Brokerage firm Prabhudas Lilladher has downgraded ITC to 'Hold' with a target price of Rs 291. The revision follows a 5% drop in cigarette volumes and a 27.1% decline in profit for the first quarter of FY27, as the company faces ongoing pressure from excise duty absorption.
Prabhudas Lilladher has shifted its outlook on ITC to 'Hold', lowering its price target to Rs 291 from the previous Rs 302. This change follows a difficult first quarter for the fiscal year 2027, where the company saw its cigarette volumes dip by approximately 5%. This volume slump, combined with the impact of absorbing higher excise duties, resulted in a 35.1% drop in Earnings Before Interest and Taxes (EBIT) for the segment. Consequently, ITC reported a 27.1% fall in its overall Profit After Tax (PAT).
Earnings Outlook and Segment Performance
The brokerage has also adjusted its expectations for the company's future earnings, cutting its Earnings Per Share (EPS) estimates for FY27 by 15.0% and for FY28 by 10.3%. While the cigarette business remains under pressure, other parts of the company are seeing varied results. The FMCG business is reporting steady growth, although analysts have raised concerns about potential margin pressure in the second quarter, linked to regional disruptions in West Asia. Conversely, the paper segment is showing signs of better profitability, helped by a combination of lower wood costs and government measures like the Minimum Import Price (MIP) that protect domestic producers from cheaper imports.
Valuation and Future Recovery
Despite the recent decline in earnings, analysts suggest that the worst of the volatility may be behind the stock. ITC has seen a significant correction of about 30% in its share price since December 25, 2025. The current valuation, with a forward price-to-earnings ratio of 16.7x for FY28 and a dividend yield of 5%, suggests to some observers that the downside risk could be limited. The brokerage expects the company's profit to fall by 13% for the full FY27 year, followed by a potential 15.2% recovery in FY28.
Investors will be tracking the company's ability to navigate volume growth challenges in the coming two to three quarters. Other key factors to monitor include how effectively the FMCG segment maintains its margins amidst global logistics or regional pressures, and whether the paper segment can sustain its improved performance as raw material costs fluctuate. The pace of volume recovery in the core cigarette business will remain a primary metric for the company's overall financial health in the near term.