ITC May Gain From Recovery In Stock Prices Of Global Tobacco Makers: UBS
ITC Ltd. can gain from a recovery in stock prices of global tobacco makers, according to broking firm UBS.
Shares of British American Tobacco Plc, Philip Morris International Inc. and Altria have declined between 15 percent and 25 percent so far this year on expectations of lower volumes, according to Bloomberg data.
Expectations of easing tax volatility on cigarettes in India and a unified market under the goods and services tax regime is likely to lead to higher volume growth in the quarters to come, the broking firm said in a research report.
India has the lowest cigarette affordability and the proportion of contraband cigarettes are the highest in the world after Brazil and Pakistan, according to market research firm Euromonitor.
Formalisation of the economy under the GST regime is expected to spur volumes for the paper-to-cigarettes conglomerate. UBS projects a price target of Rs 375 apiece provided ITC can achieve 3 percent volume growth in its cigarette segment for the ongoing financial year.
Thirty-six of the 44 analysts covering the stock have a ‘Buy’ rating, according to Bloomberg data. Six recommend a ‘Sell’, while only one suggest a ‘Hold’, the data showed.
Shares of ITC today closed at Rs 312.75 apiece on the BSE, implying a potential upside of more than 7 percent from the Bloomberg consensus estimate.