ITC cracks over 3 per cent on cigarettes duty hike in Budget; CLSA downgrade

MUMBAI: Shares of cigarette manufacturer ITC extended losses for second straight session reacting to excise duty hike on cigarettes.

The stock ended the day at Rs 343.30; down 4.97 per cent, on the BSE.

The duty on sub-65mm cigarettes has been hiked by 25 per cent, while it is up by 15 per cent on cigarettes of other lengths.

Meanwhile, CLSA after seven years of positive stance has downgraded the stock to SELL from BUY due to government’s hawkish stance on cigarettes and cut EPS estimates by 5-10 per cent over FY16-17.

The brokerage has revised its one-year forward target price of Rs 330/share based on sum-of-the-parts.

“On our revised earnings, ITC would trade at 21.5x Mar-17 earnings (which is around one standard deviation from five year average). Applying 21.5x P/E on Mar-16 earnings, we believe that the stock could go down to Rs290/sh in the near-term,” the report said.