Shares of ITC have continue their downward trajectory on Wednesday and are now trading at their lowest levels since July 2022. This comes just a day after ITC shares had hit 52-week low on the back of a 23% drawdown since the turn of the year.
The stock is currently trading at Rs 277.55, levels not seen since July 2022. The stock has fallen as much as 33% in the past 12 months and 23% on a year-to-date basis.
This comes on the back the government's elevated tax on cigarettes in February, which in turn, has forced the company to issue steep price hikes on cigarettes.
Cigarettes are indeed a vital organ for ITC, contributing a chunk of their main revenue. But the steep hikes have led to a fall in cigarette sales volumes, thus putting pressure on ITC, even though per cigarette realisations are higher due to higher prices.
In the fourth quarter earnings, ITC reported a year-on-year drop of 7% in its revenue, even though net profit increased by almost 5%.
ITC Q4FY26 (YoY)
- Net Profit up 4.9% at Rs 5,113 crore versus Rs 4,875 crore
- Revenue down 7% at Rs 16,050 crore versus Rs 17,249 crore
- EBITDA up 7.3% at Rs 6,425 crore versus Rs 5,987 crore
- EBITDA Margin at 40.03% versus 34.7% YoY
Should you buy ITC?
NDTV Profit spoke to G Chokkalingam, Founder & MD, Equinomics Research, who offered a bullish view on the FMCG counter despite the drawdown.
"We hold Buy recommendation on itc. Expect further rise in cigarette prices and a turnaround in business cycle in paper industry and better growth in fmcg other segment. We maintain a target of Rs 377," he said.
Chokkalingam's target price suggests ITC share price still has an upside potential of more than 36%. That is considerably higher than average analyst upside of 23% from current levels, though more than half of the analysts tracked by Bloomberg have either a hold or a sell rating on the counter.
"The important point is that this decline is not happening in a weak company. ITC remains cash-rich, profitable, and institutionally owned. But markets do not de-rate weak companies alone.
"They de-rate companies where expectations were too comfortable. A stock can have quality and still deliver poor price action if earnings visibility, tax risk and capital allocation expectations begin to move in the wrong direction. That is the reset ITC is facing today," says Harshal Dasani, Business Head at INVAsset.
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