ITC Shares See Barrage Of Target Price Cuts From Brokerages Over Higher Cigarette Tax — Buy, Sell Or Hold?
In the wake of ITC's sharp fall on Thursday, a slew of brokerages have cut target price on the FMCG counter.
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.
Brokerages On ITC
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%.
