ITC shares: Nirmal Bang downgrades stocks; Antique, Elara, JM & Nuvama cut price targets

Shares of ITC Ltd continued to remain in focus during the trading session on Friday after select brokerage firms slashed their target prices with some slapping it with a rating downgrade after the diversified FMCG conglomerate reported a muted set of performance in the March 2025 quarter.

ITC reported a marginal rise of 0.8 per cent on a year-on-year (YoY) basis in its net profit at Rs 4,874.7 crore, while otherwise profit zoomed manifold to Rs 19,561.6 crore, thanks to exceptional gains of Rs 15,179.4 crore. Revenue for the quarter increased 9.6 per cent YoY to Rs 17,2482 crore.

"Other FMCG profitability was under significant pressure. With high-cost leaf tobacco inventory and no major respite likely in Other FMCG, we expect profit growth to be muted compared to our earlier expectations in FY26, especially given reluctance to take price increases in cigarettes," said Nirmal Bang Institutional Equities.

The company has restated results for FY25 and FY24 adjusting for demerger of the Hotels business, and thus, results are not fully comparable to the past, it added. "We had upgraded the stock to 'buy' in our 4QFY25 preview but delay in profitability recovery led us to revise our recommendation back to 'hold' with a target price of Rs 475."

ITC also reported an Ebitda increase of 2.5 per cent YoY to Rs 5,986.4 crore in the fourth quarter of financial year 2024-25. Ebitda margins for the quarter dropped 240 basis points to 34.7 per cent. The company board also announced a final dividend of Rs 7.85 per share for the financial year 2024-25.

"We remain positive about ITC due to its steady momentum in the cigarette business and expected recovery in FMCG performance. Post the 4QFY25 performance, we have cut our FY26E and FY27E Ebitda estimates by 9 per cent and 8 per cent, respectively. We maintain a 'buy' recommendation with a revised SoTP-based target price of Rs 497 (previously Rs 543)," said Antique Stock Broking.

Steady volumes indicate that the category remains relatively resilient vs other consumption segments. However, RM inflation and lack of price hikes resulted in EBIT growth being lower at 4 per cent, said JM Financial. High input cost and increased marketing spends led to 214 bps YoY decline in Ebitda margins, it said.

Shares of ITC gained 2.5 per cent to Rs 436.75 on Friday, commanding a total market capitalization of Rs 5.45 lakh crore. The stock had settled at Rs 426.10 on Thursday. ITC is down nearly 12.65 per cent from its 52-week high at Rs 500.01 hit in September 2024.

Resilient volume growth & taxation stability in Cigarettes is positive; acceleration in EBIT growth will be key monitorable. Pace of recovery in FMCG needs to be watched due to heightened competitive scenario in Foods. The capex intensity will reduce & aid improvement in ROIC. Valuations at 25 times/23 times FY26/27E are not demanding," JM added with a 'buy' and a trimmed target price of Rs 500.

Palm oil has started correcting, and FY26 could see its benefits. Agri exports shall stay strong on the back of a good monsoon and capacity expansion, said Nuvama Institutional Equities. It has retained a 'buy' rating on the stock but trimmed its target price to Rs 532 from Rs 571 earlier.

Elara Capital cut its earnings estimates by 4 per cent each for FY26E and FY27E, to factor in lower operating margin. "We pare our SoTP-TP to Rs 464, from Rs 487, valuing the cigarettes business at 23 times FY27E P/E and FMCG at 5.5 times FY27E price/sales. We reiterate 'accumulate' rating. The key risk is lower-than-estimated volume growth in the cigarettes business," it said.

The cigarette volume growth will be hindered due to increased competitive intensity from Godfrey Phillips, which has been gaining market in recent quarters, driven by strong traction in the Marlboro and Stellar Shift brands; and limited scope for further improvement by ITC, having already addressed key pricing and portfolio gaps through innovative NPD launches, said HDFC Securities.

"We believe the best margin expansion in ITC's FMCG business is behind us, and any future margin gains will be more gradual. We maintain our 'reduce' rating on ITC with a target of Rs 425 per cent," it added.