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ITC is entering a crucial phase where the pressure on cigarette volumes is being weighed against improving realisations, a recovery in profitability and growth opportunities across its non-tobacco businesses. After a sharp decline over the past year, the stock is now being backed by 360 ONE Capital Research, which sees significant upside as these factors begin to reflect in earnings. The brokerage has maintained its BUY rating on ITC with an unchanged target price of ₹440 per share, compared with the current price of ₹266. That implies a potential upside of around 68% from its previous close of ₹262.20 per share on BSE. “We continue to maintain BUY rating on the stock with a target price of ₹440/share (unchanged), on a SOTP basis. Currently the stock trades at a P/E of 15.2x on FY28 basis," said 360 ONE Capital Research. The stock has declined 36% over the past year and is trading close to its 52-week low of ₹256. Meanwhile, it has shed 14% in 6 months, 10% in 3 months and 3% in the last 1 month. 360 ONE believes the recent weakness has created an opportunity as the impact of cigarette price increases starts flowing through profitability. At the same time, the brokerage expects support from FMCG, paperboards and packaging, agri and ITC's technology businesses. “The stock has been range-bound in the last 2 months, driven by uncertainties related to the impact of the recent tax hikes on the overall cigarette volumes. However, we think, in the current industry dynamics, the pricing lever has more weight than the volumes lever, which should offset the decline in volumes that should follow, as the company has been raising pricing in well-known brands consistently in a staggered and phased manner,” noted the brokerage. The brokerage has made some changes to its earnings estimates, reflecting the sharper-than-expected impact of recent cigarette price increases on volumes. “We have increased our volume degrowth assumption from -2.5% to -4% for FY27, driven by sharp price hikes done recently, resulting in a Revenue/EBITDA/PAT cut of -3%/-6%/-4%, while increasing our FY28 estimates a tad,” it noted. For the upcoming quarter, 360 ONE expects consolidated net revenue to fall 3.4% year-on-year, EBITDA to decline 10.3%, while PAT is expected to be 10.9% down. The central argument behind the brokerage's positive stance is that pricing is becoming more important than volumes in the cigarette business. With ITC raising prices in a staggered manner across its brands, 360 ONE expects higher realisation to compensate for part of the volume decline. The brokerage expects cigarette net realisation per stick to reach neutrality by Q4FY27 compared with Q3FY26. It also sees EBIT margins improving as successive price increases flow through the business. The brokerage expects cigarette profitability to improve despite the volume pressure. ITC has already increased prices across key brands, with Classic Connect rising from ₹19.5 to ₹21.4 per stick and Gold Flake Superstar from ₹7.9 to ₹8.9. “Current tax burden on cigarettes is ~65-67% of MRP, increasing from pre-tax hike figures of 53-54% and much closer to WHO recommendation of 75% of MRP (we rule out any sharp hike possibility in the coming years). With the last price increases, we estimate ~85% of ITC’s portfolio has been covered in terms of net realisation per stick, pre tax increase levels. The benefit from lower-cost leaf tobacco inventory is expected to start reflecting from Q3FY27, approximating to ₹10-15 paise/stick benefit,” it added. Beyond cigarettes, ITC's other businesses provide additional potential support. FMCG demand has remained healthy over the past six to nine months, helped by strong consumption and favourable macroeconomic conditions. Supply-chain disruptions affecting smaller competitors have also supported the segment. However, ITC has not yet fully passed on inflationary pressures, while higher fuel and crude prices could weigh on margins in the second half. “As of the last 6-9 months FMCG demand remained healthy on account of good consumption demand, supported by better fundamental macroeconomic and supply-chain disruptions affecting smaller competitors. However, the company has not yet fully passed on the impact of inflation," said 360 ONE Capital Research. Moreover, the paperboards, paper and packaging business is another area being watched. Integration of Century is expected from Q2FY27, taking combined paperboard capacity to around 1.5 million tonnes, from approximately 1 million tonnes earlier. The portfolio spans virgin board, recycled board and specialty products. Paperboard prices remain strong, while lower wood prices in North India are expected to provide a benefit from FY28. ITC is also increasing its exposure to technology through the proposed Happiest Minds transaction. ITC Infotech will acquire a 22.1% promoter stake in Happiest Minds for ₹13.3 billion, followed by a 25:81 share-swap merger. The combination will bring together Happiest Minds' AI, digital engineering, cloud and cybersecurity capabilities with ITC Infotech's enterprise technology services. ITC is expected to hold around 73.4% of the merged entity, with completion expected in approximately 15 months, subject to shareholder and regulatory approvals. Overall, 360 ONE's thesis is centred on improving profitability, a stronger FY28 earnings trajectory and increasing contributions from ITC's diversified businesses. With a ₹440 target and a BUY recommendation, the brokerage expects the current weakness to give way to improved earnings visibility Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions. Pranati Deva is a seasoned financial journalist with over a decade of experience in high-pressure newsroom environments, currently working as a Senior Sub Editor at LiveMint. Over the years, she has developed a reputation for sharp editorial judgement, a strong grasp of market dynamics, and the ability to translate complex financial developments into clear, engaging stories for a wide audience. <br><br> Her core areas of coverage include stock markets, leading listed companies, currencies, and commodities, with a particular strength in fast-paced, real-time market reporting. She is known for handling breaking market news, earnings-driven stock movements, and macroeconomic developments with speed, accuracy, and context—qualities that are essential in financial journalism. <br><br> Pranati has built a diverse and credible professional track record across some of India’s most respected news organisations, including MintGenie, CNBC-TV18, Business Standard and EconomicTimes.com. During her stints at these platforms, she produced data-driven market stories, curated and steered live blogs during volatile trading sessions, and conducted interviews with market veterans, fund managers, economists, and industry experts. Her work often combines on-ground reporting with analytical depth, helping readers make sense of daily market fluctuations and longer-term trends. An alumnus of the Symbiosis Institute of Media and Communications and Hansraj College, University of Delhi, Pranati brings a strong academic foundation to her journalism. She specialises in real-time financial reporting, with a keen focus on precision, balance, and insight, aiming to decode market movements in a way that is both informative and accessible to readers across experience levels. Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
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