ITC shares climb to five-year high. Is there any steam left?

It has been an early Diwali for shareholders of FMCG and cigarette major ITC Ltd, which on Friday hit a five-year high of Rs 354 a share. 

Indian investors have a love-hate relationship with ITC, which has been one of the most consistent dividend stocks, but has been disappointing as far as its share price goes. 

But brokerages are now upbeat on the diversified company, whose largest shareholder is British American Tobacco and in which even the Indian government and insurance behemoth LIC have a substantial stake. 

So, how much higher could ITC go from here? What do analysts have to say?

Domestic brokerages value ITC between Rs 375 and Rs 405. Among global brokerages, CLSA has an outperform rating on the stock with a target price of Rs 375. JPMorgan, which has an overweight call on the stock, has a target price of Rs 380 and Morgan Stanley expects the stock to hit Rs 374.

But how well has ITC done versus expectations in the past?

Beating Street expectations, ITC's net profit for the quarter ended September rose nearly 21% on year to Rs 4,466 crore. The revenue-net of excise duty-increased nearly 27% to Rs 16,129.91 crore.

Revenue from the mainstay cigarette business grew more than 23% on year to Rs 6,953.80 crore.

And why are the markets getting so bullish on the counter?

According to a report by The Economics Times, brokerages say that the key reasons to be positive on ITC are better-than-expected demand recovery, a healthy margin outlook in cigarettes, healthy sales momentum in the FMCG business, and recovery in the hotels business.

How has ITC’s FMCG business been doing?

ITC's FMCG business has been growing at a sustained pace with continuous improvement in margins in the last five years.