Shares of ITC rallied nearly 8 percent intraday as investors placed bets after GST Council’s announcements.
The GST Council on Thursday decided to cap the cess rate on tobacco products at Rs 4,170 per 1,000 sticks or 290 percent ad valorem. It also capped the cess on pan masala at 135 percent ad valorem. This cess would be levied on top of the GST to be imposed on these products.
Analysts are largely positive on the stock due to these announcements and have largely maintained their buy calls.
Deutsche Bank has reiterated its buy stance on the stock with a target price of Rs 325 per share. Its initial assessment on GST highlights a positive for the stock on the status quo on taxes. It also feels that the state VAT will be substituted with GST rate of 28 percent.Morgan Stanley is overweight with a target price of Rs 310. It says the proposed specific cess on cigarettes 6 percent lower than the current tax rate. This reduction will be offset by an increase in GST rate to 28 percent against the VAT rate of 25
CLSA has a buy call on the stock with a target price of Rs 325 per share. It feels that the overall tax incidence on tobacco is likely to be neutral and considers it positive for the stock.
IDFC has an outperform rating on the stock with a target price of Rs 314 per share. It sees the possibility of a re-rating of the stock if there is a tax neutrality.
Macquarie has maintained outperform rating with a target price of Rs 304 per share. The total tax incidence on tobacco will remain the same, it feels. The research firm also forecasts cigarette earnings before interest and taxes growth to return to double digits in case of stable taxation in the GST Bill.The stock has soared over 7 percent in the past one month, while its three-day gain is nearly 8 percent. At 11:08 hrs, it was quoting at Rs 287.75, up Rs 19.55, or 7.29 percent. It touched an intraday high of Rs 289.00 and an intraday low of Rs 276.00.