ITC Shares: Rally to ₹585 or Drop to ₹435? Analysts Await Upcoming Budget for More Cues

As the financial markets eagerly await the upcoming Union Budget, ITC Ltd., the cigarettes-to-hotels conglomerate, remains a focal point for analysts. With its shares correcting 12% from the peak of ₹499 reached in July last year, the company’s future performance hinges significantly on potential regulatory changes post-election. Analysts have set price targets ranging from ₹435 to ₹585, reflecting a mixed but predominantly positive outlook for ITC.

Brokerage Ratings and Target Prices

Despite a mixed performance in the March quarter, multiple brokerage firms have maintained a ‘buy’ rating on ITC’s stock, driven primarily by the stability of its cigarette business. Here’s a snapshot of current ratings and target prices from various analysts:

Citi’s Perspective

Citi has increased its target price for ITC to ₹515 per share, underscoring a ‘buy’ rating. The brokerage is particularly attentive to any changes in taxation or regulatory pronouncements in the Union Budget, which could affect ITC’s volumes and ability to manage cost pressures.

Jefferies’ Take

Jefferies maintains a ‘hold’ rating with a target of ₹435 per share. While the cigarette segment exceeded expectations, driven by positive volume surprises, the overall earnings missed due to acute pressures in the agri and paperboards sectors. Jefferies considers the upcoming Budget crucial for ITC’s share price performance.

CLSA’s Analysis

CLSA, with an ‘outperform’ rating and a target of ₹470 per share, noted steady performance in the cigarette segment but acknowledged subdued results in the paper and agri businesses. The brokerage has reduced its near-term earnings projections by 2-3% due to these segmental challenges.

Emkay Global’s Optimism

Emkay Global remains optimistic, setting a target of ₹510 per share. Despite highlighting potential FY25 challenges such as inflationary stress in cigarettes and a muted outlook for the agri business, Emkay believes in ITC’s diversified business execution and macroeconomic support.

Motilal Oswal’s Defensive Bet

Motilal Oswal sees ITC as a resilient defensive bet amid the volatile interest rate environment. With a 3-4% dividend yield, the brokerage reaffirms its ‘buy’ rating and a target price of ₹515 per share.

Market Sentiment

Of the 38 analysts covering ITC, 35 recommend buying the stock, two suggest holding, and one advises selling. As of Friday, ITC shares were trading flat, down 6% year-to-date, reflecting cautious market sentiment as investors await further cues from the Union Budget.

Conclusion

The upcoming Union Budget is poised to play a pivotal role in shaping ITC’s stock trajectory. While the cigarette business remains robust, the broader performance will be influenced by regulatory developments and economic conditions. Investors and analysts alike are closely monitoring these factors to gauge the potential rally to ₹585 or a dip to ₹435.

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