Synopsis:
ITC Ltd is in focus after Morgan Stanley cut its target price from Rs. 500 to Rs. 469, citing margin pressures and weaker FY25 performance, though it maintained an overweight rating on the stock.
India’s largest cigarette manufacturer is in the spotlight today following a new analyst outlook on its business, and has significantly reduced their target prices for the stock. Check it below.
With the market capitalization of Rs. 5,01,015 crore, the shares of ITC Ltd were trading at Rs. 399.90, down by 1.4 percent from its previous day’s close price of Rs. 405.55 per equity share. The stock has touched an intraday high of Rs. 406.50 in today’s trading session.
What’s the news?
Morgan Stanley has maintained a buy/overweight rating on ITC but reduced its target price to Rs 469 from Rs 500, implying a 17.28 percent upside from current trading price of Rs. 399.90.
It expects slightly higher revenue in FY26–27, driven by the agri and cigarette businesses, but has cut EBITDA margin estimates by 175–250 bps due to inflation and weaker FY25 performance. As a result, earnings forecasts for FY26–27 are lowered by 3–4 percent, and scenario values by 5–7 percent, leading to the reduced target price.
Expected GST Reforms
Right now, tobacco products are taxed at the highest GST rate of 28 percent plus an extra cess. In the new GST reform, the system will be made simpler with only two main rates – 5 percent and 18 percent – and a special higher 40 percent tax for tobacco and other sin goods.
For tobacco, this means taxes will go up and prices will rise, making cigarettes, pan masala, and chewing tobacco more costly. This could lower sales, especially among price-sensitive buyers, but these maybe passed on to the consumers, thereby taking a low hit. At the same time, it will help the government earn revenue and discourage people from using tobacco, which supports public health.
About the Company
ITC Limited, India’s largest cigarette manufacturer, was founded in 1910 and has since expanded into a diversified conglomerate with businesses in FMCG, Paperboards & Packaging, Agri Business, and IT Services. The company remains a major player in India’s consumer and industrial sectors, with its operations expanding beyond its tobacco roots.
Financial Outlook
ITC Ltd posted revenue of Rs. 21,495 crore in Q1 FY26, up 14.55 percent QoQ from Rs. 18,765 crore and up 20.91 percent YoY from Rs. 17,778 crore. EBITDA stood at Rs. 6,816 crore, rising 4.56 percent QoQ from Rs. 6,519 crore and 4.14 percent YoY from Rs. 6,545 crore. Net profit grew by 3.21 percent year over year from Rs. 5176.99 crore to Rs. 5343.41 crore.
At the moment, the company’s P/E ratio is 25x lower as compared to its industry P/E 47.7x, and its ROE and ROCE are 27.3 percent and 36.8 percent, respectively, showing companies financial performance.
Written by Akshay Sanghavi
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