Finance Minister Purbaya Confirms No Cigarette Price Hike in 2026 as Excise Remains Unchanged

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JAKARTA, Investortrust.id — Finance Minister Purbaya Yudhi Sadewa confirms that Indonesia will maintain its tobacco excise rates and retail cigarette prices in 2026, a move aimed at preventing the spread of illegal cigarettes in the domestic market.

Speaking after leading the 79th Customs Day celebration at the Directorate General of Customs and Excise headquarters in Jakarta on Monday, Oct 13, 2025, Purbaya said there is no justification to raise retail prices when excise remains the same.

“There’s no need to increase the price. Otherwise, it would be misleading,” he said. “If the excise stays flat but retail prices go up, that’s the same as raising taxes indirectly.”

The minister explained that higher retail prices would widen the price gap between legal and illegal cigarettes, potentially encouraging consumers to shift to unregulated products. “For now, I’ll leave it as is. I haven’t raised anything yet,” Purbaya said.

Earlier, the finance minister confirmed that the government would not increase the tobacco excise rate, known locally as CHT, after consulting with the Indonesian Cigarette Manufacturers Association (Gappri).

“One thing I discussed with them was whether I should adjust the 2026 excise rate. They said, ‘As long as it’s not changed, it’s fine,’” Purbaya told reporters at his office on Friday, Sept 26, 2025.

Jokingly, he added that he had initially considered lowering the excise rate but dropped the idea after receiving input from the industry. “They said it’s enough to keep it unchanged, so I’ll hold them to that,” he said with a laugh.

“Therefore, the 2026 excise rate will remain the same,” Purbaya concluded.

Despite the decision to freeze excise, the Finance Ministry plans to focus its 2026 enforcement efforts on eradicating smuggled and illegal cigarettes from foreign sources, which have been eating into state revenues.

Market Reaction and Valuation Impact

Purbaya’s decision to keep the tobacco excise rate unchanged in 2026 has been interpreted as a short-term relief for tobacco producers, which have been under pressure from continuous tax hikes in recent years. The announcement provides cost stability for the industry and may help improve margins amid declining volume trends.

Hanjaya Mandala Sampoerna (HMSP) stock last traded at Rp 695, down 2.11% on the day of the announcement, but still up 6.9% year-on-year. HMSP’s fair value is estimated at Rp 976, implying an upside potential of 40.5%. The company maintains strong profitability and dividend yield, supported by a clean balance sheet with more cash than debt.

Analysts view HMSP as the most defensive pick in the sector due to its premium segment exposure and high payout ratio. The excise freeze is expected to stabilize earnings and protect margins, potentially triggering a re-rating toward its fair value range between Rp 782–Rp 1,220.

Gudang Garam (GGRM) shares rose 0.43% to Rp 11,650, recovering slightly from last week’s 21.6% annual drop. The fair value estimate stands at Rp 16,502, signaling a potential 41.6% upside.

GGRM, which relies heavily on machine-rolled clove cigarettes (SKM), is particularly sensitive to tax policy changes. With no excise increase in 2026, the company could experience a margin recovery and stronger earnings growth, especially as net income is projected to rise this year. Its valuation multiples remain low, with a Price-to-Book ratio well below 1x, making it an attractive cyclical rebound candidate.

The smaller cap stock Wismilak Inti Makmur (WIIM) dropped 4.55% to Rp 1,155, though it remains 32% higher year-on-year. WIIM’s fair value is Rp 1,485, suggesting a 28.6% upside.

The company benefits most from policy certainty because of its leaner cost base and focus on hand-rolled and mid-tier products. WIIM has raised dividends for six consecutive years and trades at a low earnings multiple, offering both growth and income potential as the market adjusts to a steady excise environment.

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