ITC shares rose over 1% on Tuesday, 3 November, after the diversified conglomerate reported its Q2 FY27 results, with consolidated profit declining 18.45% year-on-year amid a sharp increase in expenses.
The company’s consolidated net profit stood at ₹4,229.33 crore in the September quarter, compared with ₹5,186.55 crore in the corresponding period last year, according to its regulatory filing.
However, revenue from operations increased 43.85% year-on-year to ₹30,578.4 crore in Q2 FY27, against ₹21,255.86 crore in the year-ago quarter.
ITC’s total expenses surged 69.6% to ₹25,462.44 crore during the quarter. Total consolidated income, including other income, rose 42.33% to ₹31,085.76 crore.
Non-cigarette FMCG businesses report robust growth
In its earnings statement, ITC said it recorded robust growth across all non-cigarette business segments.
The FMCG business delivered its fourth consecutive quarter of double-digit revenue growth, while its EBITDA margin expanded by 50 basis points year-on-year despite inflationary pressures.
The company also reported a strong recovery in its paper segment, while the agriculture business recorded healthy growth despite trade disruptions arising from tensions in West Asia.
Revenue from ITC’s total FMCG business, which includes cigarettes, increased 51.58% to ₹23,455.47 crore during the September quarter.
The cigarette business recorded revenue growth of 72.47% to ₹16,237.11 crore. However, ITC noted that industry volumes continued to face pressure following an unprecedented increase in taxes.
ITC flags geopolitical tensions, higher input and freight costs
ITC said the operating environment remained uncertain during the quarter amid renewed geopolitical tensions and trade disruptions.
Crude oil and crude-linked input prices remained elevated, while supply chain disruptions and higher freight costs continued to weigh on the business environment.
The company also highlighted intensifying global inflationary pressures, driven by higher energy and food prices, alongside elevated sovereign bond yields and tighter financial conditions.
In India, headline inflation increased during the quarter, reflecting a broad-based rise across food, fuel and core components, ITC said.
ITC shares – Should you buy, sell or hold?
Axis Direct maintains Hold, cuts target price to ₹260
Axis Direct has revised its earnings estimates for ITC downward, citing the recent tax hikes in the cigarettes business and persistent inflationary pressures arising from geopolitical tensions, elevated energy costs and supply-side disruptions.
However, the brokerage remains constructive on the company’s long-term growth prospects, supported by its diversified business portfolio and strong execution capabilities.
Axis Direct has lowered its target price to ₹260 per share from ₹285 earlier and revised its valuation multiple to 18x September 2028 EPS from 19x June 2028 EPS. It has maintained its HOLD rating, indicating a downside potential of 2% from the current market price (CMP).
Nuvama upgrades ITC to Buy, retains ₹310 target
Nuvama Institutional Equities said ITC’s Q2 performance was marginally ahead of its estimates and consensus expectations, supported by strong growth in FMCG, agriculture and paper businesses, while the cigarette segment was broadly in line.
Cigarette volumes declined 7-8% year-on-year, with net revenue and EBIT falling 21% and 27%, respectively. However, the segment showed a sequential recovery, with net revenue and EBIT increasing 5% and 14%, respectively, compared with declines of 1% and 39% in Q1.
The FMCG business reported 16% revenue growth and 28% growth in profit before interest and tax (PBIT). The agriculture and paper businesses also delivered strong performances, with revenue/PBIT growth of 12%/11% and 36%/48%, respectively.
Nuvama expects cigarette EBIT to improve in the second half of FY27 as the company adjusts to the higher tax regime, while non-cigarette businesses are likely to sustain healthy growth.
The brokerage believes ITC’s valuations are attractive at 19x and 17x FY27 and FY28 estimated price-to-earnings (P/E), respectively, along with a dividend yield of 5-6%.
Citing the recent correction in the stock and an improving business outlook, Nuvama upgraded its rating to BUY from HOLD, while retaining its target price of ₹310 per share.
Technical Views
ITC share price today opened at ₹269.20 apiece on the BSE, the stock touched an intraday high of ₹270.05 per share, and an intraday low of ₹264.60 apiece.
Gaurav Arora, Head of Research at SAHI, said ITC shares have been trading in a consolidation range of ₹250- ₹270 and are currently testing the upper boundary near ₹270. He noted that the EMA curvature is also turning upward, with the stock moving above the indicator, signalling improving technical momentum.
A decisive breakout above ₹270 could pave the way for further upside towards ₹295 in the near term, Arora added.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
