ITC Ltd shares declined as a lot as 6.4% on Monday to hit new 52-week low after the Union Funds 2020 proposed to lift excise responsibility on tobacco and cigarettes. The inventory had fallen 7% within the earlier session on Saturday as properly.
ITC shares hit a low of Rs 205 apiece in intraday commerce on Monday. At 11:47 am, the inventory was buying and selling at Rs 212.45, down 3%. Notably, the inventory had fallen over 23% within the final one 12 months.
Brokerage agency Sharekhan stated that the tax charge on cigarettes has been raised by 6-12% relying on the dimensions of the cigarette. The weighted common tax charge enhance for ITC stands at 9%, it added.
Cigarette gross sales quantity development was already muted at 2% within the December quarter, and worth enhance of 10% would put additional stress on gross sales within the close to time period, Sharekhan stated.
“We have now diminished our earnings estimates to consider lower-than-earlier anticipated cigarette gross sales quantity for FY2021 and FY2022 and downgraded our ranking on the inventory to ‘maintain’ with a revised worth goal of Rs 242,” it added.
JP Morgan additionally downgraded the inventory to ‘impartial’ from ‘obese’ and minimize the goal worth to Rs 235. It stated the tax hike would impression quantity development and weigh on inventory multiples, nonetheless, the robust financial franchise makes it engaging at 5-7% potential draw back.
One other brokerage agency Investec, in the meantime, maintained a ‘purchase’ name on ITC inventory however minimize the goal to Rs 259 from Rs 290 per share.
“It’s first sizeable enhance in taxes on cigarettes since July 2017 and we count on the corporate to lift costs by over 6-7%,” it stated.
The analysis home minimize earnings earlier than curiosity, tax, depreciation and amortization (Ebitda) estimates by 3.7/5.6% for FY21/22, diminished cigarette quantity and EBIT development assumptions from 4% to 2% for FY21/22, whereas sustaining a ‘purchase’ name resulting from decadal low valuations.
Get the very best of Information18 delivered to your inbox – subscribe to Information18 Dawn. Comply with Information18.com on Twitter, Instagram, Fb, Telegram, TikTok and on YouTube, and keep within the know with what’s occurring on this planet round you – in actual time.