More upside in ITC stock with some help from stable taxation of cigarettes

Analysts say while valuations of global tobacco peers are back to pre-pandemic levels, ITC still trades at a 24% discount to its Jan 2019 valuation of 25.4x one-year forward EPS

ITC hit a 52-week high of Rs 285 before closing four per cent higher at Rs 284.35 on Friday even as markets were down. Analysts say ITC is a defensive play in volatile markets with high dividend yield, backed by its near-monopoly in cigarettes, leadership in paperboard and packaging, steadily growing FMCG business and recovery in the hospitality segment.

A stable tax regime for cigarettes is also helping. Motilal Oswal Securities has a buy with target price of Rs 335.

It said, “While valuations of global tobacco peers have been restored to their pre-pandemic levels, ITC still trades at a 24 per cent discount to its January 2019 valuation of 25.4x one-year forward EPS.”