Systematix flags ITC cigarette volume pressure; prefers Marico, Bikaji and Dodla
Systematix retained a Hold on ITC, citing a 10–15% year-on-year decline in cigarette demand and price-hike backlash. The brokerage expects near-term range-bound trading and named Marico, Bikaji Foods and Dodla Dairy as preferred consumer picks.
What happened
ITC Limited · Systematix retained Hold on ITC, citing 10-15% year-on-year cigarette demand declines and price-hike backlash. It expects near-term range-bound
Key facts
- ITC target price: Rs 290
- ITC valuation: 18x FY28E PE
- Cigarette demand down 10-15% YoY
- Kings 84mm volumes down 20-25%
- DSFT 64mm and Regular 69mm volumes down 7-8%
- Marico target: Rs 990
- Bikaji Foods target: Rs 740
- Dodla Dairy target: Rs 1,295
- Dabur target: Rs 510
- Godrej Consumer Products target: Rs 1,045
- Hindustan Foods target: Rs 680
- Patanjali Foods target: Rs 580
Why this matters
The divergence between ITC’s cigarette softness and Systematix’s preferred staples and food picks highlights potential value in resilient, affordable consumption platforms with stronger volume-led growth.
What to watch
- ITC quarterly cigarette volume growth falling below -10% year on year or recovering toward flat growth.
- Kings 84mm volume decline remaining in the -20% to -25% range versus evidence of stabilization.
- Any reduction in cigarette price-hike cadence, promotional intensity increase or shift toward lower-price packs.
- Management disclosure of market-share loss, downtrading or rising illicit-cigarette penetration.
- Marico, Bikaji and Dodla reporting volume growth above sector expectations without material margin deterioration.
- Union Budget or regulatory announcements affecting tobacco taxation.
- Track cigarette pricing actions, including whether ITC pauses hikes, changes pack architecture or increases trade incentives.
- Watch for management commentary on downtrading, illicit-trade incidence and volume trends across premium versus value cigarette segments.
- Reassess ITC earnings assumptions if weak cigarette volumes persist for a second consecutive reporting period.
- Monitor relative valuation and fund-flow rotation into Marico, Bikaji Foods and Dodla Dairy, especially after quarterly volume disclosures.
- Track tobacco-tax or excise-policy signals, as a higher tax burden would compound price elasticity and illicit-market risks.