ITC’s Q2 results were largely in line with Street expectations, marked by muted revenue growth but an outperformance on EBITDA and net profit.
The Cigarettes and FMCG segments supported overall growth, partly offset by weakness in the Agri business.
Nirmal Bang said Cigarette volumes, estimated at 6 per cent, continued to be healthy while the other FMCG business surprised positively both on sales growth and margins, which can sustain further.
“With minimum import price being imposed on paperboard, the domestic industry has obtained a breather, and margins in this segment are likely to be better going forward,” it said. The brokerage suggested a ‘Buy’ rating and a target of Rs 495 on the stock.
MOFSL said ITC’s core business growth has been steady, with healthy cigarette volume growth. Consistent focus on new launches, stable taxes, and a variety of other initiatives led to 7 per cent cigarette growth in FY25, and the momentum continued in 1HFY26, it said.
“Cigarette EBIT margin is likely to improve from 4QFY26. FMCG performance was below par in FY25, but with demand experiencing a recovery, we expect improving trends from 2HFY26. The paper business is also bottoming out for growth and margin. We reiterate our Buy rating on ITC with our SoTP-based target of Rs 515 (implying 27x Sep’27E P/E),” it said.
Given the weak set of numbers, Nuvama said cut its FY27 and FY28 EPS estimates by 4.1 per cent and 3.3 per cent, respectively, yielding an target price of Rs 534 against Rs 540 earlier.
Emkay Global has maintained its ‘Add’ rating on ITC and a target price of Rs 475, as it feels external factors may aid the outlook for the company going ahead.
“ITC’s business performance was marred by multiple headwinds, which are now in the base. With clarity on cigarettes taxation (expected in Q3), the company should enhance execution to protect and recoup market share,” Emkay said adding that the Q2 performance was marginally weak, affected by slower topline and weak margin delivery.
“We expect improvement in cigarette earnings delivery from FY27E, driven by low-cost leaf tobacco and expected sustenance of mid-single digit volume. We uphold our view that containing the market-share loss will be key for valuations. Near term, announcements on new central taxation (excise/NCCD) need to be watched,” it said.
Nirmal Bang said it retained its Buy rating on three reasons.
First is the stock valuations becoming attractive post 13 per cent correction year-to-date. In addition, it is optimistic on continued healthy momentum on cigarette volumes with likely margin improvement in FY27 as the company gains from decline in leaf tobacco costs. Lastly it sees a gradually improving earnings prospects of the other FMCG business as well as the paper and paperboard business.