ITC share price up 15% so far this year, dividends extra; analysts see 80% more upside

ITC stock price has zoomed 15% so far this year, topping it off with an interim dividend of Rs 5.75 per share, amounting to about 2.4% in dividend earnings over the stock price in January.

ITC stock price has zoomed 15% so far this year, topping it off with an interim dividend of Rs 5.75 per share, amounting to about 2.4% in dividend earnings over the stock price in January. The rally in ITC share price may be far from over just yet. Analysts at Edelweiss Wealth see another 80% upside in ITC scrip from today’s levels. “A strong up-move of prices on the ratio chart of ITC/FMCG suggests a strong outperformance by the stock in the sector,” Edelweiss Wealth said in a report. Analysts have pinned a target price of Rs 450 on ITC. The stock closed Wednesday’s session at Rs 251.95 per share.

ITC finds strong support on charts

“Prices on the ratio chart suggest a base formation hinting towards the start of a strong outperformance by the stock,” said Edelweiss in the note. They added that the charts signal an end to the underperformance of ITC against the benchmark Nifty 50 index, as shown by prices, trendline demand, and time cycle equality. “A probable formation of an inverted head and shoulder pattern on the weekly charts and a time series analysis on the quarterly chart indicate a change in trend and resurgence of the super bull cycle.”

Over a little longer timeframe, ITC’s share price has gained just 5% since January 2020. However, during the same period, the company has rewarded investors with Rs 26.15 per share in dividends. “Plotting the ratio chart on a P&F platform indicates a strong base-building formation underway since two years. Recently, prices on the ratio chart of ITC/Nifty FMCG formed a high swing bottom, which is an early indicator of the beginning of a fresh uptrend,” Edelweiss said.

Price analysis of the stock shows ITC is on the cusp of a breakout from an inverted head and shoulder pattern, which shall be validated on a weekly close above Rs 253, the report added. “Every time the stock tests the level of 200, charts indicate robust demand and lack of selling, reaffirming a strong accumulation zone,” it added.

ESG concerns to fade

On the fundamental side, analysts said that considering how commodity prices moved up in the last two years, the ESG investing philosophy and its long-term benefits are uncertain. ITC has seen multiple deratings owing to ESG concerns despite strong cash flows. ITC’s volumes in the cigarettes business are estimated to revive at a CAGR of 5% during FY22–24E as against a CAGR of -1% during FY11–21. FMCG’s EBITDA margin is expected to scale up to higher single digits while the hotel, paperboard and agri-commodities businesses revive. “This will lead to an earnings CAGR of 12% in FY22–24E against a mere 7% in the last five years,” analysts said.

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