Tax shocker makes Nuvama downgrade ITC shares, says cigarette prices can go up 20%

Nuvama cut ITC’s target price to Rs 415 and downgraded the stock to hold after the government announced a sharper-than-expected hike in cigarette taxes. The brokerage expects price hikes to hurt volumes and EBITDA from FY27, prompting earnings downgrades. However, strong cash flows, a high dividend payout and growth in non-tobacco businesses offer downside support.