Shares of ITC have risen 50 per cent year-to-date, outperforming peers such as Hindustan Unilever (up 10 per cent) and Nestle India (up 1 per cent) hands down.
The scrip, in fact, has rallied 62 per cent over its February low of Rs 207, making investors wonder whether the ongoing rally has more legs.
The FMCG stock has been a darling of memesters in the past few years, due to its lacklustre performance. But the scrip has delivered solid return in an otherwise weak market in 2022 so far. Analysts are largely bullish on ITC and believe that the ongoing outperformance may continue.
The ITC stock is above its 100-day, 200-day moving averages, but below its 10-day, 20-day moving averages.
Axis Securities believes that ITC is poised to deliver encouraging performance moving forward. The brokerage remains positive on the recovery in the cigarette segment, which is back to pre-Covid level. It is also positive on the structural uptick in the FMCG revenue and recovery in its hotels and paper and paperboard divisions. The brokerage has a ‘Buy’ rating on the stock with a target price of Rs 380.
On Friday, the scrip closed at Rs 333.95, down 0.77 per cent.
The FMCG firm, Axis Securities said, mitigated the unprecedented increase in crucial input prices by undertaking focused cost-management measures across the value chains as well as through premiumisation, product mix enrichment, judicious pricing actions, and fiscal incentives.
Centrum Broking also remains bullish on ITC, given its potential for price hikes in cigarettes pre-empting the next Union Budget, strong underlying performance with improved profitability in the foods portfolio, improving outlook and potential demerger for the hotel business, and bridging the valuation gap.
The broking firm has a target price of Rs 424 on the stock, implying an upside of 26 per cent.
“FMCG sector continues with its outperformance as the NSE FMCG index continues to form higher peak and higher trough in all time frame and in that space, ITC remains a clear outperformer,” Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking Ltd told Business Today.
Das said that the stock has registered a breakout of the 2.5-year-old rising channel and, thus, is indicating room for further upside. However, the immediate resistance from the stock arises from the previous swing high of July 2017 at Rs 345-350, he said.
“Since the pattern has emerged over a longer period, present resistance can be considered more reliable and larger moves can also be expected once the price breaks out of the pattern. On the oscillator front, in the weekly time frame, prices seem a little stretched and some amount of price consolidation at a higher level can be expected in the range of Rs 305-345,” Das added.
Das said price sustenance above Rs 300 would keep bias positive.
“For medium-term investors, a corrective dip towards Rs 290-300 should be used as an ideal buying opportunity to ride the next leg of up move towards Rs 350 and beyond,” he said.