The broking firm Jefferies has kept the rating unchanged on the stock of ITC to “Buy”. The brokerage firm has a target price of Rs 520 on ITC, an upside of 16% to the current market price.
According to Jefferies the company is trading at a fair value. It expects the company’s “stock to remain range-bound because of near-term volume moderation, tax uncertainty until the final budget, and overhang from potential BAT (British American Tobacco) stake sale.
Further, the brokerage house in its research report said that the interim budget will likely impact the company’s Cigarette business. Usually, the company’s sales are feared over tobacco taxation during every budget.
On the risk front, the brokerage house said, “We currently build-in 5% YoY rise in tobacco taxes for ITC in FY25 and believe that ITC could manage a high-single-digit tax hike also with minimal impact on earnings/volumes, but a D/D (double digit) hike would be negative while LSD (low single digit) would be a positive.”
Jefferies expects the company’s Cigarette EBIT to grow 7% annually over FY23-26 and revenue in FMCG to grow by 10%.
On Monday, ITC posted its third-quarter earnings. The company’s net profit rose by 6% during the quarter to Rs 5,335, beating the Street estimates. Its revenue from operations increased slightly by 2% year over year to Rs 19,484 crore.
The company’s Cigarette business segment increased by 3% year on year in the quarter ending December to Rs 8,295 crore against Rs 8,086 crore in the same quarter a year ago.