ITC shares fall 3% to recent 52-week low; Motilal Oswal sees extra ache forward
ITC shares dropped to a recent 52-week low of Rs 275.50 apiece on NSE within the morning buying and selling hours of Wednesday. The inventory is presently among the many prime losers on Sensex and Nifty, following the IT shares, which crashed as much as 7%.
Why are ITC shares falling at the moment?
Motilal Oswal Monetary Providers, in its newest word, highlighted that the cigarette business is witnessing one in all its most disruptive regulatory resets after the implementation of GST 2.0, efficient from February 1, 2026. The revised taxation framework has resulted in round 60-65% surge in cigarette taxes for ITC, implying the necessity for round 35% hike in MRPs (at historic combine), it additional mentioned, including that this was the steepest hike seen traditionally and a pointy departure from the largely secure tax regime maintained throughout 2018-25.
The home brokerage highlighted that the transition has additionally been uncommon as a result of one-month hole between the announcement (January 1) and the implementation (February 1), in comparison with the everyday quick or near-immediate execution seen traditionally. To sort out the excessive taxes, ITC has adopted a calibrated and phased worth hike technique as an alternative of taking an upfront full tax pass-through, with the target of limiting the shift towards illicit cigarette markets and retaining market share amongst authorized gamers, it added.
Motilal believes the present part could be considered in two phases. The primary stage represents a transitionary adjustment interval whereby ITC is progressively taking worth will increase to ultimately attain tax-neutral ranges. The second stage, in keeping with the brokerage, is more likely to emerge as soon as the total tax improve is absorbed into retail costs and the aggressive equilibrium between authorized and illicit commerce stabilises.
How will tax hikes impression ITC’s earnings?
“We count on volatility in cigarette volumes and EBIT to average from the preliminary transitionary part. On this normalized part, ITC’s product portfolio, innovation pipeline, and premiumization technique will play a crucial function in rebuilding the expansion momentum and defending its market positioning. Given the MRP revisions are nonetheless underway, the outlook for ITC’s cigarette enterprise stays unsure. We don’t rule out any risk for additional earnings cuts. That mentioned, the extent of shopper acceptance for revised costs might be a key monitorable. We mannequin 15% income decline and 19% dip in EBIT within the cigarette enterprise in FY27,” the home brokerage mentioned.
In the meantime, ITC’s non-cigarette enterprise continues to exhibit structural enchancment, in keeping with Motilal, which sees FMCG as a key progress driver. “Constructive catalysts equivalent to bettering FMCG efficiency and paperboard margin normalization are overshadowed by the cigarette earnings headwind stemming from illicit competitors, constrained pricing flexibility, and the inevitable volume-versus-margin trade-off that defines ITC’s near-term trajectory,” it added.
Additionally learn: Cigarette enterprise weak point drags ITC margins in March quarter
Tax hikes might weigh on ITC’s near-term quantity
The home brokerage highlighted that latest tax hikes may weigh on ITC’s near-term quantity, protecting progress subdued. It expects cigarette quantity to say no 10% in FY27 and to stay flat in FY28. On the EBIT entrance, the excessive worth differential after the tax improve constrains pricing flexibility, making it difficult to drive earnings progress, it added.
“We mannequin 15% income decline and 19% dip in EBIT within the cigarette enterprise for FY27. We mannequin a detrimental EBIT CAGR of ~8% for the cigarette section over FY26-28E,” Motilal mentioned, including that aggressive stress from illicit cigarettes will weigh on the formal cigarette business.
ITC share worth
The home brokerage has a ‘Neutra;’ score for the shares of ITC, with a goal worth of Rs 300 apiece, implying an upside potential of almost 6% from the inventory’s earlier closing worth of Rs 283.25 apiece on NSE.
ITC shares have fallen greater than 5% in a single week, 12% in a single month and round 24% thus far in 2026. The inventory is down greater than 33% in a single yr. In the long term, ITC shares fell greater than 37% in three years however gained over 32% in 5 years.
Additionally learn: Why inventory market is crashing at the moment?
(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t symbolize the views of The Financial Instances)
