ITC ALERT: Analyst's BUY Call & INR 486 Target Price Revealed!

ITC reported a mixed performance for its Q2FY26 results. Consolidated net revenue from operations (excluding excise duty) declined by 2.4% year-on-year to INR 1,95,016 million. This dip was largely driven by a significant 30.3% year-on-year drop in the Agri Business segment. However, the Cigarettes business demonstrated resilience with a 6.0% year-on-year growth, and the FMCG–Others segment sustained healthy growth of 8.5% year-on-year.

Profitability faced pressure, with EBITDA falling 20.4% year-on-year to INR 66,947 million. Margins compressed by 772 basis points year-on-year to 34.3%, attributed to higher input costs, subdued volumes, and weak operating leverage. Adjusted Profit After Tax (PAT) came in at INR 51,261 million, down 25.1% year-on-year, falling below expectations due to broad-based margin pressure and lower other income.

Outlook Deven Choksey's research report values ITC using a Sum-of-the-Parts (SOTP) valuation methodology. Different multiples are applied to its various business segments: 13.0x FY27E EV/EBITDA for Cigarettes, 8.0x FY27E EV/EBITDA for Agri Business, 4.5x FY27E EV/EBITDA for Paper, and 8.0x FY27E EV/Revenue for FMCG. Its stake in ITC Hotels is valued at INR 12.0 per share, incorporating a 20.0% hold-co discount.

This valuation results in a target price of INR 486. The report reiterates a "BUY" rating on ITC stock, supported by the company's resilient core performance and a positive outlook for margin improvement.

Impact This research report, with its reiterated 'BUY' rating and a specific target price of INR 486, could positively influence investor sentiment towards ITC. It may encourage buying activity, potentially driving the stock price towards the stated target. Investors will be looking for confirmation of margin improvement in future quarters. Rating: 7/10.

Difficult Terms Explained: QoQ: Quarter-on-Quarter, a comparison of financial performance between consecutive three-month periods. YoY: Year-on-Year, a comparison of financial performance between the current period and the same period in the previous year. INR: Indian Rupee, the official currency of India. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a profitability metric that indicates operational efficiency. Basis Points (bps): A unit of measure used in finance, equal to 1/100th of a percent (0.01%). 772 bps equals 7.72%. Adjusted PAT: Profit After Tax that has been adjusted for non-recurring or unusual items to better reflect ongoing operational profitability. SOTP valuation methodology: Sum-of-the-Parts, a valuation technique where the total value of a company is estimated by summing up the individual values of its distinct business segments. EV/EBITDA: Enterprise Value to EBITDA, a valuation multiple used to assess a company's value relative to its operational earnings. EV/Revenue: Enterprise Value to Revenue, a valuation multiple used to assess a company's value relative to its total sales. Hold-co discount: A discount applied to the value of a holding company's stake in its subsidiaries, reflecting potential complexities or inefficiencies of multi-company ownership.