ITC (+) : Calm before the storm

Research evidence excerpt

ITC (+) : Calm before the storm

EQUITIES

FOOD & HPC

ITC OUTPERFORMPRICE* INR308.1  TARGET PRICE INR370 (UPSIDE 20%) TARGET 3%PRICE EPS03/27e1% nonEPS material03/28e

Calm before the storm

Cigarette taxation in India has been overhauled, and ITC’s cigarette revenue is not strictly21 MAY 2026

Securities Research Report comparable q-q or y-y. Cigarette EBIT was 3% ahead of BNPPe. FMCG/paper board business EBIT

Production time: 18:44* (London time)

grew 51%/21%. The cigarette business is under pressure due to a steep increase in duties, with the

Research Analysts & Publishing Entities

worst impact expected in 1QFY27. FMCG business should see healthy revenue growth, with margins

Kunal Vora, CFA under pressure due to higher RM costs. We expect FY27 earnings to decline by 8% due to lowerBNP Paribas Securities India Private

Limited cigarette business EBIT partially offset by other businesses. Our FY27/28E earnings are largely

+91 22 6196 4384 unchanged. We roll forward our valuation by a quarter to Jun-28E and revise our SOTP-based TP

kunal.d.vora@asia.bnpparibas.com

to INR370. ITC offers an attractive dividend yield, with a reasonable valuation of 21x FY27E P/E.

Cigarette EBIT to be under pressure due to staggered price hikes and volume pressure

ITC has raised cigarette prices sharply in response to the increase in duties and the impact of these

new prices will be visible in numbers starting 1QFY27. Also, price hikes have been staggered and

1QFY27 is set to see an impact of lower realisation per stick as well as lower volumes. We are

building in 20% decline in cigarette EBIT for 1QFY27. Going forward, as ITC takes more price hikes,

we expect realisation per stick to be fully recovered in the coming quarters, with EBIT decline

depending on the volumes.