Synopsis:
ITC Ltd is in focus after Morgan Stanley minimize its goal worth from Rs. 500 to Rs. 469, citing margin pressures and weaker FY25 efficiency, although it maintained an obese score on the inventory.
India’s largest cigarette producer is within the highlight right now following a brand new analyst outlook on its enterprise, and has considerably decreased their goal costs for the inventory. Examine it beneath.
With the market capitalization of Rs. 5,01,015 crore, the shares of ITC Ltd had been buying and selling at Rs. 399.90, down by 1.4 p.c from its earlier day’s shut worth of Rs. 405.55 per fairness share. The inventory has touched an intraday excessive of Rs. 406.50 in right now’s buying and selling session.
What’s the information?
Morgan Stanley has maintained a purchase/obese score on ITC however decreased its goal worth to Rs 469 from Rs 500, implying a 17.28 p.c upside from present buying and selling worth of Rs. 399.90.
It expects barely larger income in FY26–27, pushed by the agri and cigarette companies, however has minimize EBITDA margin estimates by 175–250 bps as a consequence of inflation and weaker FY25 efficiency. In consequence, earnings forecasts for FY26–27 are lowered by 3–4 p.c, and situation values by 5–7 p.c, resulting in the decreased goal worth.
Anticipated GST Reforms
Proper now, tobacco merchandise are taxed on the highest GST fee of 28 p.c plus an additional cess. Within the new GST reform, the system might be made easier with solely two principal charges – 5 p.c and 18 p.c – and a particular larger 40 p.c tax for tobacco and different sin items.
For tobacco, this implies taxes will go up and costs will rise, making cigarettes, pan masala, and chewing tobacco extra expensive. This might decrease gross sales, particularly amongst price-sensitive patrons, however these possibly handed on to the customers, thereby taking a low hit. On the identical time, it would assist the federal government earn income and discourage individuals from utilizing tobacco, which helps public well being.
In regards to the Firm
ITC Restricted, India’s largest cigarette producer, was based in 1910 and has since expanded right into a diversified conglomerate with companies in FMCG, Paperboards & Packaging, Agri Enterprise, and IT Providers. The corporate stays a serious participant in India’s shopper and industrial sectors, with its operations increasing past its tobacco roots.
Monetary Outlook
ITC Ltd posted income of Rs. 21,495 crore in Q1 FY26, up 14.55 p.c QoQ from Rs. 18,765 crore and up 20.91 p.c YoY from Rs. 17,778 crore. EBITDA stood at Rs. 6,816 crore, rising 4.56 p.c QoQ from Rs. 6,519 crore and 4.14 p.c YoY from Rs. 6,545 crore. Web revenue grew by 3.21 p.c 12 months over 12 months from Rs. 5176.99 crore to Rs. 5343.41 crore.
In the intervening time, the corporate’s P/E ratio is 25x decrease as in comparison with its business P/E 47.7x, and its ROE and ROCE are 27.3 p.c and 36.8 p.c, respectively, displaying firms monetary efficiency.
Written by Akshay Sanghavi
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