ITC Shares: Prabhudas Lilladher Sets Rs 294 Target

Brokerage firm Prabhudas Lilladher has upgraded its rating on ITC to Accumulate from Hold, setting a target price of Rs 294 in its research report dated November 2, 2026. The brokerage expects a gradual recovery across the company’s businesses, although cigarette volume trends, input costs and potential changes in cigarette duties remain important factors to monitor.

The revised recommendation comes after ITC reported an 8% decline in cigarette volumes. Despite the volume contraction, the company’s cigarette business recorded an increase of Rs 4.7 billion in earnings before interest and tax (EBIT) on a quarter-on-quarter basis, supported by price increases to pass on the higher excise burden.

Why Prabhudas Lilladher Upgraded ITC to Accumulate

Prabhudas Lilladher believes ITC’s business performance could improve gradually as the company continues to manage the impact of higher taxation and operating costs. The brokerage estimates that ITC has passed on more than 75–80% of the excise burden through price increases so far.

This pricing action could support earnings recovery if the company continues to manage costs while maintaining demand. However, higher prices can also influence consumer purchasing behaviour, making cigarette volume recovery an important factor for the company’s future performance.

The brokerage believes the worst may be over for ITC, although it expects the recovery in cigarette volumes to remain gradual rather than immediate.

ITC Cigarette Business Faces Volume Pressure

ITC reported an 8% decline in cigarette volumes, highlighting the pressure facing its tobacco business. Cigarette companies have been adjusting prices to manage the impact of higher excise costs, but passing on these increases can affect demand.

According to Prabhudas Lilladher, ITC’s cigarette EBIT increased by Rs 4.7 billion quarter-on-quarter despite the fall in volumes. The improvement reflects the company’s efforts to transfer a significant portion of the additional excise burden to consumers through higher prices.

The brokerage estimates that more than 75–80% of the burden has already been passed on. This could help support profitability in the coming periods, provided the company can maintain an appropriate balance between pricing and sales volumes.

However, investors will need to monitor cigarette duty developments and changes in consumer demand. Any additional increase in taxation could create fresh pressure on prices, volumes and profitability.

FMCG Business Shows Positive Growth and Margins

ITC’s fast-moving consumer goods (FMCG) business has also contributed to the brokerage’s positive assessment. Prabhudas Lilladher noted that growth and margins have remained positive across several categories, including food, personal care and hygiene (HPC), and stationery.

The performance of these businesses is important for ITC’s broader diversification strategy beyond cigarettes. Its FMCG portfolio includes products across multiple consumer categories, giving the company exposure to different segments of household spending.

However, the brokerage cautioned that the margin trajectory needs to be watched because input costs are rising. Higher raw material and operating expenses could affect profitability if companies are unable to pass on the additional costs to consumers.

Demand has remained steady so far, according to the research report. Maintaining this demand while protecting margins will be important for ITC’s FMCG business in the coming quarters.

Paper Business Could Benefit From Multiple Factors

Prabhudas Lilladher also expects ITC’s paper business to gain support from three developments: the extension of minimum import price (MIP) measures, the integration of Century Paper and higher product prices.

The extension of MIP measures could provide support to domestic paper manufacturers by influencing the competitive environment for imported products. The integration of Century Paper may also create opportunities to improve business operations and strengthen the company’s position in the paper segment.

Higher paper prices could further support revenue realisation. However, the brokerage noted that input costs remain elevated, which could limit the improvement in margins.

The overall performance of the paper business will therefore depend on how effectively ITC manages production costs and benefits from pricing conditions and business integration.

ITC Outlook: Gradual Recovery Expected Across Businesses

Prabhudas Lilladher expects a gradual recovery across ITC’s business segments. Its assessment is based on the progress made in passing on cigarette excise costs, positive trends in the FMCG business and potential support for the paper segment.

Nevertheless, the brokerage highlighted several factors that investors should continue to monitor:

• Cigarette volumes: The pace of recovery after the reported 8% decline will remain important for earnings growth.
• Cigarette duty: Any further increase in duties could affect pricing decisions, consumer demand and profitability.
• FMCG margins: Rising input costs could put pressure on margins even if demand remains steady.
• Paper business: The benefits of MIP extension, Century Paper integration and higher prices will need to be assessed against elevated input costs.

These factors could influence the speed and sustainability of the company’s earnings recovery.

Brokerage Sees Limited Downside After Previous Share Price Decline

Another factor behind the rating upgrade is ITC’s previous share price correction. Prabhudas Lilladher noted that the stock has declined by approximately 50% from its peak and offers a dividend yield of around 5%.

The brokerage believes these factors limit the potential downside and support its decision to upgrade the stock to Accumulate from Hold.

However, the target price of Rs 294 represents the brokerage’s assessment based on its research and assumptions. It is not a guaranteed future market price, and actual performance will depend on the company’s financial results and broader market conditions.

What Investors Should Watch Before Considering ITC Shares

Investors tracking ITC should focus on the company’s quarterly performance across cigarettes, FMCG and paper. The pace of cigarette volume recovery will be particularly important because the business continues to face pressure from taxation and pricing adjustments.

In the FMCG segment, steady demand will need to be supported by effective cost management to protect margins. For the paper business, the impact of higher prices and integration benefits will have to be evaluated alongside elevated input costs.

Dividend yield and valuation may also form part of an investor’s assessment. However, a lower share price compared with its previous peak does not automatically make a stock inexpensive. Investors should examine earnings prospects, cash flows, business risks and their own investment objectives.

ITC Share Recommendation: Key Takeaways

Prabhudas Lilladher has upgraded ITC to Accumulate from Hold and assigned a target price of Rs 294 in its November 2, 2026 research report. The brokerage expects gradual improvement across the company’s businesses, supported by cigarette price adjustments, positive FMCG trends and potential gains in the paper segment.

At the same time, the 8% decline in cigarette volumes, rising FMCG input costs, elevated paper costs and the possibility of higher cigarette duties remain important risks.

The brokerage’s assessment suggests that ITC’s recovery could take time, particularly in its cigarette business. Investors should consider the company’s latest financial performance, valuation and risk factors before making any investment decision.

Disclaimer: The investment views and recommendations discussed in this article are those of Prabhudas Lilladher and do not represent the views of this website or its management. The target price and rating are brokerage estimates, not guaranteed outcomes. Investors should consult a SEBI-registered investment adviser or certified financial expert before making investment decisions.