ITC vs HUL: Which FMCG heavyweight is a better bet after Q1 results? 

As brokerages reassess India’s leading FMCG heavyweights after Q1 FY27, the key question for investors is becoming increasingly clear: which stock offers the stronger mix of earnings visibility, profitability and upside potential? 

Here’s how Jefferies, Nomura and Macquarie compare ITC and HUL and why one brokerage sees as much as 43% upside in one of the two stocks.

ITC Vs HUL: Growth remained intact, but the drivers differed

ITC, which reported after HUL, posted consolidated gross revenue of Rs 29,410 crore for the Q1FY27, up from Rs 23,007 crore in the corresponding quarter of FY26. The first quarter revenue from operations increased to Rs 29,523 crore from Rs 23,129 crore, while total income rose to Rs 30,179 crore from Rs 23,812 crore. The quarter also included the consolidation of Sproutlife Foods from 1 April 2026, along with an exceptional gain of Rs 405.88 crore following the remeasurement of ITC’s existing investment.

Excluding the impact of the cigarette business, the company’s FMCG portfolio maintained broad-based growth across packaged foods, dairy, frozen snacks, personal care and digital-first brands, while paperboards benefited from improved demand and pricing.

The Street broadly agreed that ITC’s June quarter was defined by the cigarette business rather than its FMCG performance. Jefferies said the company’s cigarette volumes were more resilient than expected despite the steep tax increase, suggesting consumers absorbed the phased price hikes better than anticipated. Nomura also described the volume performance as better than expected and said the calibrated pricing strategy, product launches and portfolio interventions should support a gradual improvement in profitability over the coming quarters. Macquarie, while acknowledging the resilience in volumes and continued recovery in paperboards, said the first quarter did not yet provide enough evidence to determine the pace of earnings normalisation because the process of passing on the tax increase through pricing is still underway.

HUL reported consolidated turnover of Rs 17,184 crore for the quarter ended 30 June 2026, increasing 10% from Rs 15,660 crore in the corresponding quarter of FY26. Underlying sales growth stood at 10%, comprising 5% volume growth and 5% pricing growth, marking the company’s strongest quarterly growth in 13 quarters. Home Care expanded 14%, Beauty & Wellbeing grew 12%, Foods increased 7%, while Personal Care rose 4% despite continued palm oil inflation. 

Brokerages viewed HUL’s quarter as operationally steady despite a modest earnings miss. Jefferies said revenue growth remained the strongest in 13 quarters and noted that the weakness in Home Care margins was offset by continued improvement across the broader portfolio. Macquarie also pointed to stable demand trends despite inflationary pressures and said management’s decision to retain its EBITDA margin guidance reinforced confidence in the company’s pricing strategy and cost management. Both brokerages also highlighted continued premiumisation across categories and the company’s ability to balance growth investments with profitability amid rising commodity costs. 

ITC Vs HUL: Margins became the biggest point of difference

ITC’s latest quarter showed that the cigarette tax increase had a much larger effect on profitability than on demand. Consolidated profit attributable to shareholders increased to Rs 5,244.20 crore for the quarter ended 30 June 2026 from Rs 4,394.13 crore a year earlier, although the reported figure included the Rs 405.88 crore exceptional gain arising from Sproutlife Foods. 

Operating profitability in cigarettes remained under pressure as the company adopted staggered price increases instead of immediately passing on the entire tax burden. At the same time, ITC continued spending on brand building across its FMCG businesses, while paperboards benefited from improved realisations and lower wood costs. The agri-business remained affected by lower export demand and geopolitical disruptions.

Brokerages differed on how quickly margins could recover. Jefferies argued that stronger-than-expected cigarette volumes gave ITC greater flexibility to take additional price increases without materially affecting demand, while Nomura expected profitability to improve progressively through FY27 and projected cigarette earnings per stick to return to pre-tax-hike levels by the fourth quarter of FY27. Macquarie took a more cautious stance, saying nearly 70% of the required price increases had already been implemented, but visibility on the pace of earnings recovery remained limited until the price increases were fully absorbed.

HUL, in contrast, continued to absorb commodity inflation without a material deterioration in profitability. EBITDA increased to Rs 3,947 crore during the quarter ended 30 June 2026 from Rs 3,654 crore in the corresponding quarter last year, while EBITDA margin moderated to 23.0% from 23.3%. Profit after tax before exceptional items increased to Rs 2,731 crore from Rs 2,503 crore, although reported profit after tax declined to Rs 2,680 crore from Rs 2,726 crore because the base quarter included a one-off tax credit. Jefferies said the margin pressure in Home Care and some weakness in Personal Care and Foods were offset by continued improvement in growth across the broader portfolio, while Macquarie said management’s decision to retain FY27 EBITDA margin guidance of 22.5% to 23.5% despite continued raw material inflation reinforced confidence that pricing and cost efficiencies would help protect profitability over the rest of the year.

ITC vs HUL: Dividend continues to separate the two FMCG majors

Dividend remains one of the biggest differentiators between ITC and HUL, although both companies have established a track record of returning a large share of earnings to shareholders. ITC has historically maintained one of the highest dividend payouts in the Indian market, supported by the strong cash generation of its cigarette business. Even after the cigarette tax increase announced before Q1 FY27, brokerages continue to expect the company to generate healthy free cash flows.

 Nomura estimates ITC’s dividend yield at 4.3% for FY27, rising to 5.1% in FY28 and 5.5% in FY29, while Macquarie expects a 3.9% dividend yield in FY27, increasing to 4.3% in FY28 and 4.6% in FY29. Although near-term earnings are expected to remain under pressure, none of the brokerages expects a meaningful change in ITC’s capital return policy given its net cash position and healthy operating cash flows.

