The third quarter results by ITC Ltd were a mixed bag. FMCG analysts said inflationary stress continued to have a bearing on ITC’s earnings delivery, even as its topline growth was better than expectations. They stay optimistic on ITC's prospects over the medium term, but see short-term pain on account of raw material inflation and urban slowdown.
Nirmal Bang said ITC’s Q3 results were a mixed bag. Cigarette volume growth came in better than expectation, but margin for cigarette and other FMCG segments remained under considerable pressure.
"Our channel checks indicated stability in cigarette market share in recent months after erstwhile losses to Marlboro. We believe it’s a matter of time before the company starts taking price increases in cigarettes to compensate for the steep increase in leaf tobacco prices. Sales and margin recovery in Other FMCG may take longer," Nirmal Bang said.
ITC reported consolidated results for Q3 and have been adjusted for demerger of the Hotels business.
Emkay Global said it remains hopeful of an improved topline and expects the margin stress to ease from FY26, which is likely to lead to resumption of the double-digit earnings growth trajectory. This brokerage has removed the Hotels business projection and factored in ITC’s stake as investment with 20 per cent holdco discount.
"The new December 2025 target is Rs 490, at a 6 per cent cut. We continue to value the cigarettes business at 20 times EPS, given favorable regulatory stance. Other FMCG is now valued at 6 times sales, Agri at 2 times sales, and the Paper business at 5 times Ebitda. Q3 delivery was muted, with some positives – 6 per cent cigarettes volume, 4 per cent Other FMCG revenue growth," it said.
Nuvama said it stays cautious in near term given the ongoing urban slowdown, inflation in key raw material and weak profitability in FMCG and paperboards, paper & packaging segment; retain ‘BUY’ with SoTP target of Rs 571.
Nirmal Bang said while it remains constructive on ITC from a medium term perspective, it maintained a 'Hold' rating on the stock, owing to limited upside. Its target price of Rs 480 offers limited upside post this run-up.
ITC shares closed at Rs 442.75 on Thursday. They are down 8.51 per cent in 2025 so far.