Brokerage Firm Prabhudas Lilladher Sees ITC Share Price Target at Rs 302
ITC Faces Challenges Amidst War in West Asia
ITC reported numbers enabled by strong growth in the FMCG and Paperboard segments, despite the cigarette business sustaining profitability and the Agri business suffering due to the impact of the war in West Asia on exports. The company's performance was driven by growth in these key sectors.
In the cigarette segment, ITC is expected to face severe pressure on volumes and profitability as the full impact of the sharp increase in excise and subsequent price hikes plays out. Additionally, the company is likely to experience downtrading in its Kings and Ready-to-Use Filter Tobacco (RSFT) products, which could deteriorate the sales mix. However, a gradual but delayed recovery is expected once a base is settled.
The FMCG segment, on the other hand, is expected to perform well, given the low base, although margin headwinds in the medium term look likely. The Paper business is expected to gain benefits from the Minimum Import Price (MIP) and gains from softer wood prices.
Forecast and Outlook
Our estimates indicate a 4.8% EPS CAGR over FY26-28 (excluding Century Paper). We assign a SOTP-based target price of INR302 and recommend retaining a "Reduce" rating on the stock, as the impact of cigarette excise is yet to play out fully.
| Segment | FY26 | FY27 | FY28 |
|---|---|---|---|
| FMCG | 10.5% | 8.5% | 7.3% |
| Cigarette | -5.5% | -8.5% | -6.3% |
| Paper | 12.5% | 10.5% | 9.3% |
| Agri | -15.5% | -12.5% | -10.3% |
EPS Growth Rate CAGR | 4.8% | - | - |
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Investors should be cautious about ITC's cigarette business due to expected pressure on volumes and profitability.
More in Market
SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire
Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
