Why ITC stock is not going up after Q4 FY21 Results?

The FMCG giant ITC has announced its quarterly results for Q4FY21 on the 1^st of June 2021. Despite posting a decent result, the price of the stock hasn’t moved much. What are the possible reasons behind this? Let's find out in this blog.

Introduction:

ITC has posted its Q4FY21 results of Tuesday 1^st of June 2021. But the stock has not shown any kind of rise in its value. Their FMCG Others segment, i.e., apart from cigarettes has disappoints the sentiments of the shareholder who is thinking that why the stock is not showing good valuation when compared to its peers.

Possible Reasons:

• The reasons for not getting as premium a valuation as its peers in the markets could be the low EBITDA margins of the FMCG Others segment.
• The EBITDA margins for Q4 FY21 came out to be 8.3%.
• If we talk about the complete year, i.e., EBITDA margins for FY21, the figure stands at 8.9%. The EBITDA margins for the previous quarter, which is for Q3 FY21 was around 9.6%.

Positives:

• One thing that should also be considered that for Q4 of all the years for ITC in the FMCG Others segment were 3.2% in Q4FY17, 5.7% in Q4FY18, 7% in Q4FY19, 8.1% in Q4FY20, and now in Q FY21the margins are 8.3%.
• Keeping apart the fall in the margin from the previous quarter, we can see that the EBITDA margin is continuously rising on a YoY basis as Q4 remains tough for the companies in this sector.
• If we talk about the figures of the complete financial year, the EBITDA margin of the FMCG Others segment was 2.5% in FY17, 4% in FY18, 5.5% in FY19, 7.1% in FY20, and now in the Financial Year 2021, the margins are 8.9%.
• The ITC stock has a good dividend yield of 5.1% in which the Interim Dividend was around Rs. 5 per share and a Final Dividend of Rs. 5.75 per share. The total dividend came out to be Rs. 10.75 per share.

Conclusion:

The only positive that can be seen in the stock is the rising EBITDA margins on yearly basis. That too is way below the industry standards and peers have an advantage in this. If the company focuses on increasing its EBITDA Margins to double digits, then only the rise in the value of a share can be seen otherwise it will remain the same zone for long.