ITC Limited: Cigarette portfolio reset underway; Q1 drag to narrow ahead

Research evidence excerpt

ITC Limited: Cigarette portfolio reset underway; Q1 drag to narrow ahead

J P M O R G A N Asia Pacific Equity Research

02 August 2026

ITC Limited Neutral

ITC.NS, ITC IN

Cigarette portfolio reset underway; Q1 drag to narrow Price (31 Jul 26):Rs281.00

ahead ▼Price Target (Mar-27):Rs310.00 Prior (Mar-27):Rs325.00

ITC’s Q1 earnings missed estimates owing to weaker than anticipated cigarette EBIT

trends. The quarter saw a significant reset across the cigarette portfolio as the company Consumer, Retail, Media

navigated a shift towards an unprecedented high taxation regime. FMCG and Paper Latika Chopra, CFA AC

revenue were in-line but margins were lower than expected. ITC has undertaken (91-22) 6157-3584

multiple interventions (staggered price hikes and the launch of new brands across latika.chopra@jpmorgan.com

price points) to mitigate the risk of consumer downtrading to illicit brands and defend Himanshu Singh

market share. It has also introduced new brands/variants to ladder its pricing (91-22) 6157-3610

himanshu.x6.singh@jpmorgan.com

architecture. Even as cigarette price hikes are yet to fully neutralize the tax hike

Saransh S Gokhale

(resulting in a steep 35% decline in cigarette EBIT in Q1), we anticipate gradual price

(91-22) 6157 3578

increases (largely in RSFT and DSFT segments) in the coming quarters which should saransh.gokhale@jpmchase.com

narrow the decline, and expect EBIT (per stick) neutrality closer to Q4. This drives J.P. Morgan India Private Limited, J.P. Morgan

down our FY27 cigarette EBIT forecasts and overall company FY27E EPS cut of Tower,Registration:Santacruz(E),INH000001873,Mumbai (91-22)- 400098,6157-3000.SEBI

~3% and we arrive at a new TP of Rs310. Neutral.

• Cigarettes - Q1 EBIT weakens sharply; expect gradual improvement. Q1 Key Changes (FYE Mar)