ITC Share Price Target Revised: Impact of High Cigarette Taxes on Indian Investors

Domestic brokerage firms have reduced their share price target for ITC Ltd. after the government imposed an excise duty on cigarettes, effective next month. This move is expected to have a significant impact on the company’s financials and, in turn, affect the Indian stock market.

ITC Share Price Target Cut by Prabhudas Lilladher

Prabhudas Lilladher trimmed its ITC share price target to Rs 348 from Rs 528 and downgraded its stock rating to ‘reduce’ from ‘buy’. This decision was made in light of the government’s decision to impose an excise duty on cigarettes, which is expected to lead to a hike in prices of various cigarettes.

According to analysts at Prabhudas Lilladher, the cigarette excise opens a ‘pandora’s box’ and they estimate a 23-50% hike in prices of various cigarettes post-imposition of new excise rates. This is likely to have a negative impact on ITC’s cigarette volumes, which may decline 12.5% in the financial year 2027 and grow by a paltry 2.8% in FY28.

DAM Capital Revises ITC Share Price Target

DAM Capital reduced its ITC share price target to Rs 440 from Rs 500 but maintained a ‘buy’ call on the stock. The brokerage firm trimmed its EPS estimates by 8% and 9% for FY27 and FY28, indicating that most of the negatives have been factored in the stock price.

Any relief in the budget, such as the removal of the National Calamity Contingent Duty, could be a positive trigger for the stock. However, the current situation suggests that investors should exercise caution and consider the impact of high cigarette taxes on their investment portfolio.

Nuvama Downgrades ITC Stock Rating

Nuvama downgraded the stock rating of ITC from ‘buy’ to ‘hold’, anticipating a negative impact on sales and operational income. The brokerage firm has a share price target of Rs 415 on ITC, which is lower than its previous estimate.

The total taxes on cigarettes in India currently account for about 53% of retail prices, which is significantly below the World Health Organisation benchmark of 75% intended to discourage consumption. This suggests that there may be further room for increase in taxes, which could negatively impact ITC’s financials and the Indian stock market trends.

ITC Share Price Movement

Shares of ITC settled 9.7% lower at Rs 363.85 on the NSE, compared to a flat benchmark Nifty 50. The stock has risen 10% in the last 12 months, but the current situation suggests that investors should be cautious and consider the impact of high cigarette taxes on their investments.

Out of 38 analysts tracking the company, 36 maintain a ‘buy’ rating, one recommends a ‘hold,’ and one suggests ‘sell,’ according to Bloomberg data. The average 12-month consensus price target implies an upside of 36%, but this may be revised in light of the current situation.

Expert Analysis and Recommendations

Given the current situation, it is essential for investors to exercise caution and consider the impact of high cigarette taxes on their investment portfolio. While some brokerage firms have maintained a ‘buy’ call on ITC, others have downgraded their rating to ‘hold’ or ‘reduce’.

Investors should carefully evaluate the potential risks and rewards of investing in ITC and consider the impact of high cigarette taxes on the company’s financials and the Indian stock market. It is also essential to stay up-to-date with the latest stock market news and trends to make informed investment decisions.

Conclusion

In conclusion, the revision of ITC share price target by domestic brokerage firms is a significant development that investors should be aware of. The impact of high cigarette taxes on the company’s financials and the Indian stock market is a concern that investors should consider when making investment decisions.

By staying informed about the latest developments and trends in the stock market, investors can make informed decisions and minimize potential risks. It is also essential to consider the impact of high cigarette taxes on the Indian economy and the overall investment landscape.