ITC shares: decline nearly 3% post Q3 results, brokerages cut target prices over hotel business demerger & weak margins
Shares of ITC declined nearly 3 per cent on posting a 7.27 per cent decline in consolidated net profit to ₹5,013.16 crore for the December quarter 2024.
However, its revenue from operations rose by 9.05 per cent to ₹20,349.96 crore for the quarter under review.
Most brokerages have maintained their stance highlighting cigarette volume growth, but lowered target prices and EPS estimates due to weak margins, muted FMCG performance and hotel business demerger.
Global brokerages JP Morgan and Morgan Stanley have reiterated overweight calls on the stock at the target prices of ₹505 and ₹578, respectively, quoting that the cigarette growth volume as a key surprise and the revenue was in-line, but margins were a tad soft.
Nuvama Institutional Equities is cautious in near term given the ongoing urban slowdown, inflation in key raw material and weak profitability in FMCG and paperboards, paper & packaging segment. Stating that the Q3 results were in-line with estimates, the brokerage has retained buy at the target price of ₹571.
Noting ITC’s announcement of acquiring Prasuma, Nuvama believes it shall help the company become a full-stack player in the frozen food segment.
Analysts of Motilal Oswal have reiterated buy rating at a target price of ₹550 and slashed the EPS estimates by 4 per cent for FY25 and 5 per cent for FY26, mainly due to the impact of hotel business demerger. Motilal anticipates sustainable growth in cigarettes business, while adding that FMCG is seeing moderation due to rising commodity prices.
Meanwhile, analysts of JM Financial said that the demerger should reduce the capex intensity and aid improvement in return on invested capital (ROIC). The brokerage has pared the target price from ₹550 to ₹515, maintaining a buy.
Elara Capital emphasised that EBIT growth in cigarettes and FMCG took a hit due to higher input cost, which was partly offset by agri businesses. The brokerage is positive as ITC continues to deliver steady growth amid subdued demand. It has reiterated accumulate call at a reduced target price of ₹487 from ₹553 earlier. However, it has cut earnings estimates by 8 per cent each for FY26 and FY27.
The stock declined 2.01 per cent to trade at ₹432.25 on the NSE as at 12.12 pm, trading among top losers of Nifty 50 pack.
