ITC slides as cigarette tax overhang keeps analysts cautious despite FMCG beat

Shares of ITC Limited were trading lower on the NSE on Friday morning, slipping 1.15 per cent to ₹304.50 by 11.45 am, extending Thursday’s close of ₹308.05. The stock has shed over 28 per cent in the past year, significantly underperforming the Nifty 50’s 3.3 per cent decline over the same period. Trading volumes were active at 1.39 crore shares, with a marginal buy-side skew of 53 per cent.

The selling pressure follows the company’s 4QFY26 results, reported Thursday, which analysts broadly flagged as non-comparable due to a mid-quarter restructuring of cigarette taxation effective February 1. The GST rate on cigarettes was raised from 28 per cent of transaction value to 40 per cent of retail sale price, alongside steep excise duty hikes, triggering an unprecedented tax-related disruption to primary and secondary sales.

Street reaction has been mixed. CLSA retained its outperform rating with a target of ₹394, noting cigarette EBIT came in 15 per cent ahead of consensus. Jefferies maintained a Hold at ₹350, cautioning that the real test arrives in the first quarter of FY27 when the full impact of price hikes and volume slowdown will be visible. Morgan Stanley kept an equal-weight with a ₹346 target, expecting the stock to remain range-bound until volume trajectory becomes clearer. Goldman Sachs, maintaining Neutral at ₹330, estimated cigarette volume and EBIT could decline roughly 8 per cent and 17 per cent respectively in FY27. Motilal Oswal also retained Neutral with a ₹335 target. At the bearish end, Citi held its Sell rating with a ₹290 target, flagging structural risks around price elasticity and potential consumer migration to illicit products.

On the positives, ITC’s FMCG segment delivered 15 per cent revenue growth with EBIT margin expanding 200 basis points to 8.3 per cent, beating estimates. The paperboard business showed early recovery signs aided by minimum import price protection. The agri segment, however, disappointed, falling 15 per cent on geopolitical disruptions linked to the West Asia conflict.

With cigarette price hikes still incomplete and FY27 earnings visibility limited, analysts expect near-term stock pressure to persist at least through the first quarter.

Published on May 22, 2026