ITC Shares See Barrage Of Target Price Cuts From Brokerages Over Higher Cigarette Tax — Buy, Sell Or Hold?

A slew of brokerages have come out with notes on ITC after the FMCG giant endured its worst session in six years on Thursday, falling almost 10% after the government announced fresh excise duty on cigarettes.

From Feb. 1 onwards, cigarettes are set to attract a tax of 40%, which serves as a major blow for ITC, where the cigarette division serves as a key revenue driver.

In the wake of ITC's sharp fall on Thursday, a slew of brokerages have cut target price on the FMCG counter.

JPMorgan on ITC

• JPMorgan downgrades ITC to Neutral from Overweight and cuts the target price to Rs 375 from Rs 475.

• The downgrade follows a sharp increase in cigarette taxes.

• The brokerage awaits clarity on finer details of the tax structure.

• Early estimates suggest a weighted average price hike of over 25% if NCCD is removed.

• If NCCD remains, required price hikes could exceed 35%.

• JPMorgan sees increased risk of consumer down-trading to cheaper variants.

• Illicit cigarette consumption could also rise.

• ITC is expected to pass on most of the tax impact.

• This would weigh on volume growth, earnings, and valuation multiples.

• Stock upside is expected to remain limited over the next 6–9 months.

Nuvama on ITC

• Nuvama downgrades ITC to Hold from Buy and cuts the target price to Rs 415 from Rs 534.

• The brokerage flags a tough outlook for the cigarette industry.

• The expected tax hike on cigarettes appears sharper than anticipated.

• This is likely to prompt consensus downgrades to cigarette volume, EBITDA estimates, and valuation multiples.

• Pending clarity, Nuvama factors in a price hike of over 20% and a tax hike of over 30%.

• EBITDA estimates for FY27 and FY28 are cut by 7% each.

DAM Capital on ITC

• DAM Capital maintains a Buy rating and cuts the target price to Rs 440 from Rs 500.

• A steep excise hike is expected to dent high-end cigarette volumes.

• Sharp price hikes are likely to lead to volume de-growth.

• The brokerage expects increased down-trading to lower-priced cigarette categories.

• Significant trade and retail stocking is anticipated in January 2026.

• The adverse volume impact is likely to become visible from Q1FY27.

• DAM Capital builds in a 7% volume de-growth for FY27, largely for KSFT.

• Price hikes of around 28% are expected across categories.

• EPS estimates are cut by 8% and 9% for FY27 and FY28 respectively.

• The brokerage believes most negatives are already reflected in the stock price.

• Any relief in the Budget, including possible NCCD removal, could act as a positive trigger.

PhillipCapital on ITC

• PhillipCapital downgrades ITC to Reduce from Buy and cuts the target price to Rs 348 from Rs 528.

• The brokerage says cigarette excise hikes open a “Pandora’s box”.

• It estimates a 23–50% price hike across cigarette categories post the new excise rates.

• Cigarette volumes are expected to decline 12.5% in FY27, followed by 2.5% growth in FY28.

• Product mix is likely to deteriorate due to down-trading from RSFT to sub-64mm cigarettes.

• Despite FMCG and Paperboard profitability improving, ITC’s EPS CAGR is now expected at just 4.5% over FY26–28.

Macquarie on ITC

• Macquarie maintains an Outperform rating with a target price of Rs 500.

• Excise duty on filter cigarettes has been raised to Rs 2,100–8,500 per thousand sticks, depending on length.

• The tax increase is steepest for longer cigarettes.

• Cigarettes under 65mm face a relatively modest hike.

• Maintaining EBIT per stick requires a price increase of 10–35% across categories.

• Macquarie awaits clarity on whether NCCD will be subsumed into the excise duty.

• Moderating leaf tobacco costs could offer some margin cushion.

• However, the tax hike raises concerns over near-term growth.

Emkay on ITC

• Emkay downgrades ITC to Reduce from Add and cuts the target price to Rs 350 from Rs 475.

• The brokerage describes the tax hike as a fiscal bombshell.

• Cigarette excise hikes are expected to hurt industry volumes and ITC’s earnings.

• The regulatory stance has shifted from rationalisation to consumption curbs.

• Emkay expects portfolio-wide price hikes of around 32% in a staggered manner.

B&K Securities on ITC

• B&K Securities maintains a Buy rating and cuts the target price to Rs 504 from Rs 567.

• Cigarette volume growth is clouded by the sharp proposed tax hike.

• Tax rates have increased by 20–65%, far above expectations of 10–15%.

• The brokerage now factors in a 5% volume decline for FY27.

• Average price increases of around 25% are assumed.

Motilal Oswal on ITC

• Motilal Oswal downgrades ITC to Neutral from Buy and cuts the target price to Rs 400 from Rs 515.

• The brokerage flags an unprecedented tax hike.

• Valuation multiples are expected to reset.

• The favourable phase for the legal cigarette industry is seen as over.

• Cigarette valuations may revert to historical multiples under a high-tax regime.

Antique on ITC

• Antique maintains a Buy rating and cuts the target price to Rs 445 from Rs 500.

• The brokerage views the tax hike as a transient near-term pain.

• It believes companies were broadly prepared, given prior focus on higher price points.

• The event is seen as a near-term headwind for the industry.

• Antique remains positive on the medium-to-long-term outlook.

• FY27–28 EBITDA estimates for ITC are cut by 9–11%.