HUL’s dividend profile remains comparatively lower, reflecting its capital allocation strategy and valuation. Macquarie estimates HUL’s dividend yield at 2.1% in FY27, 2.3% in FY28 and 2.6% in FY29. While the yield trails ITC, brokerages continue to see HUL’s appeal in sustained earnings growth rather than income distribution. Jefferies expects HUL to deliver about 9% annual revenue growth between FY26 and FY29, accompanied by gradual EBITDA margin improvement, supported by operating leverage and continued premiumisation across categories. 

As a result, the investment case for HUL remains centred on earnings growth, whereas ITC continues to offer a combination of cash generation and dividend support despite near-term pressure on cigarette profitability.

ITC Vs HUL: Input costs a common challenge, but the response differs

Both companies dealt with higher commodity costs during the quarter ended 30 June 2026, although the sources of inflation differed across their portfolios. ITC said the FMCG business continued to face inflation in edible oils, packaging materials, fuel and other crude-linked inputs amid geopolitical disruptions in West Asia. Despite these pressures, the company continued investing behind brands while maintaining growth across packaged foods, personal care and digital-first businesses. The paperboards business also benefited from improved realisations and lower wood costs, partly offsetting inflation elsewhere in the portfolio. At the same time, the agri business remained affected by geopolitical disruptions and softer demand for leaf tobacco exports.

HUL encountered a different inflation profile, led by crude oil derivatives and palm oil, which remained elevated for the second consecutive year. During the quarter ended 30 June 2026, the company delivered 10% underlying sales growth while keeping EBITDA margin at 23.0%, within its guided range of 22.5% to 23.5%. Brokerages noted that HUL has so far passed on only part of the raw material inflation through pricing while continuing to invest in innovation and market development. Jefferies expects further calibrated price increases as commodity inflation persists, while Macquarie believes HUL remains well positioned to protect margins through pricing actions, product mix and cost efficiencies despite a volatile input cost environment.

ITC vs HUL: Expansion plans intact despite headwinds

Both companies continued investing in their core businesses during the quarter, signalling that short-term cost pressures have not altered their long-term growth priorities.

For ITC, the FMCG business continued expanding across packaged foods, dairy, frozen snacks, premium personal care and digital-first brands, even as commodity inflation remained elevated. The company also strengthened its portfolio through the consolidation of Sproutlife Foods with effect from 1 April 2026, while increasing its holding in Mother Sparsh to 49.32% on a fully diluted basis. 

The ITC management also continued investing in brand building across personal care and packaged foods, with these costs reflected in operating expenses during the quarter. The paperboards business benefited from better realisations and lower wood costs, while notebooks delivered a recovery after a softer performance in previous quarters. The presentation also identified geopolitical developments, crude-linked input costs, climate risks and monsoon conditions among the key variables that could influence demand and costs during the rest of FY27.

HUL also maintained investments across innovation, premiumisation and distribution despite a volatile raw material environment. During the quarter ended 30 June 2026, the company introduced new products including a sugar-free variant under Liquid I.V. and Vaseline Gluta Hya Smoothening Body Lotion, while Minimalist continued to record double-digit growth with sequential improvement. 

Premium Skin Care, Premium Hair Care and Vim Liquids remained among the stronger performers during the quarter for HUL. The company reiterated that growth investments would continue alongside calibrated price increases to offset commodity inflation rather than reducing investments behind brands.

Which is better, ITC or HUL?

Brokerages remained positive on both companies following their Q1 FY27 results, although the investment case differs. For ITC, Jefferies upgraded the stock to ‘Buy’ from ‘Hold’ with a target price of Rs 350, implying an upside of about 23% from the previous closing price. The brokerage said cigarette volumes were more resilient than expected despite the sharp tax increase, which should give the company greater confidence to take additional price hikes while sustaining demand. 

Nomura also upgraded ITC to ‘Buy’ from ‘Reduce’ and raised its target price to Rs 340 from Rs 300, implying an upside of about 21%. It expects profitability to improve progressively through FY27 as staggered price increases flow through the system and believes earnings per stick could return to pre-tax-hike levels by the fourth quarter of FY27. 

Macquarie, however, maintained a ‘Neutral’ rating and cut its target price to Rs 300 from Rs 330, implying an upside of around 11%. While it acknowledged resilient cigarette volumes and continued strength in paperboards, it said visibility on the pace of cigarette earnings recovery remains limited until the tax increase is fully absorbed.

HUL attracted a more consistent brokerage view after its June quarter results. Jefferies retained its ‘Buy’ rating with a target price of Rs 2,850, indicating an upside of about 31%, arguing that the market reaction to the results was disproportionate to what it viewed as a modest earnings miss. The brokerage expects FY27 to be stronger than FY26, supported by volume-led growth, premiumisation and operating leverage while maintaining EBITDA margins within the guided range. 

Macquarie reiterated its ‘Outperform’ rating with a target price of Rs 2,860, implying an upside of about 43% from the previous closing price. It said stable demand trends, disciplined pricing and management’s confidence in maintaining FY27 EBITDA margin guidance of 22.5% to 23.5% strengthen the earnings outlook despite persistent commodity inflation.

Brokerage face-off: ITC vs HUL after Q1 FY27

Conclusion

ITC and HUL both delivered healthy FMCG growth in Q1 FY27, but the quarter drew attention to different priorities. While ITC’s near-term earnings remained tied to the pace of recovery in its cigarette business after the tax increase, HUL continued to rely on volume-led growth and pricing to manage commodity inflation. Brokerages remained positive on both companies, although ITC’s outlook hinges on margin recovery, whereas HUL’s rests on sustaining growth without compromising profitability.