ITC stock correction post BAT stake sale an entry opportunity, Emkay says

Brokerage firm Emkay Global maintains a positive stance on ITC Ltd., the cigarettes-to-hotels conglomerate, with an 'Add rating and a price target of Rs 475. The target ascribed by Emkay indicates a potential upside of 13% from current levels.

Emkay said that the worst is likely behind for ITC. The recent correction in ITC's stock, triggered by British American Tobacco (BAT) diluting its stake, has created an attractive entry point, offering a potential 13% return along with a 4% dividend yield, the brokerage wrote in a note.

With the overhang of the stake sale largely behind, Emkay expects the stock to react to the expected improvement in financials.

"“We believe a combination of margin stress (with limited near-term visibility on recovery), weak topline performance amid increased competition, and the BAT stake sale overhang led to the 20% correction from the September 2024 peak," it said.

Going head, Emkay expects a gradual improvement in ITC's performance. In the cigarettes segment, the brokerage sees better execution and sustained mid-single-digit volume growth, supported by industry-wide acceleration. Softer leaf tobacco prices could also support margin expansion beginning Q4 FY26.

In other FMCG and paper segments, Emkay expects a gradual recovery in both growth and margins. Meanwhile, in the agri-business, a sharper focus on value-added products may support profitability, though the overall impact is expected to be modest.

Overall, Emkay sees an improving outlook for ITC and expects earnings growth to accelerate going forward.

Of the 40 analysts that have coverage on ITC, 37 of them have a 'Buy' rating, two say 'Hold', while one analyst has a 'Sell' rating on the stock.

Shares of ITC Ltd. are trading 0.059% higher at ₹421.30. The stock has declined 13% so far in 2025.

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