ITC shares are a buy or sell after Q2 results? Here's how much upside analysts see

Shares of ITC Ltd. will be reacting to their September quarter results on Tuesday, November 3, which were reported after market hours on Monday. The numbers saw strong performance from all of its businesses barring the cigarette business, where volume growth continued to decline.

ITC's cigarette business EBIT declined by 27% from last year during the September quarter, while volumes saw a drop of 7% to 8% from last year amidst the growing share of illegal cigarettes and contrabrand.

On the flip side, ITC's FMCG business revenue growth was the highest in 14 quarters, with margins expanding by 70 basis points. The company's paperboards revenue grew by 36% from the year-ago period, while its EBIT increased by 48%. The Agri business revenue grew 12% with steady margins.

ITC Shares Are A Buy Or Sell?

38 analysts have coverage on ITC, of which 58% or 22 of those continue to maintain a "buy" recommendation on the stock, while 15 others have a "hold" rating. One other has a "sell" recommendation on the stock.

JPMorgan remains "neutral" on ITC with a price target of ₹310. That implies an upside potential of 16.5% from current levels.

The firm wrote in its note that a reset in ITC's cigarette portfolio mix is underway with salience of the RSFT and DSFT nearly converging.

"ITC's ongoing portfolio re-architecture and staggered pricing actions should help progressively narrow the EBIT decline," JPMorgan wrote in its note.

With further pricing action likely, particularly in RSFT, JPMorgan expects the EBIT per stick to return to neutrality by the fourth quarter.

Goldman Sachs also remains "neutral" on ITC with a price target of ₹290.

Jefferies Among The Bullish One

The global investment banking firm maintained its "buy" rating on ITC with a price target of ₹350, stating that even as the cigarette business continues to be weighed down by sharp tax hikes, calibrated price hikes should support a gradual recovery, even as a significant tax arbitrage on illicit cigarettes persists.

Although Jefferies has trimmed its Earnings Per Share (EPS) estimates by 2% to 3%, it expects a sequential improvement in cigarette trends.

CLSA Sees 46% Upside On ITC

CLSA has maintained its "outperform" rating on ITC with a price target of ₹390, which is among the highest on the street for the stock.

ITC has continued with a calibrated response to the tax increase for cigarettes, alongside multiple portfolio interventions to limit the volume migration to illicit trades. Non-cigarette portfolio remains strong.

Shares of ITC ended 0.3% higher on Monday at ₹266.4. The stock is down 27% so far this year.