ITC share price: Macquarie, UBS, CLSA, Morgan Stanley - Highest and lowest targets

June quarter results by ITC Ltd missed Street estimates, with 20 brokerages that reviewed the quarterly results suggesting a neutral-to-positive view on the stock. The highest target price on the FMCG stock post Q1 results stands at Rs 440 by 360 ONE Capital. The lowest target price on the cigarette maker stands at Rs 290 by Goldman Sachs and Systematix Group so far. The target suggests 3-57 per cent potential upside on the counter.  

ITC's Q1 revenue fell 14 per cent YoY, which was 9 per cent below the consensus estimates mainly due to the 26 oer cebt decline in cigarette net sales. Ebitda and PAT declined 28 per cent and 27 per cent, which was 16 per cent and 18 per cent below consensus’ expectations. That said, cigarette volumes declined by a mid-single-digit YoY against expectations of a high-single digit. 

"The EBIT decline in cigarette was much sharper (down 35 per cent YoY) than our expectation of 25 per cent fall, which was the lowest for ITC among the three listed players (GPI, VST). We expect the EBIT decline to be gradually lower in coming quarters due to further price hikes and full impact of previous price hikes flowing through," it said. 

While the ITC stock seems attractive at current valuation, Emkay said the uncertainty regarding the extent and timing of future price hikes in cigarettes and their impact on volume will remain an overhang, The brokerage suggested a target of Rs 310.

Among global brokerages, Investec has a target price of Rs 308, while JPMorgan suggested Rs 310 for the stock. HSBC set a target price of Rs 320. Nomura upgraded the stock to 'Buy' with a target of Rs 340. Jefferies and UBS have a target price of Rs 350 each, followed by BNP Paribas at Rs 380 and CLSA at Rs 388.

"We revise our FY27, FY28 and FY29 EPS by minus 5 per cent, 2 per cent and 1 per cent to factor in 1Q results and price hikes. We value ITC on an SoTP basis and arrive at a target of Rs 340 rs 300 previously), implying a P/E of 20 times on Jun-28 basis. ITC is trading at -1SD to its 10-year P/E. Upgrade to Buy, Nomura said.

Nuvama said the sharp increase in cigarette taxes weighed on the entire industry in Q1 with all three listed players recalibrated pricing strategies to protect consumer franchise and limit illicit trade. 

It noted that Godfrey reported 19 per cent and 46 per cent YoY decline in revenue and Ebitda while cigarette volumes fell only 2 per cent YoY, aided by 17 per cent decline in realisation/stick. 

VST, it noted, reported 14 per cent and 35 per cent YoY decline in revenue and Ebitda with cig volumes down 14.4 per cent YoY. 

"ITC's cigarette business reported 26 per cent/35 per cent YoY decline in revenue/EBIT while cig volumes fell only 5 per cent YoY, led by 30-plus portfolio and pricing interventions across brands and price points to balance profitability, consumer retention and illicit trade risks," Nuvama said. 

Overall, Nuvama said Q1 was the first full quarter under the new pricing regime, highlighting ITC's relatively superior execution in navigating the industry-wide tax reset.

Among domestic brokerages, Antique Stock Broking suggested a target price of Rs 377 on ITC. Axis Capital has a target of Rs 295, MOFSL Rs 300, Dolat Capital Rs 306, PhillipCapital Rs 350, and DAM Capital Rs 355.