ITC shares fall 4% after Q3 earnings; should you buy, sell or hold?

ITC Q3 net profit at Rs 3,587.20 crore; revenue from operations at Rs 14,124.48 crore

FMCG-others segment registered a growth of 13 percent YoY at Rs 3,752.61 crore during the quarter. The segment’s EBIT jumped 123.8 percent YoY to Rs 243.17 crore.

Severely hit by the COVID-19 pandemic, ITC’s hotel business reported a sharp 56.7 percent YoY revenue decline to Rs 248.87 crore in Q3FY21. Its EBIT loss stood at Rs 72.25 crore as against a profit of Rs 88.9 crore in the corresponding period.

The company also declared an interim dividend of Rs 5 per share.

The cigarette recovery augers well for FY22 with healthy FMCG performance, Credit Suisse said. It remained positive on the company and sees strong cigarette recovery. It sees potential re-structuring and increasing value of FMCG business.

Credit Suisse maintained an Outperform rating on the stock with a target price of Rs 265 per share.

Cigarette trends are slightly better than feared, while other FMCG moderated, Citi said. The possible news relating to any changes in regulations are key to watch. Developments like demerger/value-unlocking of smaller businesses will be tracked, it added.

Citi maintained a Neutral call on the stock with a target price of Rs 215 per share.

"We are optimistic on the recovery in cigarette volumes due to increasing out of mobility on ease of lockdown and market share gain on the introduction of new formats, variants in cigarettes in KSFT and RSFT segment," Antique Broking said.

The brokerage house maintained its estimates and Buy recommendation on the stock with a target price of Rs 273 per share.

According to Yes Securities, ITC’s overall results were weaker than expectations with flat revenue, decline in EBITDA and decline in PAT given muted revenue performance in FMCG and sharp margin decline in cigarettes and losses in hotels.

Despite a muted FY21, FY22 should see a strong recovery with cigarette volumes bouncing back and FMCG sustaining a strong growth trajectory coupled with improving margins, the brokerage firm said.

“Given still attractive valuations at 15x FY23, we remain positive on the stock despite this muted performance and see a gradual re-rating towards 18-20x and move towards Rs 270 and beyond," it said.

At 10:05 am, the shares of ITC were trading 3.71 percent lower at Rs 218.05 apiece on the BSE as compared to a 0.07 percent gain on the benchmark Sensex.