In what can be termed as a turnaround after being in a narrow range for over a year, ITC shares gained a lot last week and gained 9% in 5 days. Shares of the cigarette-from-hotel conglomerate did not participate enthusiastically in the recent bull market rally as the stock is up 10% this year compared to a 23% rise in the benchmark Sensex.
The GST Council made several changes: GST RatesIncluding some big announcements in the meeting held on Friday. However, the Council did not make any rate changes in any cess area including tobacco. “This is a positive development for ITC, which is set to see improved cigarette volumes and earnings in the coming quarters,” Jefferies said in a note.
Stable taxation and opening up of the economy are expected to improve cigarette volumes in the coming quarters. The brokerage firm said that even in Q1FY22, the impact of the second wave was less than last year, and the recovery has been strong since mid-June 2021.
Jefferies has maintained a high conviction rate on ITC stock and has revised upwards its target price to Rs. ₹300 (against ₹275 ago), target price with an upward scenario ₹360 and below landscape ₹190 each.
FMCG benefited from higher demand for packaged foods, health and hygiene products in FY21. “ITC sees Ebit loss of ₹5.3 billion (3-4% of total Ebit) in its hotel business in FY21 due to covid. Despite the impact of the second wave, the trend has been far better in 1QFY22. With travel improvement and continued cost focus, we expect the business to reach EBIT break-even in 2HFY22,” said Jefferies. Overall, it expects ITC to see a strong uptick in earnings growth led by the cigarette business. does.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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