ITC Share Price Target Trimmed As Brokerages See Pressure From High Cigarette Taxes
Analysts at Prabhudas Lilladher said the cigarette excise opens a "pandora’s box" and they estimate 23-50% hike in prices of various cigarettes post imposition of new excise rates.
Domestic brokerage firms have reduced their share price target for ITC Ltd. after the government imposed an excise duty on cigarettes, effective next month.
Prabhudas Lilladher trimmed its ITC share price target to Rs 348 from Rs 528, and downgraded its stock rating to 'reduce' from 'buy'.
DAM Capital reduced its target to Rs 440 from Rs 500 buy maintained 'buy' call on ITC.
Analysts at Prabhudas Lilladher said the cigarette excise opens a "pandora’s box" and they estimate 23-50% hike in prices of various cigarettes post imposition of new excise rates.
According to a Finance Ministry order issued late on Wednesday, the excise duty will range between Rs 2,050 and Rs 8,500 per thousand sticks, depending on product length, from Feb. 1.
ITC's cigarette volumes may decline 12.5% in financial year 2027 and grow by a paltry 2.8% in FY28. Despite an expected uptick in profitability in the FMCG and paperboard segment, PL now expects ITC to post an earnings per share CAGR of only 4.5% over FY26-28.
DAM Capital trimmed its EPS estimates by 8% and 9% for FY27 and FY28 and indicated that most of the negatives have been factored in the stock price. Further, any relief in budget like National Calamity Contingent Duty removal could be a positive trigger.
Nuvama downgraded the stock rating of ITC from 'buy' to 'hold', anticipating negative impact on sales and operational income. It has a share price target of Rs 415 on ITC.
The total taxes on cigarettes in India currently account for about 53% of retail prices, which is significantly below the World Health Organisation benchmark of 75% intended to discourage consumption, according to a Reuters report.
Shares of ITC settled 9.7% lower at Rs 363.85 on the NSE, compared to a flat benchmark Nifty 50. The stock has risen 10% in the last 12 months.
Out of 38 analysts tracking the company, 36 maintain a 'buy' rating, one recommends a 'hold,' and one suggests 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 36%.
