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Edelweiss Securities remains positive on ITC after the cigarette-to-hotel conglomerate's quarterly results. ITC has a weightage of 30 percent in the brokerage's model consumer portfolio, Abneesh Roy, Executive Director- Institutional Equities at Edelweiss, told CNBC-TV18.

"(Quarterly) numbers are really strong. If you see from February 1 to now, the ITC stock has done quite well. It has outperformed the indices as well as the consumer sector, and we expect that trend to continue,” he said.

Roy expects the ITC stock to achieve the target price of Rs 325 in the coming quarters.

On Wednesday, ITC reported a set of profit, revenue and EBITDA that exceeded Street estimates.

ITC's cigarette revenue growth came in at 10.2 percent in the January-March period. Analysts in the CNBC-TV18 poll had estimated the growth at 9-11 percent.

Its margin, however, remained flat on a year-on-year basis at 33.7 percent and fell short of their expectations.

Roy believes ITC offers the best predictability of earnings in the consumption space."When the rest of consumer stocks are seeing inflation, there is no cost inflation in ITC's cigarettes business, which is the main business... Of course, with global liquidity drying up and (rising) interest rates, investors are looking for defensive ideas," he said.

ITC's board declared a final dividend of Rs 6.25 per share for the financial year 2021-22.

“As mobility is coming back and as price laddering is being used by ITC, we are seeing that the mix is improving. ITC has been on the forefront in terms of investing into D2C startups and their own e-commerce portal etc. and it will again be a very strong year in terms of agri and paperboard,” he said.

Though the wheat export ban is slightly negative for the company's agri business in the near term, ITC will have a lot of opportunities in tobacco, rice and soya exports, and the paperboard volume is extremely strong, he said.

There is some cost pressure in the FMCG space but earnings growth of 12-13 percent is possibble for ITC, something that is expected to be difficult for most other consumption stocks especially in the first half, he said. “We do expect good earnings growth to continue in 2022-23, and possibly even in 2023-24. But for 2023-24, we need to watch out what happens on February 1 (Union Budget), which is still 2-3 quarters down the line,” Roy added.

(With agency inputs)

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