ITC hits Rs 500: Jefferies says 'Buy' on no tobacco tax rejig in Budget

ITC share price target: ITC stock hits Rs 500-mark for the first time. Jefferies upgrades stock to 'Buy', Macquarie initiates with 'Outperform'

ITC share price crosses Rs 500: ITC share price hit a record high of Rs 510.60 as it rallied nearly 4 per cent on the BSE in Wednesday's intraday trade. ITC stock has gained 10 per cent in two days in an otherwise subdued market.

The rise in ITC stock came after Finance Minister Nirmala Sitharaman, on Tuesday, did not make any tax changes for the tobacco industry in Union Budget 2024-25.

The stock price of the cigarettes-to-hotels conglomerate surpassed its previous high of Rs 499.60, touched on July 24, 2023. Thus far in the month of July, ITC share price has surged 20 per cent. It has also bounced back 27 per cent from its previous month's low of Rs 403 hit on June 4.

At 09:38 AM, ITC share was trading 3 per cent higher at Rs 506.15 as compared to 0.07 per cent decline in the BSE Sensex. Around 17 million shares have already changed hands on the NSE and BSE.

According to reports, Jefferies India has upgraded ITC stock to a 'Buy' rating, raising ITC stock target price to Rs 585 per share.

Jefferies, according to reports, noted that the Union Budget 2024-25 kept tobacco taxes unchanged, which came as a relief for ITC. The last tobacco tax hike was 2 per cent, done in February 2023. This stability allows ITC to focus on volume with minimal price hikes, Jefferies said.

Further, Jefferies noted that GST taxes are expected to remain stable until March 2026 as the Centre settles state dues.

"Improving demand in the staple sector should, thus, benefit ITC's key businesses. The February 2025 Budget will be significant, but a modest price hike this year will lay the groundwork for next year," Jefferies said.

Meanwhile, Macquarie has initiated coverage on ITC stock with an 'Outperform' rating and  target price of Rs 535 per share. The brokerage firm sees above-peer Ebit growth for the key cigarette segment, given ITC's market share and innovation focus. This pickup will not impact continued diversification into non-cigarette segments, as tailwinds across FMCG and hotels offset weakness in paper, the brokerage firm said.

In FY24, the cigarette segment witnessed consolidation of volumes on a high base after a period of sustained growth momentum. It delivered 7.1 per cent year-on-year (Y-o-Y) revenue growth and 6.5 per cent Y-o-Y Ebit growth.

"ITC continues to counter illicit trade and reinforce market standing by fortifying the product portfolio through innovation, democratising premiumisation across segments and enhancing product availability. It remains well positioned to enhance its market standing in the legal cigarette industry," said analysts at Nuvama Institutional Equities in a company update.

Differentiated variants and the premium segment delivered a strong performance. Recently, a range of distinctive variants was introduced under brands like 'Classic', 'Gold Flake', 'American Club', and 'Bristol', among others. ITC also bolstered its presence in key markets by launching several unique products across different segments, the brokerage firm said. It retains a 'Buy' rating on ITC stock with a revised target price of Rs 540 (earlier Rs 505).

Meanwhile, the board of directors of ITC is scheduled on August 1, 2024 to consider and approve the financial results of the company for the quarter ended 30th June, 2024 (Q1FY25).