Shares of FMCG major ITC will remain unaffected from the amendment to the GST Compensation Cess Schedule passed by the Lok Sabha late last week, said JM Financial in its report. The schedule has been seen as a prelude to a possible government action on cigarette taxation, which has been fairly steady and reasonable over the last few years.
However, JM Financial said that the amendment was more of a move to cast the tax net wider on non-cigarettes forms of tobacco (specifically gutkha, pan masala, chewing tobacco etc), and it was likely that cigarette tax structures are left untouched given that compliance therein is pretty robust already.
In the current trading session, shares of ITC were trading 3.36% away from the 52 week high of Rs 394 hit on February 23, 2023. Shares of ITC have gained 50.91 per cent in a year and risen 15.26% this year.
Total 2.27 lakh shares of the FMCG firm changed hands amounting to a turnover of Rs 8.62 crore on BSE. Market cap of the firm rose to Rs 4.74 lakh crore. At 11:57 am, the stock was trading 0.82% higher at Rs 381.80 on BSE.
In terms of technicals, the relative strength index (RSI) of ITC stock stands at 50.8, signaling it’s trading neither in the overbought zone nor in the oversold zone. ITC stock has a one-year beta of 0.5, indicating very low volatility during the period. ITC shares are trading higher than the 5 day, 50 day, 100 day and 200 day moving averages but lower than 20 day moving averages.
JM Financial in a report said, “We continue to expect that the government’s increasingly logical stance on tobacco taxation remain a key value-driver for the ITC stock, and there is increasing evidence of the policy environment in recent years being quite supportive.”
The brokerage maintained its buy stance on ITC with a target of Rs 440,an upside of 16% to the current market price.
Earlier this month, Motilal Oswal Financial Services too assigned a target of Rs 450 to the ITC stock.
ITC Ltd recent stock’s outperformance over FMCG peers might continue going ahead, thanks better earnings visibility in the next few quarters, inexpensive valuations and attractive dividend yield, said Motilal Oswal Securities. The brokerage, which has a target of Rs 450 for ITC, said the stock has done well at a time when consumer peers in both staples and discretionary categories have struggled. ITC’s dividend yield, it said, is healthy at 3.5-4 per cent despite the recent stock price appreciation.
In late February, Goldman Sachs maintained a buy call for the FMCG major. Goldman Sachs set ITC shares price target at Rs 450 in a year.
Goldman Sachs said, “FMCG business has a significant contribution to ITC’s EBIT. Capital allocation has improved resulting in 85% PAT to FCF conversion. ITC’s PE is in-line with the 15-year average despite the improvements. ITC’s premium over global tobacco peers in-line with history.”
The global investment bank highlighted that the valuations still trade at a steep discount to India FMCG despite being comparable.
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