ITC share price target: Cigarette volumes seen falling by high single-digits; buy, hold or sell?

Emkay Global on Friday said the cigarette business of ITC Ltd remained in flux following a sharp tax hike and anticipated turbulent times ahead for the segment. The domestic brokerage said the FMCG-Others business remained on a healthy growth trajectory, with improving margins. It also noted that the balance sheet for ITC remained healthy, supported by strong cash generation of over Rs 15,000 crore in FY26. For now, Emkay Global maintained its 'Add' rating with a target price of Rs 310 apiece.

Emkay said the return profile for ITC has consistently improved in the past few years, led by higher profitability and also partly due to the demerger of the hotels business. It said the ITC stock  currently trades at 18 times estimated forward one-year earnings per share, which is at one standard deviation below its past five-year average.

Emkay said FY26 started well for ITC with resilient volume growth and continued focus on strengthening its product portfolio. ITC, it said, launched 15 new cigarette products, including Classic Clove, American Club Super Slims and Gold Flake Kings Longs. 

That said, the unprecedented tax hike in February 2026 disrupted the industry, leading to sharp price increases and mix change, which impacted volumes. 

British American Tobacco (BAT) held 22.91 per cent stake in ITC through Tobacco Manufacturers India (17.79 per cent), Myddleton Investment Company Ltd (3.88 per cent) and Rothman International Enterprises (1.24 per cent).

"We expect the industry to remain in flux over the coming quarters, and expect cigarette volumes to decline by high single-digits. As price increases have largely been lower than the tax hike, we expect EBIT margin to remain under pressure as well," Emkay said.

The broking firm said ITC’s FMCG-Others segment revenue grew 10 per cent YoY, with EBITDA margin expanding 20 basis points YoY to 10 per cent.

"Branded Packaged Foods (84 per cent of sales) drove overall growth, led by market extensions in Aashirvaad, Sunfeast, and Bingo!, alongside macro tailwinds and premiumization. The management fortified its future pipeline by launching 100 new products, scaling digital acquisitions (Rs13.5bn revenue run rate), and expanding a fresh food cloud-kitchen network," Emkay said.

In the case of Paperboard business, t navigated early margin pressure from cheap imports and soaring wood costs, recovering in H2FY26 via cooling raw material prices and import protections (MIP). 

"Agri business was impacted by geopolitical and policy headwinds, and ITC aims to sustain profitability by focusing on high-margin, value-added adjacencies," Emkay said.