Morgan Stanley expects ITC to outperform benchmark Indian indices; Read to know full details

The broking firm Morgan Stanley in a research report said that ITC’s share price will outperform the benchmark indices of India over the next 30 days. The rationale the brokerage firm gave was that the stake sale by British American Tobacco cleared the supply overhang on the stock.

To give context, ITC has underperformed the markets by 8%. The brokerage believes that the company is scaling up its non-cigarette businesses. Also, a moderate and infrequent cigarette tax environment becoming an important catalyst for the stock’s performance.  

Morgan has a target price of Rs 491 on the stock of ITC with a rating of “overweight”. The stock of ITC rose to an intraday high of 8% on March 13 before closing at Rs 422.45.

“We estimate that there is about an 80%+ (or “highly likely”) probability for the

scenario,” said Morgan Stanley in the research report. 

On the risk side, the brokerage firm said adverse policies regarding cigarettes such as levying high taxes, a ban on loose sales, etc. However, Morgan believes that a benign tax environment for tobacco, the successful launch of differentiated products in the FMCG segment, better than better-than-expected improvement in margins coupled with business restructuring – separate listing of the FMCG arm – will prove to be growth boosters.