Shares of ITC experienced a notable gain of over 4% on Tuesday, making significant contributions to the Nifty index’s upward movement. The stock is adding close to 40 points, helping to mitigate broader index losses.
The surge in ITC’s shares comes in response to Finance Minister Nirmala Sitharaman’s budget speech, during which no changes were announced regarding tobacco taxation.
This decision has been welcomed by ITC, a company that derives a significant portion of its revenue from cigarettes. The current rates were left unchanged following a 16% increase in National Calamity Contingent Duty (NCCD) imposed last year.
Rural Demand Recovery Boosts Non-Tobacco Segments
ITC’s shares have shown little movement on a year-to-date basis and have remained relatively flat over the past 12 months, following a strong performance in 2022 and 2023. The lack of change in tobacco taxes is seen as a relief for the company, which has been a major contributor to its financial stability.
Adding to the positive outlook for ITC is the potential recovery in rural demand, which is expected to benefit the company’s non-tobacco segments, including FMCG and Agri. The Finance Minister’s budget also includes a 12% increase in rural allocation, further supporting the company’s broader business interests.
Macquarie on ITC
Brokerage firm Macquarie initiated coverage on ITC on Monday with a target price of Rs 535, citing the growth potential of the company’s cigarette business. Macquarie has given ITC an “outperform” rating, suggesting that the company’s cigarette business still has significant room for expansion.
The brokerage also forecasted that ITC’s non-cigarette Earnings Before Interest and Tax (EBIT) could rise to 35% to 40% of the company’s overall EBIT over the next decade, up from the current 20%.
Stocks Performance In Last One Year
In terms of stock performance, ITC shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 14.78% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 5.74%, indicating a strong upward trend.
Year-to-date, ITC shares have surged by 3.79%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 3.02% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.