ITC Shares Face Significant Downturn
As of May 22, 2026, shares of FMCG major ITC Ltd. have experienced a notable decline, correcting over 25% in the past six months. The stock was trading at Rs 302.65, reflecting considerable pressure in the market. This performance follows the company's March 2026 quarter (Q4 FY26) results, which have led several brokerage firms to reassess their outlook on the stock.
Brokerage Firms Offer Varied Outlooks
Following ITC's recent financial disclosures, brokerage houses have largely adopted a cautious to neutral stance on the company's shares. While some highlight underlying strengths, others point to near-term challenges.
Motilal Oswal Financial Services Analysis
Motilal Oswal Financial Services Ltd. (MOFSL) reported that ITC's consolidated gross cigarette sales grew by 30% year-on-year, reaching Rs 11,950 crore. However, net cigarette sales declined by 22% to Rs 5,950 crore. This disparity is attributed to an increase in excise duty and a unique month-long gap between the tax announcement and its implementation, which distorted Q4 performance metrics.
MOFSL noted that ITC has employed a calibrated price hike strategy, differing from its historical immediate tax pass-on approach. This move aims to prevent consumers from shifting to illicit cigarette markets following the sharp tax increase. The brokerage anticipates significant volatility in cigarette revenue and earnings before interest and taxes (EBIT) in the near term, potentially extending into Q1 FY27. Consequently, MOFSL maintained a 'Neutral' rating on ITC, setting a target price of INR 335.
Other Key Brokerage Recommendations
- Axis Direct maintained a 'Hold' rating on ITC, acknowledging the company's resilience in navigating tax shocks while demonstrating robust FMCG growth.
- Nuvama Institutional Equities also issued a 'Hold' rating but revised its target price downwards to Rs 350 from an earlier Rs 365.
- Elara Capital reiterated its 'Accumulate' call for ITC, with a target price of Rs 335.
Factors Driving Near-Term Volatility
The primary drivers of the anticipated volatility in ITC's stock performance are the recent excise duty hikes and the company's strategic, staggered approach to price increases. While the calibrated pricing aims to protect market share against illicit trade, it is expected to impact cigarette EBIT performance in the immediate future. Analysts suggest that the earnings pressure on the cigarette segment could overshadow potential recoveries in ITC's FMCG and Paper businesses.
Investment Outlook for ITC
Given the mixed signals and anticipated near-term volatility, investors are advised to exercise caution. The consensus among leading brokerages leans towards a 'Hold' or 'Neutral' position, with some suggesting an 'Accumulate' strategy. The company's ability to fully pass on tax increases to consumers and mitigate competitive pressures from illicit markets will be crucial for its future performance.