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26 September, 2018 15:52 IST
Edelweiss downgrades ITC to 'Hold' from 'Buy'
Source: IRIS | 18 Jul, 2017, 12.05PM
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Edelweiss Securities has downgraded ITC to 'Hold' from 'Buy' with target price of Rs 304 as against current market price (CMP) of Rs 325 in its report.

Commenting on the investment rationale, Edelweiss said, ''In a negative surprise, the GST Council on Monday stepped in to check the windfall being reaped by cigarette manufacturers and increased effective tax under GST by ~10-11% which will result in MRP increase of ~8-9%. This with 6% hike in the Budget 2017-18 amounts to ~16-17% total hike in taxes for FY18. So, why was this unexpected? The Budget had sprung a positive surprise with mere 6% tax hike (lowest hike in past 6 years) coupled with relatively softer stance in earlier GST.

With per capita consumption 1/18th of China's, cigarette opportunity in India remains attractive over long term. Negative surprise on taxation front coupled with uncertainty will keep the stock under pressure. We value ITC on SoTP basis on FY19E and arrive at a target price of Rs 304. We downgrade to 'HOLD/SP' from 'BUY/SO'.

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