ITC shares declined 1.15% to ₹304.50 on Friday morning following the release of Q4FY26 results, extending Thursday's close of ₹308.05. The stock has shed over 28% in the past year, significantly underperforming the Nifty 50's 3.3% decline over the same period. Trading volumes remained active at 1.39 crore shares with a marginal buy-side skew of 53%. The selling pressure reflects analyst concerns over the impact of recent cigarette tax changes and their potential effect on future performance.
ITC delivered robust Q4FY26 results with consolidated net profit rising 4.64% year-on-year to ₹5,100 crore, beating market estimates of ₹4,900 crore by 4.08%. The company also announced a final dividend of ₹8 per share, bringing the total dividend for FY26 to ₹14.50 per share when combined with the earlier interim dividend. On a sequential basis, profit improved 9% from the previous quarter, demonstrating resilience through the year-end period. The cigarette business remained the biggest contributor with FMCG-cigarettes segment revenue rising to ₹11,951.72 crore in Q4 from ₹9,228.66 crore a year ago, while the FMCG-others segment also posted healthy growth. However, agri-business revenue declined 15% due to geopolitical disruptions linked to the West Asia conflict, which affected export volumes.
Major brokerages remain divided on ITC Limited's outlook following Q4FY26 results, with Jefferies maintaining a 'Hold' rating and lowering its target price to ₹350 from ₹400, implying nearly 14% upside. CLSA retained its outperform rating with a target of ₹394, noting that cigarette EBIT came in 15% ahead of consensus. Morgan Stanley kept an equal-weight with a ₹346 target, expecting the stock to remain range-bound until volume trajectory becomes clearer. Goldman Sachs maintained Neutral at ₹330, estimating cigarette volume and EBIT could decline roughly 8% and 17% respectively in FY27. At the bearish end, Citi held its Sell rating with a ₹290 target, flagging structural risks around price elasticity and potential consumer migration to illicit products. According to Jefferies, the company delivered a strong fourth quarter mainly supported by cigarette business and improving FMCG performance, but warned that the March quarter numbers may not fully reflect the actual impact of the tax increase as part of the benefit likely came from inventory stocking before the tax changes took effect.
The biggest concern now is how the cigarette business performs over the next few quarters after the government increased taxes sharply earlier this year. The GST rate on cigarettes was raised from 28% of transaction value to 40% of retail sale price, alongside steep excise duty hikes, triggering an unprecedented tax-related disruption to primary and secondary sales. Jefferies reports that ITC has so far implemented only partial price hikes despite a steep rise in taxes, which could affect both cigarette volumes and margins in the coming quarters. Nomura warns that aggressive price increases may lead consumers towards illegal cigarette markets, which could affect formal industry growth. The brokerage believes the cigarette business could remain under pressure in the near term because ITC has not fully passed on the tax hike to consumers yet, with taxes on cigarettes effectively increasing nearly 40% while the company's price hikes remain lower than that level. JM Financial noted that ITC has implemented staggered price hikes of nearly 20% against a tax increase of around 35–40%.
The Fast-Moving Consumer Goods segment delivered robust performance with revenue growth accelerating to nearly 15% year-on-year, helped by staples, biscuits, dairy products, snacks and personal care categories. According to JM Financial, the segment delivered robust performance with margin expansion during the quarter despite continued investments in branding and trade promotions. ITC's FMCG segment delivered 15% revenue growth with EBIT margin expanding 200 basis points to 8.3%, beating estimates. The FMCG segment continues to show healthy traction and is expected to remain one of ITC's key long-term growth drivers, with the diversified model helping cushion tobacco tax pressures. The FMCG-others segment also posted healthy growth, supported by the company's broader consumer portfolio. Steady FMCG growth indicates a recovery in rural and semi-urban consumption patterns, as reported by market analysts.
ITC maintained its reputation as one of India's most consistent dividend-paying large-cap stocks with the final dividend of ₹8 per share for FY26. The company has fixed May 27, 2026 as the record date for the final dividend, with the payout expected to be credited between July 24 and July 29, 2026, subject to shareholder approval at the AGM. The steady payout, combined with ITC's scale and cash flow profile, makes it attractive for income-focused investors. Looking ahead, with cigarette price hikes still incomplete and FY27 earnings visibility limited, analysts expect near-term stock pressure to persist at least through the first quarter as the full impact of tax changes becomes visible. The next few quarters could be crucial for understanding how cigarette volumes and margins respond after the sharp tax increase, while the company's ability to exceed profit estimates despite agri-business challenges highlights the strength of its diversified business model.
