JP Morgan has maintained its ‘Overweight’ rating on ITC while trimming the target price to ₹475 per share, down from earlier estimates. The revised target still reflects an upside from the current market price of ₹410.25. The brokerage has also reduced its FY25–FY27 earnings per share (EPS) estimates by 4–6%, citing lower earnings before interest and tax (EBIT) forecasts for the cigarettes, other FMCG, and paper businesses.
In the cigarette segment, while volume growth has been resilient, pricing power remains elusive amid heightened competition from players like Godfrey Phillips India (GPI) and Philip Morris (PM). This increased activity has limited ITC’s ability to raise prices, putting pressure on margins.
TheFMCG segment is seeing profitability headwinds due to muted revenue growth and continued raw material (RM) inflation, while the paper division continues to face unresolved challenges. In response to GPI’s deep discounting strategy in select markets, ITC is adopting portfolio interventions and sustained innovation to defend its share.
JP Morgan noted that despite these headwinds, ITC’s valuations remain attractive, trading at 24x FY26E and 22x FY27E earnings, alongside a healthy dividend yield of 4%. However, it emphasized that a pickup in cigarette EBIT growth, supported by pricing gains, and improvements in the other FMCG business are key catalysts for a meaningful re-rating of the stock.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making any investment decisions.
