INSUBCONTINENT EXCLUSIVE:
fell nearly 3 per cent on Monday even after the company delivered an 18.73 per cent year-on-year (YoY) rise in March quarter profit in line
with Street estimates.
Turns out, investors and analysts have started discounting a GST rate hike on cigarettes after almost two years.
The
FMCG firm on Monday reported Rs 3,481 crore profit in line with a Rs 3,201 crore profit estimate that analysts had made in an ET NOW poll
But analysts looked worried in their growth projections and apprehend a GST blow soon.
The company registered an 8 per cent volume growth
in its core business for the quarter on a low base and a stable tax regime
There may be strong pressure on volume growth if the GST Council increases the tax rates in its subsequent meetings as there has not been
any rise in taxes on cigarettes for almost two years, participants said
Motilal Oswal.
After March quarter numbers, Motilal Oswal maintained a 'neutral' call on the stock with a target price of Rs 305.
ITC shares
traded over 1 per cent higher at Rs 293 on BSE around 11 am (IST).
While the stock trades at a discount to its peers at 23.9 times FY21E
earnings per share (EPS), it is at a premium to global cigarette majors (1.5 times-3 times)
Edelweiss has a different view
The brokerage has retained its buy recommendation on the stock with a target price of Rs 340, showing optimism on the opportunity in the
Compared with global peers, where staples trade at a premium of nearly 35 per cent to cigarette companies, the premium in India is about 75
In our view, the result was admittedly not great, but not that bad either," the brokerage said
JM Financial said it likes the stock as the risk-reward looks favourable, considering the steep 45 per cent price-to-earnings (PER)
discount to the sector against a 10-year average of 20-25 per cent.
Macquarie and Credit Suisse have 'outperform' view on the stock with
target prices of Rs 376 and 370, respectively
On the other hand, Morgan Stanley and JP Morgan have 'overweight' view on the stock with target prices of Rs 320 and 340,
respectively.
Jefferies and BNP Paribas have given buy recommendation on the stock with target prices of Rs 360 and Rs 370, respectively.
