ITC, India’s largest cigarette maker and second-largest fast-moving consumer goods (FMCG) company, regained its Rs 4 trillion market capitalisation on Friday as the stock continued to rise.

Shares of ITC rose 2% intraday to a five-year high of Rs 323.40 today on expectations of solid earnings growth. The stock has risen 50% in the past six months, compared with the S&P BSE Sensex’s 6% gain. So far, in 2022, ITC is up 47%, while the benchmark index is down 0.54%.

ITC’s market cap stood at Rs 4.01 trillion as of 2.17 pm, BSE data showed. The stock rose 1.8% to Rs 323.15, while Sensex gained 0.49%. The volume on the table is huge, with the average volume more than doubling compared to the previous 10-day volume. As of this writing, 21.23 million shares in the NSE and BSE have changed hands.

The last time ITC’s market capitalisation hit the Rs 4 trillion feat was on July 14, 2017, when it closed at Rs 4.10 trillion. On July 3, 2017, ITC reported a record market capitalization of Rs 4.16 trillion. The stock hit an all-time high of Rs 353 on the same day.

ITC is India’s leading cigarette manufacturer with over 75% volume share and a significant competitive advantage.
In Q1FY23 (first quarter of the current financial year) (April-June), ITC reported encouraging results, with sales of cigarettes growing by around 26%, with cigarettes, cardboard and hotels. The profit margin of the business continues to expand. The company witnessed strong growth across segments against a low base, strong agricultural exports, and rising paperboard prices.

According to analysts at Prabhudas Lilladher, ITC’s near-term outlook remains positive given the positive cigarette volume traction from a stable tax regime, strong pricing and the benefits of recent cardboard backwards consolidation, resulting in improved hotel and hotel ARR and occupancy rates Level. Continued growth in the FMCG segment, with margins likely to expand from Q3FY23.

While the brokerage expects another quarter of margin pressure in FMCG, strong traction in other businesses will allow ITC to sustain double-digit profit growth, the brokerage said. “Long-term growth rates could benefit from cigarettes’ low share of overall tobacco consumption, ITC’s dominance, high barriers to entry, and improved profitability of its non-tobacco business,” JPMorgan analysts said in their Q1FY23 results update.”

The cigarette business is returning to normal as Covid-19 subsides, markets reopen and a stable pricing environment (in the absence of tax hikes). ITC’s competitive position in most other FMCG categories continues to strengthen, thanks to expanded distribution, enhanced e-commerce presence (a significant 7%) and meaningful innovation intensity, the brokerage said, with a December target price of Rs 350.