Top brokerages remain largely positive on ITC after the company reported a muted EBITDA growth of 3% YoY in Q1FY26, citing resilience in the cigarettes and FMCG businesses amid pressures in the agri and paperboard segments.
Cigarettes: Solid volumes, margin watch
Multiple analysts noted volume growth in the cigarettes segment of around 6–8% YoY, aided by a stable tax regime and increased trade promotions. However, margin pressures persist due to high-cost leaf tobacco.
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CITI (Buy, TP ₹500) estimates cigarette volume grew 7% YoY and expects margins to remain under pressure near-term.
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Jefferies (Buy, TP ₹535) said volumes rose to a multi-quarter high (>6%) but segment EBIT margins trended down.
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Macquarie (Outperform, TP ₹500) highlighted a 6.5% volume growth and sees margin relief by Q4FY26 as leaf costs ease.
FMCG: Steady recovery, margin expansion
Analysts observed that ITC’s FMCG business continued to recover, with sequential margin expansion of 50 bps, supported by better urban demand and product mix.
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Goldman Sachs (Buy, TP ₹490) and HSBC (Buy, TP ₹510) expect further recovery in H2FY26, even as near-term pressures persist in non-cigarette segments.
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Morgan Stanley (Overweight, TP ₹500) reported FMCG revenue growth at 5.2%, up from 3.7% in Q4, and highlighted a 50bps QoQ improvement in margins.
Agri and paperboard segments drag
The agri business saw strong top-line growth due to trading in bulk commodities, but its EBITDA miss dragged the consolidated margin. Meanwhile, the paperboard segment remained under pressure, with most brokerages stating that weakness may have bottomed.
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CITI noted a 21% YoY revenue growth, primarily due to agri-led gains, but also flagged the ongoing drag from high-cost raw materials in cigarettes and paper.
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Jefferies and Goldman Sachs believe earnings acceleration is likely in H2FY27 as margin pressures begin to ease across segments.
Consensus outlook: Cautious near term, optimistic H2
Despite a slight miss on margins, brokerages maintained buy or overweight ratings, pointing to long-term growth catalysts in FMCG, stabilizing cigarette margins, and bottoming out of pressure in other segments.
Brokerages on ITC share today, on Aug 4:
| Brokerage | Rating | Target Price | Key Highlights |
|---|---|---|---|
| Jefferies | Buy | ₹535 | Strong cig volume, segment margins down, muted EBITDA growth |
| HSBC | Buy | ₹510 | Revenue beat, cig EBIT up 4% YoY, FMCG margin up 50bps QoQ |
| CITI | Buy | ₹500 | 21% rev growth, cig margin pressure near-term |
| Macquarie | Outperform | ₹500 | 6.5% cig volume growth, margin recovery expected in Q4 |
| Goldman Sachs | Buy | ₹490 | In-line earnings, margin pick-up in H2 |
| Morgan Stanley | Overweight | ₹500 | Cigarette rev growth at 7.7%, FMCG improving |
Disclaimer: This article is based on brokerage reports and is for informational purposes only. It does not constitute a recommendation or investment advice. Investors should consult their financial advisors before making investment decisions.
