Here's Why ITC Hit a New Life High on Feb 2, Bullish Calls

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Here’s Why ITC Hit a New Life High on Feb 2, Bullish Calls

By Malvika Gurung — Shares of the diversified conglomerate ITC (NS:ITC) hit an all-time high of Rs 384.7 apiece on Thursday’s intraday trade despite a lacklustre session on Dalal Street.

The stock surged in response to finance minister Nirmala Sitharaman’s speech at Budget 2023 on Feb 1, when she announced to raise the customs duty on cigarettes by 16%.

According to the finance minister’s Budget announcement, the national calamity contingent duty (NCCD) levied as a duty on the excise duty was hiked by 16%.

Read Also: Custom Duty on Cigarettes Hiked in Budget 2023: Market Reaction in Focus

NCCD accounts for almost 10% of the overall taxes on cigarettes. The Government has tweaked this duty after two years.

For a conglomerate giant like ITC, whose over 80% of net profit and about 45% of revenue and sales come from the cigarettes business, a hike of 16% in NCCD serves as a positive development for the company’s financials.

Nuvama Institutional Equities is of the view that the tax increase on cigarettes is lower than the Street’s estimates and pegs legal cigarette players to gain share from the illegal ones.

Global brokerage Jefferies expects the effective increase in prices of cigarettes to be around 1.5-2% following the duty hike.

“This is a clear positive for ITC. This improves volume growth visibility as well for ITC in the context of the modest product price hike required,” it said. The brokerage has a buy call on ITC with a target price of Rs 415/share, an almost 10% upside from the mega-cap giant’s closing price on Thursday.