ITC's Cigarette-Price Increases to Support Earnings Recovery — Market Talk

What happened

ITC Ltd. has continued raising cigarette prices, which Jefferies analysts say should support a gradual earnings recovery. Cigarette sales volumes and EBIT, which means profit before interest and taxes, fell in the second quarter from a year earlier due to recent tobacco tax increases. Jefferies cut its earnings-per-share forecasts for this fiscal year and the next.

Confirmed

Global impact / market context

Higher cigarette prices can lift revenue from each pack sold, helping offset falling sales volumes caused by tax-driven price rises. If that works, profit can recover even while smokers buy fewer cigarettes. Jefferies still rates the stock a buy with a 350-rupee target, signalling it expects this repair to play out.

Analyst inference

The stock trades at 267.00 rupees, up 0.4%, well below Jefferies' 350-rupee target, so investors are not yet pricing in a full earnings recovery. Tax increases have already hurt volumes and profit, and forecast cuts show the rebound is expected to be gradual rather than immediate.

Analyst inference

What to watch

1. Jefferies maintains a buy rating and a 350-rupee target price on ITC shares, which were 0.4% higher at 267.00 rupees, so the gap between price and target shows expected upside. Confirmed
2. Watch whether ITC keeps raising cigarette prices in coming quarters, since Jefferies says continued increases should support a gradual earnings recovery; further rises could offset volume declines. Proposed
3. Track cigarette sales volumes and EBIT in the next results: if tax pressure eases and price increases hold, profit per sale could improve, but another weak quarter would challenge the recovery case. Analyst inference

Evidence

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