ITC reported a strong revenue performance in the first quarter of the financial year 2025-26. However, on the operating front, the margins were squeezed this reporting quarter. Most of the brokerage houses kept the rating unchanged on the stock. Here’s a detailed analysis of what they expect on ITC post Q1 FY26.
Nuvama on ITC: Target price raised
Nuvama Institutional Equities stays positive on ITC given early trends of urban revival and broad-based growth across segments. However, the brokerage has cut FY26-27 EPS by 2% each. The brokerage has raised the target price slightly to Rs 540 from Rs 533, while retaining a ‘Buy’ rating. This implies 30% upside for the stock
ITC’s Q1 FY26 net sales expanded 20.6% YoY, mainly led by 39% YoY growth in Agri on the back of strong exports, trading gains, and value-added portfolio expansion.
On the operating front, EBITDA rose 3% YoY. Cigarette net sales rose 7.6% while volumes grew 6.5% YoY, which stands at an eight-quarter high, ahead of the brokerage’s 4% expectations.
Motilal Oswal on ITC: Stable growth
Motilal Oswal Financial Services said if ITC sustains mid-single digit volume growth in the cigarette and FMCG business, and sees a recovery in FY26, then the brokerage may re-rate ITC. The brokerage firm has reiterated its ‘Buy’ rating on the stock, with a target price of Rs 500, implying an upside of 20%.
Motilal Oswal said there is no material change in EPS estimates for FY26 and FY27. ITC’s core business of cigarettes saw steady performance. With stable taxes on cigarettes, the brokerage expects stable growth in this business.
The brokerage house expects a 5% revenue CAGR in FY26-28. At the same time, the FMCG segment is seeing moderation due to multiple headwinds. ITC has historically enjoyed industry-leading growth due to several category drivers, e.g., a large unorganised mix, under-penetration, etc.
“With the overall demand environment expected to improve, we expect FMCG performance to improve in the coming quarters. We model an 11% revenue CAGR during FY26-28,” said Motilal Oswal.
JM Financial on ITC: Volumes to drive growth
FMCG margins were better than expectations. However, the overall segmental EBIT was a miss, predominantly on account of weaker EBIT margins in cyclical businesses and Cigarettes due to challenges pertaining to raw material inflation (Cigarettes & Agri business) and low-priced imports (for Paperboards).
Nonetheless, moderation in leaf tobacco prices seen in the current crop cycle, along with steady volumes, should drive an uptick in Cigarette EBIT growth towards the end of FY26, said JM Financial. Similarly, the FMCG business should also see a sequential uptick in sales & profitability in the coming quarters with an improving macro & benign raw material scenario.
With the demerger of the hotel business, the capex intensity will reduce & aid improvement in return on invested capital.
JM Financial has maintained its Buy rating on ITC and the target price remains unchanged at Rs 500.