Shares of ITC attracted market buzz by gaining sharply in the last few days, surprising a lot of naysayers. The stock of ITC, on Tuesday, breached the ₹250-mark for the first time since October 19, 2021. The stock closed at ₹249.80 on the BSE, a gain of ₹5.40 or 2.21 per cent over the previous day’s close of ₹244.40
Analysts expect the stock to gain momentum in the coming weeks, due to short covering and fear of the environmental, social and governance (ESG) investing concept is receding.
ESG to take backseat
Considering how commodity prices moved up in the last two years, the ESG investing philosophy 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/paperboard businesses, said Edelweiss Securities.
“We expect change in investment philosophy (ESG-related) and EPS CAGR of 12 per cent to lead multiple re-ratings from 16x currently to 30x for FY24 earnings,” said Edelweiss with a target price of ₹450.
Delivery-based buying
According to ICICI Securities, the current up-move in the stock is backed by significant delivery-based activity, which is the highest seen since last October when ITC made highs near ₹260 levels. Moreover, it has also been able to sustain above its mean+1*sigma levels near ₹220. "Last time, when the stock moved above this level, it experienced another 20 per cent gain in the short-term. We believe ITC will move towards ₹270 in the coming weeks," I-Sec said.
ITC has been witnessing closure of open interest since December series, with the current open interest (OI) being one of the lowest seen in almost a year. "Since the February series, OI has declined more than 40 per cent in the stock, suggesting ongoing short covering," it added.
According to Jefferies, ITC is well placed due to tobacco, which faces limited headwinds.
ITC remains optimistic of achieving significant scale over the period, including through the inorganic route, said Julius Baer in its February report. "Other businesses are likely to benefit from a cyclical recovery, while its IT subsidiary is also seeing good trends. We remain positive on ITC, with its attractive valuations and healthy dividend yield," it said while maintaining buy with an SOTP-based target of ₹285.
ITC and memes
ITC was one of the favourites for the troll-army, as the stock has underperformed in the last few years. "If you meditate regularly in the morning, you will get stable heart rate which will look like #itc shares chart," said one tweet.
“Loose cigarette prices moved from ₹18 to ₹20 for badi gold and classic, but still ITC not seeing any rally,” said another.
“ITC can prepare an Investors’ presentation of 290 pages, but can’t get the stock price to reach 290,” another disappointed investor trolled ITC.