The Health Minister has announced that the Ministry of Health has accepted the expert committee recommendation on prohibition on sale of loose or single stick of cigarette, increasing the minimum legal age for sale of tobacco products, increasing the penalty amounts for violation of certain provisions of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA), as well as making such offences cognizable. The draft note for the Cabinet has also been circulated for the inter-ministerial consultation.

''We believe these recommendations would be discussed in the Cabinet meeting and may be amended before any notification. However, the government has already notified stamp health warnings across 85% of the surface of cigarette packs and other tobacco products, which will be implemented from Apr. 01, 2015,'' said ICICIdirect.

''We believe volume dip is the major concern for both ITC and VST Industries and these regulations would be an overhang on cigarettes stocks in the medium-term. However, we await any change in revenues, earnings estimates until the government comes out with the notification,'' it said.

''We value ITC on an SOTP basis and maintain our target price of Rs 387 with Hold rating. We value VST Industries at 18x FY17E EPS of Rs 104.7 (30% discount to ITC) and arrive at a target price of Rs 1,872 a share. We maintain our Hold recommendation,'' it opined.

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