HSBC Hikes ITC Target Price On Attractive Risk-Reward Ratio, Sees 12% Upside
Shares of ITC are in news on Thursday after the FMCG firm said ITC Infotech India, a subsidiary of the company, has acquired 100 per cent shares of Blazeclan Technologies for Rs 485 crore. Consequently, Blazeclan and its subsidiaries have become step-down wholly owned subsidiaries of the company, effective October 1.
“We have been advised by ITC Infotech India Limited, a wholly owned subsidiary today, that they have acquired 100 per cent of the share capital of Blazeclan Technologies Private Limited (Blazeclan). Consequently, Blazeclan and its following subsidiaries have become step-down wholly owned subsidiaries of the Company with effect from 1 October, 2024,” said ITC in a communication to bourses.
ITC stock has a one-year beta of 0.6, indicating low volatility during the period. In terms of technicals, the relative strength index (RSI) of ITC stock stands at 56.6, signaling it’s trading neither in the oversold nor in the overbought zone. ITC shares are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.
Global financial services firm HSBC has maintained its ‘Buy’ rating on ITC, raising the target price from Rs 480 to Rs 580, suggesting a potential upside of 12 per cent from its previous closing price of Rs 515.9. This revision reflects HSBC’s confidence in ITC’s defensive appeal in the current market environment.
The brokerage notes that ITC’s stock is trading at a wider discount compared to its FMCG peers. HSBC also emphasizes the stability of the tax regime for cigarettes, a significant segment of ITC’s business, which supports the company’s earnings growth prospects in the FMCG space.
Additionally, HSBC acknowledges ITC’s growth potential, highlighting its relative value within the market and sector.
Shares of ITC fell as much as 1.3 per cent to Rs 509 in Thursday’s intraday trade. Its shares have surged 9% in 2024 to date and 16% over the past 12 months, with the company currently holding a market capitalization of Rs 6,38,638 crore.
In Q1 FY25, ITC reported a marginal increase in standalone net profit at Rs 4,917.45 crore, compared to Rs 4,902.74 crore in the year-ago period. The standalone revenue from operations for the reported quarter was Rs 18,219.74 crore, reflecting a 7 per cent increase over Rs 16,995.49 crore in the corresponding quarter of the previous financial year.
The FMCG segment revenue rose 6.3 per cent in Q1, driven by growth in staples, snacks, dairy, personal wash, fragrances, home care, and agarbatti. The segment’s EBITDA margin expanded by 25 basis points year-on-year to 11.3 per cent. Cigarette segment net revenue increased by 7 per cent, with segment PBIT (Profit Before Interest and Taxes) rising by 6.5 per cent year-on-year.
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