CLSA has reiterated its ‘Outperform’ rating on ITC with a target price of ₹496 following the company’s Q4FY25 results. While revenue came in ahead of expectations, margin contraction in the cigarette business due to rising tobacco costs led to a modest EBIT miss, the brokerage noted.
ITC reported 9% YoY growth in revenue, beating CLSA’s estimates by 3%. The cigarettes segment grew 6% YoY, driven largely by volumes, with only marginal contribution from product mix and flattish pricing trends. However, the segment’s EBIT margin contracted by 204 basis points YoY, reflecting the impact of sharp leaf tobacco inflation.
The brokerage stated that the 2% miss in EBIT was primarily attributable to the cigarette division, while FMCG and agribusiness remained in line. CLSA acknowledged that the overall cost environment remains elevated, but expects easing inflation in inputs like palm oil to benefit FMCG margins going forward.
CLSA views ITC’s long-term story as intact, supported by its wide distribution reach, dominant cigarette franchise, and growing FMCG footprint. The brokerage expects margin pressures to stabilise in FY26, especially if commodity inflation eases further and the company continues to maintain its pricing discipline across categories.
Disclaimer: This article is based on the brokerage report by CLSA. It does not constitute investment advice. Investors are advised to consult their financial advisors before making any investment decisions.
