Whalesbook
Brokerage firm Kotak Securities has upgraded ITC to 'Buy' with a fair value of ₹365, citing recovering cigarette business trends. It also initiated coverage on NBCC with an 'Add' rating, highlighting its robust order pipeline. Investors are evaluating the long-term potential of ITC's cigarette segment amidst tax shifts and NBCC’s execution pace.
What Happened
Kotak Securities has updated its outlook on two major Indian companies. The brokerage has upgraded ITC to 'Buy' from its previous 'Reduce' rating, setting a new fair value of ₹365. Simultaneously, the firm initiated coverage on NBCC (India) with an 'Add' rating and a fair value of ₹115. These changes reflect the brokerage's latest view on ITC’s ability to navigate regulatory and competitive challenges, and NBCC’s potential to capitalize on its infrastructure order pipeline.
Why the Change for ITC
For ITC, the upgrade centers on the cigarette business. The brokerage noted that the negative impact on cigarette volumes has been relatively contained, estimated between 5% and 10%. While the business has faced a significant decline in earnings before interest and tax (EBIT)—approximately 30%—due to a major tax increase in early 2026, the outlook is turning more positive.
The company is using a strategy focused on "EBIT-per-stick" neutrality. This means ITC is taking calibrated price hikes and promoting specific product variants, such as 'Longs' and premium 'DSFT' (Direct-to-Store/Factory) offerings, to offset the impact of higher taxes. The expectation is that these headwinds will moderate throughout FY27. Investors are tracking how effectively ITC transitions price-sensitive consumers to these alternative products while managing competition, particularly from players like Godfrey Phillips, which has been expanding its Marlboro brand presence.
The NBCC Opportunity
For NBCC (India), the initiation of an 'Add' rating is driven by its massive order book. As of March 2026, the company reported a robust order backlog of approximately ₹1.27 lakh crore. NBCC’s business model is largely built on Project Management Consultancy (PMC), which allows it to secure fees for managing government infrastructure and redevelopment projects without bearing all the capital risks associated with construction.
The company’s recent financial results also showed strong growth, with a consolidated profit-after-tax (PAT) increase of over 33% in FY26. The brokerage view appears to factor in this revenue visibility and the potential from upcoming government redevelopment projects, including housing and institutional infrastructure.
How Investors May Read This
For ITC, the key monitorable remains the cigarette volume and margin trajectory. While the worst of the tax-hike impact may be passing, investors are cautious about whether the company can sustain pricing power without losing market share to cheaper, illicit, or competitor alternatives. The stability of the FMCG business, which has acted as a support pillar, will also be closely watched alongside the dividend consistency.
For NBCC, the main debate among market participants revolves around valuation versus execution. While the order book provides multi-year revenue visibility, the stock trades at a relatively high price-to-earnings (P/E) multiple. Investors should track whether the company can turn this massive order book into actual cash flow and profit margins, as historical data shows that infrastructure sector stocks can face risks regarding project delays, rising material costs, and elongated receivable cycles. Maintaining healthy operating margins will be as important as securing new orders for long-term shareholder value.