ITC share price: ITC@Rs 450? Fundamental & technical signs may have finally aligned for a super cycle! – The Economic Times


imageNEW DELHI: Ever since the war broke out between Ukraine and Russia, the market has seen a roller coaster ride.But there has been an unusual Nifty stock that has defied trend and rallied significantly.It is now staring at its highest weekly close in two years.ITC has jumped 21 per cent since February 24 to hit the Rs 250 mark.In the 16 market sessions since then, it has closed in the red in just 4 instances.Now, Vinay Khattar, Head of Research at Edelweiss Broking believes stars have aligned for a super cycle in the counter and stretch the rally to Rs 450.

The money manager has put both fundamental and technical reasons behind the conviction.

Both analyses point towards a possible 80 per cent jump from current levels, it said in a research note polished on Tuesday.The above-mentioned target is among the most bullish ones among all analysts who track the stocks.Refinitive data shows a median target of 12 analysts pegs the stock at Rs 276.The highest one estimate it at Rs 341 and the lowest one at Rs 230.Bye, bye ESG! Khattar said in the times when commodity prices moved up significantly, the ESG investing philosophy (which strives to invest in environmentally and socially responsible companies) and its long-term benefits are uncertain.ITC is among the ESG negative companies that have seen significant multiple deratings despite strong cash flow, scaling up of the FMCG business, rationalisation in the retail business and revival of the hotels and paperboard businesses.“We expect change in investment philosophy (ESG-related) and EPS CAGR of 12 per cent to lead multiple re-ratings from 16 times currently to 30 times for FY24E earnings,” said Khattar.

He is basically banking on higher cigarette sales compared to earlier and greater margins in FMCG businesses.

Edelweiss expects volume in cigarettes to revive at a CAGR of 5 per cent during FY22–24 as against a CAGR of minus 1 per cent during FY11–21; FMCG’s Ebitda margin to scale up to higher single digits; and the hotel, paperboard and agri-commodities businesses to revive.

“This will lead to an earnings CAGR of 12 per cent in FY22–24E against a mere 7 per cent in the last five years,” Khattar added.ITC has dealt with a lot of criticism in the last few years mainly for banking heavily in cash from cigarettes and failing to lift FMCG margins.Moreover the calls for asset heavy underperforming businesses like hotels to be carved out.This had led to a stagnation of stock price, which consolidated for over two years around Rs 200 per share.

Every time the stock tests the level of 200, charts indicate robust demand and lack of selling, reaffirming a strong accumulation zone.Cusp of revival The technical charts that Edelweiss analysed also gave strong buy signals.It said ITC is on the cusp of a breakout from an inverted head and shoulder pattern (strong trend reversal), which shall be validated on a weekly close above Rs 253.90377576 The stock closed at Rs 250 on BSE.

It is very close to its 52 week high level of Rs 265.

“Price action on the long-term chart (quarterly) shows every time the stock corrects or consolidates for 14–16 quarters, a fresh uptrend resumes.ITC has been in consolidation since the last 15 quarters, with the current quarter being the 16th one.A quarterly close above Rs 253 implies the highest closing the stock will record in two years,” said Khattar..

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