ITC shares climbed nearly 3% on Monday after global brokerage Citi upgraded the stock from 'sell' to 'buy'. The firm raised its price target to ₹300, noting that the worst of the earnings downgrade cycle has passed despite ongoing challenges in the cigarette segment.
Shares of ITC saw a positive reaction on Monday, rising nearly 3% to reach an intraday high of ₹264.25 on the BSE. This movement comes after global brokerage Citi upgraded the stock from 'sell' to 'buy', setting a new price target of ₹300 per share.
The brokerage’s move reflects a shift in sentiment regarding the company's risk-reward profile. Citi analysts indicated that the earnings downgrade cycle for the stock is likely nearing an end. This update comes after a challenging year for the company, with the stock price having corrected by approximately 35% over the past 12 months. According to the brokerage, the current market valuation appears to have already factored in the concerns regarding volume growth and profitability.
While the outlook has turned more optimistic, the cigarette business continues to face hurdles. Citi noted that the sector is dealing with persistent competitive intensity and the impact of illicit trade, which may keep near-term volume growth under pressure. However, the brokerage highlighted the company’s ability to manage costs effectively. ITC has reportedly passed on about 75% of recent tax hikes to consumers through calibrated price increases, demonstrating stable pricing power.
To counter the risk of consumer downtrading—where customers switch to cheaper alternatives—the company is focusing on its premium and large-size filter tipped product segments. These products are expected to help protect the portfolio's overall health.
Despite the upgrade, investors should remain aware of potential risks. The company’s financial performance remains sensitive to further tax changes and regulatory shifts in the tobacco space. Additionally, broader market factors, such as foreign institutional investor (FII) outflows and rising bond yields, have historically influenced sentiment in the Indian equity markets. The effectiveness of the company’s current product strategy against ongoing competitive and regulatory pressures remains a key area for shareholders to monitor in the coming quarters.