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ITC Shares Fall After Second Quarter Earnings Were Below Street Estimates;  should you buy, hold or sell stocks now?


ITC stocks were in the spotlight on Thursday, a day after major FMCG released its financial results for the September quarter. Shares fell about 3% in early trades after the company’s quarterly net income missed Street’s estimates.

As of 10 a.m., ITC shares were down 2.7% to Rs 232 on BSE, after dropping to 3.3% earlier today.

The after-hours hotel cigarette conglomerate on Wednesday posted a 13.7% year-over-year increase in its stand-alone net profit to Rs 3,697.2 crore for the three months ended September 30. Its stand-alone revenue increased 12% to Rs 13,553.5 crore.

Analysts in a CNBC-TV18 poll had predicted that ITC’s net profit would rise to Rs 3,725 crore on earnings of Rs 12,875 crore during the July-September period. (Learn more about ITC results)

FMCG company’s cigarette volume increased nine percent, according to analysts’ estimate of 9 to 10 percent.

Here’s what the brokerages said after the ITC’s second quarter numbers:

Morgan stanley

The brokerage has retained an “overweight” call on ITC with a target price of Rs 251.

The company’s second-quarter profits were slightly higher than estimated, with weaker-than-expected sales in the cigarette business. In the company’s FMCG business, revenue growth has been well below expectations, according to Morgan Stanley.

Jefferies

ITC’s cigarette volumes were somewhat lower, offset by a better margin, according to the brokerage, which maintained a “buy” rating on the stock with a target price of Rs 300.

The company’s FMCG business is expected to slow down, in part because of the root problem. The Union budget will be a key event for ITC as the expert group decides on tobacco taxation, Jefferies said.

Sharekhan

The brokerage has retained a call to buy on the stock with a target price of Rs 280. ITC’s cigarette business volumes are expected to improve in the coming quarters with the easing of foreclosure restrictions. in most states, according to Sharekhan.

Increased management focus and redefined growth strategies have contributed to the expansion of its non-cigarette FMCG

trading margins, the brokerage said.

The stock is currently trading at 17.1 times and 15.3 times its EPS for FY2023 and FY2024 respectively, a marked reduction from some of the major consumer goods holdings, Sharekhan said. High visibility on profits with improved growth prospects for the main cigarette business, expansion of margins in the non-cigarette FMCG business and high cash generation capacity with a large dividend payment will narrow the valuation gap in the years to come, he added.

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