- ITC shares declined nearly 20% this year, making entry appealing per UBS
- Price hikes on cigarettes passed fully in premium segments, minimal in others
- ITC aims for low single-digit EBIT decline in FY27 and rebound in FY28
A nearly 20% decline in ITC Ltd. share price so far this year has made entry "appealing", according to multinational brokerage UBS, which expects better operational performance in the next fiscal after rolling out cigarette price hikes. The share price recently hit a 52-week low of Rs 302.
The company has sharply raised cigarette prices across some categories after higher excise duty came into effect this month. The price hikes have been fully passed on in premium cigarettes which will keep net realisation same as before, while it is kept minimal in price sensitive segments of 69mm and 64mm. This pricing approach is likely to keep ITC's volume and EBIT impact to minimum, they said. The company can deliver low single-digit EBIT decline in FY27, by playing the overall pricing strategy through its portfolio and deliver meaningful rebound in FY28.
"... we think valuation has become quite appealing now and a risk worth taking. As the price curve and overall portfolio continues to take shape, we expect this will serve as the key catalyst for the stock performance," UBS analysts said in a note.
The firm maintained a 'buy' rating on ITC and cut target price to Rs 395 from Rs 420 earlier. The new price indicates a 22% potential upside to the previous close.
Shares of ITC traded 1.3% higher at Rs 329.75 apiece on the NSE as of 10:00 a.m., compared to a 0.25% decline in the benchmark Nifty 50.
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