ITC hit by 6 brokerage downgrades as cigarette tax hike darkens earnings outlook. Should you buy, sell or hold? - The Economic Times
ITC shares have come under selling pressure after several brokerages downgraded the stock, citing concerns over a potential increase in cigarette taxes. Analysts believe higher taxation could affect cigarette volumes and margins, which remain a key profit driver for the company despite its diversified presence in FMCG, hotels, paperboards, and agri-business. While ITC has historically managed tax hikes through price adjustments and cost control, the current valuation leaves limited room for earnings disappointment. Some experts feel near-term growth may slow as consumers react to higher prices, while others highlight ITC’s strong balance sheet, steady cash flows, and expanding non-cigarette businesses as long-term positives. The stock’s recent rally has also prompted caution, with brokerages advising investors to reassess risk-reward levels. For existing investors, the consensus leans toward holding the stock, while fresh buyers may consider waiting for clearer visibility on taxation and earnings growth.
The Key points
- Multiple brokerages have downgraded ITC stock.
- Cigarette tax hike fears triggered earnings concerns.
- Cigarettes remain ITC’s largest profit contributor.
- Higher taxes may impact volumes and margins.
- Valuations are seen as stretched by analysts.
- ITC has managed past tax hikes effectively.
- FMCG and hotels provide diversification support.
- Strong cash flows and balance sheet remain positives.
- Near-term stock performance may stay volatile.
- Analysts suggest hold, with caution on fresh buying.
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