ITC in Focus After Reporting Rs 5,343 Crore Profit, Up 3% in Q1FY26

On Monday, ITC shares rose by 1.45 percent, touching a day’s high price of Rs 422.50 on NSE upon releasing its Q1FY26 results. The company reported a 3.2 percent year-on-year increase in consolidated net profit, reaching Rs 5,343 crore compared to Rs 5,177 crore a year ago. Its consolidated revenue from operations rose sharply by around 20.91 percent year-on-year to Rs 23,129.35 crore, reflecting strength in its core segments and a recovery in certain businesses. Profit before tax touched Rs 7,128 crore, up by about 3.2 percent year-on-year, while total expenses jumped 26.73 percent to Rs 16,752.31 crore. Diluted earnings per share increased moderately to Rs 4.18.

A breakdown of segmental revenues reveals mixed trends. The cigarette business continued to be ITC’s anchor, registering a revenue of Rs 9,553.86 crore, up 8.04 percent year-on-year, supported by volume growth. This was attributed to proactive portfolio interventions and efforts to counter illicit trade. The overall FMCG segment, including cigarettes, reported revenue of Rs 15,354 crore, up from Rs 14,341 crore in the prior year. The FMCG-Others segment (excluding cigarettes) saw revenue growth to Rs 5,800.44 crore, fuelled by robust performance in staples, biscuits, dairy, personal wash, and homecare.

In the agribusiness, revenue surged to Rs 9,724 crore from Rs 6,998 crore last year, driven by robust growth in bulk commodities and exports of leaf tobacco. Paperboard, paper, and packaging revenue climbed modestly to Rs 2,116 crore due to the influx of low-priced supplies into global markets, including India, and other subdued realisations. ITC Hotels delivered a record performance with segment revenue at Rs 816 crore, achieving the highest-ever Q1 turnover and an impressive 53.40 percent year-on-year PAT growth, bolstered by strength in retail, MICE (Meetings, Incentives, Conferences, and Exhibitions), and weddings.

When it comes to segment profitability, the cigarettes vertical continued to dominate overall profit contribution, while the non-cigarette FMCG portfolio maintained healthy margins at 38.77 percent, down from 40.53 percent. This was due to commodity prices for items such as edible oil, wheat, maida, cocoa, soap noodles, and others, despite a growth offset by cigarettes. The agribusiness and paper segments faced pronounced margin challenges due to competition and elevated costs. The company plans to continue de-risking through diversification, and the strategic post-demerger focus is expected to improve ITC’s return profile going forward. The latest AGM revealed that they plan to spend around Rs 20,000 crore on new manufacturing units.

Despite these operational achievements, ITC’s stock price significantly underperformed broader indices over the past year. The stock has declined approximately 14 percent in the past year, compared to a 2.53 percent rally in the Nifty 50 Index, and underperformed against the Nifty FMCG of 8.95 percent. The stock corrected from a 52-week high price of Rs 528.50, and now it trades at around a 20 percent discount at Rs 420. Analysts attribute this to pressure on margins driven by high input costs and expect to recover in Q2FY26, and FMCG recovery is likely in the second half of the fiscal year. Nevertheless, market watchers note that ITC maintains a favourable risk-reward profile, supported by a 3.45 percent dividend yield.