Why has the stock of ITC been rallying so sharply in the last few months?

In the midst of the current sell-off in the markets and despite the pressure that FMCG stocks like HUL and Britannia have faced, ITC has been among the star performer in the current calendar year. It finally touched a 52-week high during the last week touching Rs.267.75 gaining almost 22% in just 3 months since the start of 2022. That is largely because the cigarette business is largely non-cyclical and generates over 80% of ITC profits.

It is not just the traders but even long term investors are rerating the stock to as high as a target of Rs.450 on the upper side. There are several reasons They expect the cigarettes volumes to grow at a CAGR of 5% annually over the next 3 years. In addition, the FMCG EBITDA is likely to get close to 10% mark while even the hotel and paperboards business is likely to show good traction. Overall earnings will grow at a higher plane of 12% ahead.

For the third quarter ended Dec-21, ITC reported net profits of Rs.4,056 crore, higher by 15% on a yoy basis. Total revenues for ITC in the third quarter were up by 30% at Rs.18,365 crore for. The revenues from the cigarettes business grew by a healthy 14% on a yoy basis while the non-cigarette FMCG business saw top line revenues growing at 9% on a yoy basis.