Motilal Oswal Suggests Buying This Consumer Stock For 22% Return, With 4% Dividend Yield

Reputed brokerage firm Motilal Oswal suggests buying the stocks of ITC. The companys refreshed strategy across business divisions places digital prowess and sustainability at its center, as it focuses on remaining nimble to address the fast-evolving trends and consumer preferences. The Current Market Price (CMP) of ITC is Rs. 274. Motilal Oswal has estimated a Target Price for the stock at Rs. 335. This stock has the potential to give a 22% return, in the upcoming 1 year. This is a large-cap company with a market capitalization of around Rs. 337,041 crore.Stock Outlook Current Market Price (CMP)Rs. 274Target PriceRs. 335Potential 1 year return22.00%52 week high share priceRs. 282.3552 week low share priceRs. 200.90The companys sales in FY22 were recorded at Rs. 563.4 b, which is expected to be at Rs. 563.4 b in FY23. Their EBITDA in FY22 stood at Rs. 189.5 b, which is expected to be at Rs. 213.3 b in FY23. The companys adj. PAT in FY22 was recorded at Rs. 150.6 b, which is expected to be at Rs. 150.6 b in FY23.Advertisement About the stock, Motilal Oswal said, The Hotels business bounced back towards the end of FY22 after the third Covid wave disrupted demand in Jan22. The companys earnings CAGR at the PBT level stood at 5% over FY17-22. We expect ITC to post a 15% earnings CAGR over FY22-24. While valuations of global Tobacco peers have been restored to their pre-pandemic levels (Jan19), ITC still trades at a 24% discount to its Jan19 valuation of 25.4x one-year forward EPS. We value ITC at 21x FY24E EPS, implying a 65% premium to its global peer average. We believe the premium multiples are justified, given its strong visibility over the medium term and the defensive nature of its business, especially in a volatile macro environment.The resilient nature of its core business, amid an uncertain environment in the sector, and a 4-5% dividend yield make it a good defensive play in the ongoing volatile interest rate environment, the firm added. ITC has 10 operational integrated consumer goods manufacturing and logistical (ICML) facilities located close to high-demand centers. These facilities have resulted in a shorter distance to market, reduced emissions, improved quality, and hygiene, as well as an improved supply chain. After subdued demand over the last 2 years, cigarette volumes surpassed pre-pandemic levels in the latter half of FY22. ITCs FMCG-Others business now reaches 7m retail outlets. The company strengthened its direct reach during the year with market/outlet coverage growing ~40%/10% YoY, respectively. Strong FY22 performance was driven by growth in wheat, rice, spices, and leaf tobacco exports despite logistical challenges. The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.