JPMorgan has downgraded ITC to neutral from overweight and cut its target price to ₹375 per share from ₹475, following the government’s announcement of a sharp increase in cigarette taxes effective 1 February 2026. The brokerage believes the scale of the tax hike materially alters the near-term risk-reward profile for the stock and is likely to restrict upside over the next several quarters.
According to JPMorgan, while detailed clarity on the finer aspects of the tax structure is still awaited, an initial assessment suggests that ITC would need to implement a weighted average price hike of more than 25% if the National Calamity Contingent Duty (NCCD) is removed, and over 35% if the NCCD remains unchanged, in order to preserve net realisation per stick. Such steep price increases are seen as challenging in the current consumption environment.
The brokerage flagged that higher price hikes, particularly in the KSFT (King Size Filter Tip) segment, could increase the risk of consumer downtrading to cheaper variants and may also encourage a pickup in illicit cigarette consumption. JPMorgan noted that while ITC has historically demonstrated strong pricing power and execution through past tax cycles, the magnitude of the current increase is significantly higher than recent years and could test volume resilience.
JPMorgan expects ITC to pass on most of the tax increase over time, though the extent and pace of pass-through may vary across sub-segments. However, even with effective pricing actions, the brokerage believes that volume growth and earnings momentum are likely to come under pressure, particularly in the first few quarters following implementation. This, in turn, could weigh on valuation multiples and cap near-term stock performance.
Given these factors, JPMorgan sees limited upside from current levels over the next 6–9 months, even as the company’s non-cigarette FMCG and paperboard businesses continue to provide earnings stability. The downgrade reflects a more cautious stance until there is greater visibility on post-tax volume trends and the competitive response across the industry.
Disclaimer: The views and recommendations above are those of JPMorgan. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
