ITC target price: Global brokerage firm Goldman Sachs has reiterated its ‘Neutral’ rating on ITC Limited with a target price of Rs 330 per share, indicating that the company has little upside potential from the current levels. This is due to a mixed outlook for the company’s core business of cigarettes and margin pressures in the FMCG business.
Goldman Sachs pointed out that the earnings before interest and taxation per share are set to decline, indicating that there is pressure on the company’s margins, even as the prices rise nominally.
Macro-economic issues are also raised in this report, such as an increase in crude oil prices, which is likely to affect ITC’s non-cigarette FMCG businesses.
This segment is one of the key investment areas for ITC in recent years, and an increase in crude oil prices is likely to squeeze the profitability of this division in the near to medium term.
This is reflected in the fact that Goldman Sachs has lowered its earnings estimates for the company. The brokerage has lowered its earnings per share (EPS) estimates for the company by about 6 per cent for FY27 and about 3 per cent for FY28. These changes in earnings estimates reflect the challenges that ITC as a company might face in its earnings growth story.
Although ITC continues to benefit from its market position and diversified portfolio, Goldman Sachs believes that the risk-reward remains balanced. This Neutral rating may be interpreted as an indication that investors may be waiting to see more positive signs of margin recovery, pricing power, or cost management.
Earlier, Morgan Stanley turned cautious on ITC Limited due to a sharp rise in cigarette taxation. According to a brokerage report on March 23, the cigarette taxation has gone up by 40 per cent since February, which is a big change in the regulatory environment. To counter this, the firm has raised prices in the range of 20-40 per cent. The premium segment has seen a higher increase in prices, which underlines a strategic attempt by the firm.
Morgan Stanley has cautioned that this kind of pricing aggression may not be without cost. The brokerage has highlighted a risk to volume growth in FY27, with high prices potentially impacting consumption, especially in price-sensitive categories.
Following the market opening session at 9:23 AM, shares of ITC Limited rose 0.48 per cent to Rs 291.80, up from the previous closing price of Rs 290.40.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
