ITC Share Price Target Revised: Cigarette Growth Strong, But Is It Enough?

Emkay Global Financial Services has reaffirmed its ‘ADD’ rating on ITC Ltd., revising the share price target to Rs 475 for June 2026, based on a sum-of-the-parts (SOTP) valuation.

With the current market price (CMP) around Rs 416, the brokerage sees moderate upside potential, driven primarily by stability in the cigarette segment.

ITC Share Price Target
“We maintain a positive stance on ITC with ADD and a Jun-26E SOTP-based target price of Rs 475, as we believe most headwinds are now in the base,” the brokerage noted in its latest report.

Cigarette Business Anchors Profit Growth
ITC’s cigarette segment, which contributes 37% of net sales and 84% of EBIT, delivered a stable Q1FY26 performance. Revenue grew 7.7% year-on-year, in line with expectations, while volumes rose approximately 6.5%, surpassing the earlier 5% estimate.

“Differentiated and premium portfolio continues to drive overall growth. Sequential growth acceleration is heartening, but likely to be lower than industry growth, implying steady market share loss,” the report observed.

Segment EBIT grew 3.7% YoY, but the EBIT margin moderated to 71.1%, down 270 bps YoY and 80 bps QoQ, partly due to rising input costs, particularly in leaf tobacco. However, Emkay expects moderate margin expansion starting from Q3FY26 as cost pressures ease.

Non-Cigarette Business Weighs on Performance
In contrast, ITC’s non-cigarette businesses presented a mixed picture. While overall revenue grew 22% YoY, this was largely led by a 39% surge in the agri business, driven by leaf tobacco exports.

Stripping out agri, revenue grew a modest 6% YoY. Notably, the FMCG (other) segment reported only 5.2% sales growth, affected by a slowdown in notebook sales. Excluding notebooks, growth improved to 8.6%. However, EBIT in this segment declined 16.5% YoY due to a 180bps drop in operating margins, settling at 9.4%.

“The digital-first and organic portfolio is clocking ₹1,000 crore ARR, with ~6% of revenue now coming from the quick commerce channel,” Emkay added, highlighting evolving distribution strategies.

Meanwhile, the paper business saw 7% revenue growth, driven by volumes, but EBIT plummeted 38% YoY due to margin contraction of 550 bps.

Valuation Outlook and Risks Ahead
Emkay cautioned that although ITC’s performance in the cigarette segment is holding firm, steady market share loss and the potential increase in cigarette taxes—due to replacement of the GST compensation cess—may pose valuation headwinds in the short term.

“While we see optical performance improvement ahead, steady share loss in cigarettes and expectation of tax increases on cigarettes linked to replacement of compensation cess are likely to keep valuation in check in the near term,” Emkay concluded.

While ITC’s core cigarette business remains robust, its non-cigarette verticals need stronger margin discipline. Investors eyeing long-term gains may find value at current levels, but regulatory risks and competition in the cigarette segment will require close monitoring. The ITC share price target of Rs 475 suggests cautious optimism ahead.

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