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Shares of India’s largest cigarette manufacturer were trading 2% lower on Wednesday a day after the company declared its March quarter earnings.

The cigarette-FMCG-to-hotel major reported a net profit of Rs 3,748.41, down 1.29%, in the quarter ended March 31, 2021. The company had posted a net profit of Rs 3,797.08 crore in the year-ago period. The standalone revenue from operations (excluding excise duty) in Q4FY21 grew by 22.6%to ₹13,294.7 crore YoY.

EBITDA grew 7.4% year on year to Rs 4,473 crore in Q4 FY21 over Q4 FY20. The company said strong sequential recovery momentum continued.

Total FMCG segment revenue rose 14.8% to Rs 9547 crore during Q4 FY21 over Q4 FY20. In the FMCG segment, cigarettes revenue increased 14.2% YoY to Rs 5860 crore while the revenue from other FMCG segment fell 15.8% YoY to Rs 3688 crore in Q4 FY21 over Q4 FY20.

Hotel business revenue stood at Rs 288 crore (down 38.2% YoY), agri-business revenue was at Rs 3,369 crore (up 78.5% YoY) and paperboards, paper & packaging revenues were at Rs 1,656 crore (up 13.5% YoY) in the fourth quarter.

The company has recommended a final dividend of Rs 5.75 per share for the financial year ended 31 March 2021. The company has fixed 11 June 2021 as the record date for the payment of dividend.

ITC range-bound performance has been frustrating for most investors and they are waiting for the stock to change its momentum. Here is what brokerages have to say about it

Sharekhan | Target price: Rs 265 | Upside: 26%

Management’s enhanced focus and redefined growth strategies have aided in scaling up the non-cigarette FMCG business margins. The higher focus is on supply agility and reduction in operating cost in the near term. The stock is currently trading at attractive valuations of 15.4x its FY2023E EPS (earnings per share). Any sustained scale-up in the margins of the cigarette business coupled with normalisation in the core cigarette business would be key triggers for valuation uptick.

Prabhudas Liladhar | Target price: Rs 258 | Upside: 22%

Lockdowns are temporary hiccups and expect smart pickup post 1Q. we believe stable cigarette taxation and FMCG profitability are key positives in the near term. Agri profitability to improve given strong surge in commodity prices and revival in leaf tobacco demand (20%+ margins). The hotel’s business remains under a cloud but global trends suggest a significant pick up in travel in 2H22. Double-digit EBIDTA margins in FMCG business by FY22/23 and relative stable cigarette tax regime cap any downside. ITC trades at 15.6x FY23 EPS, 60% discount to our coverage universe with 5% dividend yield and 13.5% EPS CAGR over FY21-23.

ICICI Securities | Target price: Rs 240 | Upside: 14%

FMCG business grew by 16% YoY (~6% on a 2-year CAGR basis). Focus on portfolio fortification (120+ launches in the year), small packs, augmented distribution may potentially help ITC to outperform industry growth in FY22. FMCG EBITDA margin expansion of 180 bps (comparable for FY21) to 8.9% was decent. Potential market share gains, FMCG scale-up and profitability improvement to continue and the potential to accelerate cost savings through a supply chain recast are key levers for the company.

Motilal Oswal | Target price: Rs 220 | Upside: 4%

Profit before tax growth over FY20-23E (7.4% CAGR) likely to remain similar vis-à-vis weaker growth in the preceding five years (6.6% CAGR), valuations of 17.5x/15x FY22E/FY23E, although cheap, are fair considering the stated concerns. A dividend yield of 5-6% is expected over the next two years, in line with global Cigarette players. Continue to value ITC at a 20% premium to its global peers.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)