AlembicHC cut its rating on Egypt's cigarette monopoly Eastern Company to "underweight" from "neutral" saying rising raw material and relocation costs could impair the company's profitability.

The brokerage also said it expected dividend payout from the company to remain weak due to worsening profitability, and lowered its price target on the stock to 110 Egyptian pounds, down 16 percent.

"Revenue growth is capped at 2-3 percent in line with population growth unless the company raises prices, which we believe is unlikely in the near term," analyst Hatem Alaa wrote in a note.

AlembicHC said it expects challenging growth in the company's earnings per share in light of limited revenue increase.

The brokerage also said sale of the company's evacuated facilities in Cairo and Giza was unlikely, especially in the light of current land disputes in the country.