(CTN News) – During the presentation of the ITC Union Budget for the year 2024, which took place on July 23, Finance Minister Nirmala Sitharaman did not include any modifications to the taxes that are imposed on tobacco products.

As a consequence of this, Jefferies India increased their recommendation to purchase ITC Ltd., and they suggested that the target price be increased to Rs 585 a share.

This represents a forty-five percent increase compared to the price currently being offered on the market. In addition to this.

Earnings ITC per share increased by between one and two percent.

The fact that the Union Budget did not make any changes to the levies that are placed on tobacco products was a source of comfort for the International Trade Commission (ITC), which was pleased with the outcome of the budget decision.

For the month of February in the year 2023, a tax increase on tobacco was implemented, which was two percent higher than the rates that were already in place. As a consequence of this consistency, Jefferies says that ITC is able to concentrate on volume while also facing slight price increases.

Furthermore, Jefferies stated that it is predicted that the Goods and Services Tax (GST) will remain unchanged until March 2026, which is the period when the Centre will resolve state dues.

This is the time when GST is expected to cease to be variable. As a result of an increase in demand in the staples industry, it is projected that the core companies of ITC will be able to reap the benefits of this demand development.

Although the budget that will be provided in February 2025 will be considerable, the foundation for the budget that will be presented the following year will be a slight rise in prices that will be implemented this year.

It is anticipated that around ninety percent of cigarette taxes will be subject to the Goods and Services Tax (GST) system.

This system is scheduled to remain in effect until March 2026 and is intended to repay state borrowings. Repaying state borrowings is supposed to be accomplished through the use of the GST system. For the next twelve to eighteen months, this will ensure that there will be no significant variations in the rates that are being charged.

EBIT growth ITC slowed to 4% in the second half (2024).

According to Jefferies. This was due to the fact that volume stabilization and inflation in input prices were the factors that caused the growth to slow down. Taking into consideration the growth of 21 percent that was seen in FY23 and the rise of 10 percent that was seen in the first half of FY23, this implies a significant decrease in comparison to those two figures.

In view of the fact that the taxing of cigarettes is anticipated to take place, the International Trade Commission (ITC) is making preparations to increase income by increasing the volume of cigarettes sold, increasing the prices of cigarettes, and improving the mix of cigarettes.

For the second half of the fiscal year 25 (FY25), it is projected that there will be a decrease in the rate of inflation in input costs, which will be advantageous to the expansion of margins.

Based on the projections made by Jefferies, the growth of cigarette earnings before interest and taxes (EBIT) will increase from four percent year over year in the second half of fiscal year 24 to seven percent in the first half of fiscal year 25 and then to double digits by the end of the corporate year.

Assuming that the corporation will have reached the end of the fiscal year, this is the conclusion that can be drawn from this.

SOURCE: MNN