ITC, a major player in the FMCG sector, saw its share price rise 3% today, after the diversified conglomerate released its Q4 earnings on May 22. Although headline profit looked muscular, a closer read shows only a wafer-thin uptick once a one-off gain is stripped out. Furthermore, the brokerage house Nuvama has stuck to its bullish stance albeit with a lower price target.
ITC Q4 earnings snapshot
ITC reported a net profit of Rs 19,562 crore for Q4 FY25; however, this figure includes a one-time windfall of Rs 15,179 crore from discontinued operations. Excluding that, underlying profit inched up just 0.8 % YoY to Rs 4,875 crore. Revenue told a brighter story, climbing nearly 9.5 % YoY to Rs 18,494 crore.
Let’s take a look at why the conglomerate remains on the brokerage’s “buy” list-
Nuvama on ITC
‘Buy’ reaffirmed, but with a trimmed target
Nuvama remains constructive on the stock, keeping its ‘Buy’ rating but lowering the 12-month target to Rs 532 from Rs 571.
The brokerage in its report noted, “ITC posted Q4FY25 revenue and EBITDA in line with our expectations. Cigarette volumes rose 5 % YoY, slightly ahead of our forecast.” Valuation still looks appealing, they add, even after the target cut.
Cigarettes – The cash engine keeps puffing
Cigarette revenue grew 6 % YoY, driven by a 5 % rise in volumes. As per Nuvama report “a rational tax environment and a clamp-down on illicit trade” for supporting growth. Management’s focus on mix improvement and selective price hikes helped blunt raw-material inflation in leaf tobacco.
FMCG and Paper – Margin pain points
While ITC’s newer FMCG portfolio logged 3.7 % revenue growth, EBIT plunged 28 % YoY. Nuvama attributes the slide to “sharp inflation in edible oil, wheat, potato, and cocoa, along with higher marketing spends amid intense competition.”
Agri Business – Quiet outperformer
Agri revenues jumped 18 % YoY, with profit up 26 %. The brokerage expects more tailwinds ahead. “Progressive scale-up is likely in FY26 as ITC’s new nicotine-derivatives plant comes onstream,” Nuvama notes.
Catalysts for FY26 – Cooling inputs, New ventures
Palm-oil prices have begun to ease, which could lift margins in packaged foods and snacks next year. Recent acquisitions such as Prasuma, Meatigo, and 24 Mantra Organic should also widen ITC’s FMCG footprint. Nuvama forecasts 15 % revenue growth and EBITDA margins approaching 27 % in FY26.