ITC Shares Decline Post Q2 Results: Investment Perspective – Buy, Hold, or Sell?
Following ITC’s Q2 results, which presented a mixed performance, many are wondering about the right investment approach: Buy, Hold, or Sell? While Motilal Oswal noted that ITC’s cigarette business had 4% YoY volume growth, slightly below their 6% estimate, and the Other-FMCG segment faced subdued demand and increased competition, several brokerages remain optimistic about ITC’s prospects.
Despite the mixed results, brokerages are endorsing ITC as a ‘Buy.’ They cite the stable cigarette business, decent earnings visibility at reasonable valuations, and an attractive dividend yield as key factors. These recommendations come amidst an environment of high inflation and continued challenges in rural sales across industries.
Kotak Institutional Equities praised ITC’s 4.5% YoY cigarette volume growth in a weak consumption environment, attributing it to a stable tax regime and government measures against illicit trade. Furthermore, the FMCG segment posted robust growth at 8.3% YoY, driven by the expansion of power brands and progress in adjacencies and future categories.
However, some challenges persist. ITC’s agri business remains affected by the ban on wheat/rice exports. Additionally, subdued demand conditions and weak prices have impacted Paperboards’ growth performance and profitability. Kotak Institutional Equities has set a fair value of Rs 470 for the stock, indicating a potential increase from its previous value of Rs 467.
Despite challenges, ITC continues to be seen as a promising investment opportunity, thanks to its stable business segments and the potential for future growth in key areas. The decision to buy, hold, or sell ITC shares ultimately depends on individual investment goals and risk tolerance.
