, return on equity of 48.38% and zero-debt ratio, this blue chip stock is undervalued. ITC is currently up by 4% from its 52-week low and nearly Rs 66 away from crossing its 52-week high. After Q2 results, brokerage Devan Choksey is the latest to recommend BUY on ITC shares with a target price of Rs 486 which could be its new peak. However, brokerage Elara Capital recommends ACCUMULATE for Rs 464 target on expectations of improvement in margins.

ITC Share Price:

After the closing bell of November 10, ITC stock ended at Rs 405.65 apiece, up by 0.41% with a market cap of Rs 5,08,191.73 crore on BSE.

From the current price level, ITC has gained by 3.61% from its 52-week low of Rs 391.50 apiece. But the stock is also away by Rs 65.65 from hitting its 52-week high of Rs 471.30 apiece.

Currently, ITC Ltd. is trading below 8 out of 8 SMAs. While it is trading below 5 out of 9 Oscillators in the bearish zone. The RSI and MFI of the stock is at 44 and 51.1 which is steady. Both RSI and MFI below 30 is considered oversold and above 70 overbought, as per Trendlyne.

ITC Share Price Recommendation:

In a report, analysts at Devan Choksey, "Resilient cigarette volumes, steady FMCG growth, and expected margin recovery from easing input costs underpin our positive outlook."

"We value ITC based on SOTP valuation methodology, with Cigarette business at 13.0x FY27E EV/EBITDA, Agri. Business at 8.0x FY27E EV/EBITDA, Paper business at 4.5x FY27E EV/EBITDA, FMCG at 8.0x FY27E EV/Revenue, and its stake in ITC Hotels at INR 12.0 per share (reflecting a 20.0% hold-co discount), implying a target price of INR 486," analysts added.

On the other hand, analysts at Elara Capital said, "We largely maintain our earnings estimates with a marginal decline in revenue estimates and slight improvement in margins. We maintain our SoTP-TP at INR 464, valuing the cigarettes business at 23x FY27E P/E and the FMCG business at 5.5x FY27E price/sales. We reiterate Accumulate."

ITC Corporate Actions:

The FMCG giant holds a strong record of rewarding investors with bonus and dividends, while it has split once in its history.

Bonus Issue: The first time ITC turned ex-bonus was on September 21, 2005 for its bonus issue ratio of 1:2. After this, the FMCG player carried 1:1 bonus in August 2010 and 1:2 bonus in July 2016.

Stock Split: The stock has split once in its history and that was in September 2005. The stock split ratio was of 1:10, where the face value of Rs 10 was trimmed to Re 1.

Dividends: ITC has distributed at least 29 dividends since July 2003, as per Trendlyne data. In the past 12 months, the stock has paid up to Rs 14.35 dividend per share. Its current dividend yield is about 3.5%.

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