ITC share price is under pressure after the company reported its December quarter earnings. The FMCG-to-cigarettes giant posted mixed results, with its core cigarette business performing well, but other segments, including FMCG and paperboards, facing challenges. Adding to the buzz, ITC announced a 100% acquisition of frozen food player Prasuma in tranches over the next three years.
Let’s take a look at what the brokerages say about ITC stock:
Nuvama on ITC: Cigarette business outperforms, but FMCG and paperboards struggle
The brokerage firm, Nuvama maintains a ‘Buy’ rating with a SoTP-based target price of Rs 571. According to them, ITC’s Q3FY25 results is in line with expectations. The company’s revenue and EBITDA grew by 8.3% and 1.6% YoY, respectively, while adjusted profit after tax fell 9.7% YoY.
The cigarette segment stood out, with net revenue and volumes rising 8.1% and 6% YoY, surpassing estimates. However, the FMCG and paperboards, paper & packaging divisions faced profitability pressures, dragged down by rising raw material costs.
“Profitability (EBIT) for FMCG – Others (down 26.6% YoY) and Paperboards, paper & packaging (down 30.6% YoY) was weak as we highlighted. Key RM inflation led to EBITDA margins compressing 239bp YoY to 34.2%,” said Nuvama in its note.
Motilal Oswal cuts EPS Estimate for ITC
Motilal Oswal has cut its EPS estimates for ITC by 4% for FY25 and 5% for FY26, mainly due to the demerger of the hotel business w.e.f. Jan’25. According to them, ITC’s core business of cigarettes has shown steady performance. With stable taxes on cigarettes, they anticipate sustainable growth in this business.
“While the FMCG sector is seeing moderation due to the rising commodity prices, ITC is enjoying industry-leading growth over peers due to its category presence (large unorganized mix, under-penetrated, etc.),” they added.
As a result Motilal Oswal reiterates ‘Buy’ rating on ITC with SOTP-based target price of Rs 550.
Morgan Stanley maintains Overweight on ITC
The brokerage firm,Morgan Stanley has maintained an Overweight rating on ITC, setting a target price of Rs 578 per share. The brokerage noted out that ITC’s topline performed well across segments, except for the agri-business.
However, according to the brokerage,the EBITDA remained weak across most divisions. One of the key highlight was the strong growth in the cigarette segment, which came as a positive surprise.
JP Morgan retains Overweight on ITC
JP Morgan also retained an Overweight rating on the stock, with a target price of Rs 505 per share. The brokerage pointed out that ITC had a mixed Q3 performance, with revenue in line with expectations but slightly weaker margins. Despite some margin pressure, valuations remain reasonable at 25x FY26 P/E with a 3%+ dividend yield.
The firm highlighted that the cigarette segment saw revenue growth driven by higher volumes, though raw material inflation impacted margins. Other FMCG segments showed mixed revenue performance with subdued margins. Meanwhile, the paper segment saw its margins hit a new low.
According to them, the Prasuma acquisition is expected to strengthen ITC’s food business.
ITC acquisition in Prasuma
ITC, one of India’s leading consumer goods companies, has signed definitive agreements to acquire a 100% stake in Prasuma over the next three years, as per its exchange filing on February 6. The company will acquire 43.8% upfront, with the remaining stake being acquired in phases until June 2028, based on predefined valuation criteria.
ITC Q3FY25 performance
ITC announced its Q3FY25 results on February 6. The company’s standalone net profit rose 1% YoY to Rs 5,638 crore, beating estimates, while its consolidated net profit declined 7.27% to Rs 5,013.16 crore. Revenue from operations grew, with standalone revenue rising 8% to Rs 18,290 crore and consolidated revenue increasing 9.05% to Rs 20,349.96 crore.
However, EBITDA stood at Rs 5,834.3 crore, slightly below expectations, with EBITDA margins slipping to 34.2% from 36.5% last year. Meanwhile, the company declared an interim dividend of Rs 6.50 per share, with February 12 as the record date and payout scheduled between March 6 and March 8, 2025.
ITC stock performance
ITC’s share price today opened at Rs 440 per share. In the early trading hours, the stock was down 1.31%, trading at Rs 435.35.
The company’s market capitalisation stands at Rs 5.46 lakh crore, with a 52-week high of Rs 528.50 and a low of Rs 399.35 per share.
Over the past five days, ITC’s share price has fallen 6.43%, while in the past month, it dropped 1.77%. Over the last six months, the stock has seen a sharp decline of 12.01%.