Shares of FMCG major ITC Ltd. gained 6.5 percent to a fresh 52-week high on Thursday ahead of the company's December quarter earnings, which are expected to be released on February 3. The stock opened at Rs 360.75 on the BSE and witnessed an upward trend to touch a new 52-week high of Rs 384.4.
On Wednesday, the ITC stock, which is a market leader in cigarettes, slumped nearly 5 percent after it was announced that the National Calamity Contingent Duty (NCCD) on cigarettes was hiked up to 16 percent during the Union Budget.
However, the stock has recovered from its lows to hit a lifetime high of Rs 365.65 apiece as analysts said the tax hike on cigarettes is not very high and can easily be passed on to customers.
ITC shares have gained more than 85 percent from their 52-week low of Rs 207, touched on February 24, 2022.
The hike in NCCD on cigarettes was revised after almost two years. Calculations imply a 2-2.5 percent increase in overall tax incidence on cigarettes.
Analysts expected a 5-10 percent increase in overall tax incidence. With the hike lower than expected, analysts say the overall impact on ITC would be negligible, making it a positive for ITC and other cigarette companies.
Nuvama estimates that cigarette companies may only need to pass on a low single-digit hike of around 2-3 percent. This, it says, is not an issue given there were no price hikes passed on to consumers in the past 2-3 years and hence, will be absorbed by consumers.
ITC had raised prices by 10-20 percent across cigarette brands in 2020 when the NCCD was hiked last time.
