Diversified conglomerate ITC Ltd shares traded in the green on August 4, after the tobacco giant reported flat profit growth for the quarter ended June.
ITC reported its standalone net profit was flat at Rs 4,912 crore for the quarter ended June 30, 2025, as elevated input costs continued to pressure margins. The company reported net profit of Rs Rs 4,917 crore in the same quarter last year.
However, the conglomerate's revenue rose 20 per cent to Rs 21,059 crore in Q1FY26 as against Rs 17,593 crore a year ago, driven by strong sales from cigarettes, agri business and fast moving consumer goods (FMCG) businesses.
Cigarette revenue was up 8 percent, supported by a stable tax environment and market interventions. However, margins are under pressure due to high-cost leaf tobacco, and this trend may continue into FY26. While the FMCG segment showed improved growth, the paperboard segment remained under pressure.
The FMCG-to-cigarettes conglomerate said it expects lower inflation, reduction in interest rates & liquidity support by RBI and tax cuts along with front loading of government expenditure to "bolster the growth momentum going forward".
At 9.25 a.m., shares of ITC were quoting Rs 419.15, higher by 0.65 percent on the NSE.
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International brokerage Morgan Stanley maintained its 'overweight' call with a price target of Rs 500 per share, noting that the beat in the revenue was driven by ITC's agri business.
Citi has a 'buy' rating, while Macquarie reiterated an 'outperform' rating on ITC, both issuing a target price of Rs 500. The brokerages noted that cigarette growth remained strong, and margins are expected to recover in the second half.
FMCG growth is improving, and a similar margin recovery is likely in the latter half of the year. Although margins in the paper business weakened, they may have bottomed. Earnings growth is expected to accelerate in the second half of FY27, noted Citi.
Jefferies retained a 'buy' rating and sets a target price of Rs 535 per share. Cigarette volume growth accelerated to a multi-quarter high, although segment EBIT margins continued to decline. EBIT was in line, but other segments reported lower-than-expected earnings due to margin pressure. Overall EBITDA growth remained muted at 3 percent.
According to Emkay Global, looking ahead, the brokerage expects a gradual improvement in cigarette performance, driven by improved execution and a catch-up in volume growth relative to the industry—containing market share loss will be key.
"That said, a near-term overhang persists due to potential cigarette tax increases linked to the replacement of the compensation cess," said Emkay.
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