ITC Ltd.'s shares are under close scrutiny by analysts after the company reported first-quarter results that fell short of Street estimates. While most brokerages maintain a neutral-to-positive outlook, there's a significant divergence in their target price projections for the FMCG giant.
Highest and Lowest Projections
Post-Q1 earnings, the highest target price for ITC stock stands at ₹440, set by 360 ONE Capital. Conversely, the lowest target price has been pegged at ₹290 by both Goldman Sachs and Systematix Group. These targets suggest a potential upside for the stock ranging from 3% to 57%.
Global Brokerage Outlooks
Several international brokerages have weighed in with their updated forecasts for ITC shares:
- Investec: ₹308
- JPMorgan: ₹310
- HSBC: ₹320
- Nomura: ₹340 (upgraded to 'Buy')
- Jefferies: ₹350
- UBS: ₹350
- BNP Paribas: ₹380
- CLSA: ₹388
Domestic Analyst Views
Indian brokerages also provided a range of targets:
- Axis Capital: ₹295
- MOFSL: ₹300
- Dolat Capital: ₹306
- Emkay: ₹310
- PhillipCapital: ₹350
- DAM Capital: ₹355
- Antique Stock Broking: ₹377
Factors Influencing Performance and Targets
ITC's Q1 revenue saw a 14% year-on-year decline, falling 9% below consensus estimates. This was largely attributed to a 26% drop in cigarette net sales. Both EBITDA and PAT also saw significant declines of 28% and 27% respectively, missing expectations by 16% and 18%.
Nuvama analysts noted that the sharp increase in cigarette taxes impacted the entire industry in Q1. Despite this, ITC's cigarette volumes fell by a mid-single-digit percentage year-on-year (5%), which was better than the expected high-single-digit decline. The company implemented pricing interventions across various brands to balance profitability, consumer retention, and mitigate illicit trade risks.
Emkay highlighted that while ITC stock appears attractive at current valuations, uncertainty regarding the timing and extent of future cigarette price hikes and their impact on volume remains a key overhang for investors.
"The EBIT decline in cigarette was much sharper (down 35 per cent YoY) than our expectation of 25 per cent fall... We expect the EBIT decline to be gradually lower in coming quarters due to further price hikes and full impact of previous price hikes flowing through," one brokerage noted.
Overall, analysts acknowledge that Q1 marked the first full quarter under the new pricing regime, and ITC demonstrated relatively superior execution in navigating these industry-wide tax adjustments compared to peers like Godfrey Phillips India (GPI) and VST Industries, which also reported significant revenue and EBITDA declines.