ITC: Bridge quarter amidst the cigarette tax transition; Near-term pressures likely…

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ITC: Bridge quarter amidst the cigarette tax transition; Near-term pressures likely…

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ITC

Bridge quarter amidst the cigarette tax

transition; Near-term pressures likely…

Reiterate Rating: NEUTRAL | PO: 315.00 INR | Price: 308.05 INR

Slight beat in 4QFY26 earnings, but can’t be extrapolated 22 May 2026

ITC's 4QFY26 recurring PAT rose 5% YoY, a little higher than BofA/consensus estimates Equity

of 3%/1% YoY. Looking past a decline in other income this quarter, operating profit

growth was higher at 8% YoY, driven by the key cigarettes business. That said, there is

Key Changeslittle to read from these results as 4Q happens to be a bridge quarter as the cigarette tax

regime changed in the middle w.e.f. 1st Feb 2026; see our note - Cigarettes under fire. 4Q (Rs) Previous Current

numbers may include elements of an abnormal trade pipeline impact, and perhaps varying 2027E Rev (m) 753,191 673,980

impacts of different taxes on business trends and the reported P&L numbers during the 2028E Rev (m) 818,916 737,229

transition. Cigarette revenue/volume in 4Q may not be comparable to previous periods 2029E Rev (m) NA 800,255

and may convey little about underlying trends or business impact post the tax change. 2027E EPS 15.5 14.9

2028E EPS 16.6 16.2

2029E EPS NA 17.8Limited pricing so far… near-term earnings pressure likely

Given the unprecedented cigarette tax hike, ITC seems to be taking staggered, small

price hikes, and also importantly working on altering product portfolio (including new Aditya Mathur >>

Research Analyst

launches in Longs and Premium DSFT segments). We think the idea is to protect BofAS India

consumer franchise, minimize volume loss and avoid significant share loss to illicit +91 22 6632 8958 aditya.mathur@bofa.com

players.