ITC Q2 results: highlights, insights, stock targets, and more

ITC reported strong revenue growth of 16.8% year-on-year (YoY) for the September quarter, surpassing expectations. This surge mainly stemmed from better-than-expected figures in its agriculture business. However, its EBITDA and profit after tax were largely in line with estimates.

The cigarette segment grew by 3.3% YoY, aligning with analysts’ forecasts of 2.5% to 3.5%. Analysts praised the Q2 results, noting that cigarette net revenue and EBIT rose by 7.3% and 5.1% YoY, respectively. These increases were driven by strategic portfolio and market initiatives. Nuvama pointed out that the 3.3% growth in cigarette volumes exceeded expectations. Meanwhile, the FMCG “Others” category saw revenue grow by 5.4% YoY, despite facing muted demand and a challenging monsoon. Key contributors to this growth included staples, biscuits, snacks, frozen snacks, dairy products, premium soaps, home care items, and agarbatti.

The agriculture business experienced remarkable growth of 47% YoY, primarily due to value-added agricultural products and leaf tobacco. Additionally, the hotels sector expanded by 12.1% YoY, fueled by food and beverage services, retail, and wedding events. The hotel EBIT surged by 20.2% YoY, benefiting from increased revenue per available room (RevPAR), operating leverage, and effective cost management.

However, not all news was positive. Analysts noted that the EBITDA for FMCG “Others” fell by 35 basis points YoY due to inflationary pressures. The notebooks segment struggled against a high base and aggressive pricing from local competitors, especially following declines in paper prices. The paper segment showed subdued growth of only 2.1% YoY, impacted by cheap Chinese imports in global markets.

Antique Stock Broking highlighted that ITC outperformed its peers in the consumer sector, given its operational scale and the challenging demand environment. They maintained a “Buy” recommendation with a revised target price of ₹557, up from ₹553.

Emkay Global also kept an “Add” rating on ITC, citing its strong competitive positioning but noting that near-term margin pressures require improved execution. They suggested a target price of ₹520. Citi recommended a “Buy” rating with a target of ₹560, while Nomura estimated a value of ₹555. Morgan Stanley maintained an overweight stance with a target price of ₹554. Nuvama raised its target to ₹585, up from ₹580.