ITC Share Price Target: Nuvama Downgrades Rating After Steep Excise Duty On Cigarettes

Domestic brokerage Nuvama has downgraded the stock rating of ITC Ltd. from 'buy' to 'hold', anticipating negative impact on sales and operational income after the government imposed an excise duty on cigarettes, effective next month.

Nuvama has a share price target of Rs 415 on the ITC stock, implying a 14% upside to Thursday's close.

Analysts also listed four reasons for not downgrading ITC stock further to the 'reduce' category. They said ITC offers strong dividend yield of 4% with 85% payout, tobacco RM is likely to turn favourable in FY27 after a challenging past few quarters. ITC has a large foods portfolio where GST cuts will be beneficial and the Century Paper acquisition will bottom out of FY27 margins.

The total taxes on cigarettes in India currently account for about 53% of retail prices, which is significantly below the World Health Organisation benchmark of 75% intended to discourage consumption, according to a Reuters report.

Shares of ITC settled 9.7% lower at Rs 363.85 on the NSE, compared to a flat benchmark Nifty 50. The stock has risen 10% in the last 12 months.

Out of 38 analysts tracking the company, 36 maintain a 'buy' rating, one recommends a 'hold,' and one suggests 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 36%.