FMCG giant ITC's stock price rallied by 1.5% after its Q1 results for FY26. On Monday, the stock crossed the Rs 420 mark. Analysts maintain a positive stance on ITC due to its strong volume growth in the cigarettes business. FMCG sales growth also improved further, which is a key bullish factor. Brokerage JM Financial has suggested BUY after Q1 results with a target price of Rs 500. However, Emkay Global recommends ADD.
ITC Share Price:
In the early trade, this mega FMCG stock touched an intraday high of Rs 422.80 apiece on BSE, rising by over 1.51%. At the time of writing, the stock is up marginally to trade at Rs 418.05 apiece with a market cap of Rs 5,23,550.41 crore.
ITC has one of the strongest return on equity (ROE) in the FMCG sector, to the tune of 48.24%. While its price-to-equity ratio is low at 14.87x.
ITC Q1 Results:
ITC reported growth of 20% YoY in standalone revenue, driven by Cigarettes, Agri Business and FMCG (Excluding Notebooks). On a consolidated basis, the revenue and PAT growth stood at 20% YoY and 5% YoY, respectively.
Furthermore, the FMCG-others segment witnessed overall revenue growth of 5.2% YoY, while the Notebooks industry continues to operate under deflationary conditions on account of low-priced paper imports and opportunistic play by local/regional players; Unseasonal rains during the quarter impacted Beverages sales.
Cigarettes net segment revenue posted 7.7% YoY growth, while agri business revenue is up by 39% YoY, driven by agri commodity trading opportunities & exports of Leaf Tobacco.
Paperboards, Paper and Packaging Segment reflects the impact of the influx of low-priced supplies into global markets, including India, elevated domestic wood prices and subdued realisations. The revenue growth here is 7% YoY.
Should You Buy ITC Stock?
According to JM Financial's note, ITC's June-Q performance was ahead of estimate on segmental revenue (by c.8%) but missed on overall EBIT (c.2% below est.). In terms of positives, yet another resilient sales performance in Cigarettes, as net sales grew 7.7% yoy (tad better than est.), led by further improvement in volume growth (at c.6.5% vs. 5% seen in recent quarters). This, along with strong growth in Agri-business, led to a revenue beat. FMCG sales growth (ex-notebooks) improved further to 8.6% (vs. 5.4% in 4Q), inline with our est. On the profitability, while FMCG margins were better than envisaged, overall segmental EBIT was a miss, predominantly on account of weaker EBIT margins in cyclical businesses and Cigarettes due to challenges pertaining to RM inflation (Cigarettes & Agri business) and low priced imports (for Paperboards).
Analysts at JM added, "However, moderation in leaf tobacco prices seen in current crop cycle along with steady volumes should drive uptick in Cig EBIT growth towards end of FY26, in our view. FMCG business should also see sequential uptick in sales & profitability in coming quarters with improving macro & benign RM scenario. With demerger of Hotels business, the capex intensity will reduce & aid improvement in ROIC. Valuations at 25x/22x FY26/27E are not demanding & at steep discount to staples peers. Maintain BUY with unchanged TP of 500 (26x June'27 EPS)."
Meanwhile, analysts at Emkay Global said, "We maintain a positive stance on ITC with ADD and a Jun-26E SOTP-based target price of Rs475, as we believe most headwinds are now in the base. Q1FY26 profit was in line with expectations, supported by stable performance in the cigarettes business (revenue up 7.7% with an estimated 6.5% volume growth). Non-cigarette revenue grew 22% YoY, led by a strong 39% growth in the agri business."
However, Emkay's analysts also said, "weak margins in other FMCG and the paper segment resulted in an 11% YoY decline in non-cigarette EBIT. Looking ahead, we expect 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 cig tax increases linked to the replacement of the compensation cess."
ITC Corporate Actions:
Dividends: As per Trendlyne data, ITC has delivered about 29 dividends since July 2003. In the past 12 months, ITC paid dividends amounting to Rs 14.35 per share. Currently, ITC has one of the highest dividend yields of 3.43% in the FMCG sector.
Bonus Issue: The company has a strong track record of bonus shares. The last bonus was of 1:2 ratio in July 2016, while ITC delivered 1:1 and 1:2 bonus ratios in August 2010 and September 2005. ITC has overall delivered 3 bonus shares.
Stock Splits: Additionally, ITC has carried a single stock split so far. In September 2005, ITC's shares split from Rs 10 face value to Rs 1 each, hence a ratio of 1:10.
ITC is a leading multi-business Indian enterprise with presence in FMCG, Paper, Packaging, Agribusiness and IT, and is a global Sustainability exemplar.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
Click it and Unblock the Notifications
Sign in with Google