Jefferies calls ITC a winner after no hike in tobacco tax in Union Budget 2025; sees 19% potential upside

Shares of the cigarette-to-hotels conglomerate ITC in Monday's session (February 3) gained marginally even as the government did not levied a higher tax on cigarettes in the Union Budget 2025. Until the budget announcement, there remained high uncertainty around tax hike on tobacco and all the stocks within the pack including Godfrey Phillips India Ltd, VST Industries and ITC tumbled up to 10 per cent in the previous month.

At around 10:16 am, shares of ITC pared initial intra-day gains and was trading lower by 0.42 per cent or Rs 1.95 at Rs 460.5 per share on the BSE.

Analyst expectations on the excise duty hike

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It was widely anticipated that this time around cigarettes may attract a 5 per cent hike in taxes. Analysts, however, were of the view that in case the hike in excise duty on cigarettes is over 10 per cent, the stock price of ITC will be weighed down. Nonetheless, no hike scenario is considered to be the best case for cigarette stocks, followed by a single-digit hike that indeed can be easily absorbed by cigarette companies.

How global brokerages view no-tax hike scenario for ITC?

Global brokerage Jefferies has reiterated its 'buy' stance on the counter with the target pegged at Rs 550, implying potential gains of over 19 per cent from the last close. As per the brokerage, ITC has emerged as a winner with no increase in tobacco tax. Further Jefferies held that stable tax regime improves earnings visibility for the company.

GST rates are also likely to stay stable until March 2026 until the centre settles dues to states, Jefferies mentioned in its note.

Also, the company is a natural beneficiary of personal tax cuts that is likely to spur consumption, added the brokerage.