ITC share price: Shares of ITC are in a downtrend slipping 23% this year. ITC shareholders are in a soup on the back of a massive cigarette tax hike from February 1, 2026. The government replaced the old compensation cess structure, raising the core GST on cigarettes from 28% to 40% of the retail price.

According to brokerage Motilal Oswal's estimates, the cigarette major may require a 35% MRP hike (based on historical mix) across its portfolio to remain EBIT neutral.

The revised cigarette taxation structure marks one of the sharpest hikes historically, it said. 

Referring to past instances of the tax hikes, the brokerage said ITC has taken immediate price increases to stay EBIT-neutral. "However, given the quantum of tax increase this time, this approach is unlikely," said Motilal Oswal. 

Considering the current market price of Rs 280, ITC's price target by the brokerage amounts to an upside of 7%. Motilal Oswal has assigned a target price of Rs 300 on ITC amid the ongoing correction in the FMCG stock. 

"We maintain our Neutral rating on ITC with our SoTP-based TP of Rs 300 (implying 18x Mar’28E P/E)," said the brokerage. 

The brokerage expects 10% volume fall in FY27E and flat volume in FY28E in cigarette segment. Earnings pressure on cigarettes would take away near-term catalysts (improving FMCG and Paper). "Valuations remain comfortable however, we do not see any near-term positive catalyst."

The brokerage says in the bear case, full passthrough of the steep tax hike could trigger sharp price-led revenue decline (20%) and 28% EBIT contraction due to an accelerated shift toward illicit cigarettes. 

Conversely, the bull case assumes better consumer absorption and limited downtrading, restricting revenue decline to 8% and a moderate cigarette EBIT decline of 11%, supported by price/mix benefits.