ITC Q2 results get a thumbs up from Dalal Street

Analysts have largely been positive on ITC’s second quarter results, as the diversified company reported a 2.6% year-on-year growth in revenues to Rs 16,551 crore in Q2FY23, driven by growth across cigarettes, FMCG and hotels businesses.

Nuvama Research has retained its ‘BUY’ rating on the stock with a revised price target of Rs 560, up from Rs 500 earlier. It has largely maintained its earnings estimates for FY2023 and FY2024.

JM Financial continues with its ‘BUY’ recommendation but has marginally reduced its price target to Rs 545 from Rs 555 earlier. It has not changed its earnings estimates.

Antique Stockbroking has also maintained its ‘BUY’ rating with a revised price target of Rs 510 compared to Rs 500 previously. It has reduced its earnings estimates for FY2024 and FY2025 by 2% each.


Cigarettes business revenues grew by 8.5% year-on-year to Rs 7,658 crore on the back of 4% volume growth and improved realizations. Cigarette volumes have recovered well due to decline in illicit trade amid stable taxes and strict enforcement actions. Better product mix and selective pricing actions have also aided growth.

Nuvama Research pointed out that stability in cigarette prices and increasing mobility is helping strong volume growth.

JM Financial highlights that innovations, premiumization and product portfolio additions have aided growth.

Antique Stockbroking expects steady volume momentum going ahead.


The non-cigarettes FMCG business grew by 8.3% year-on-year with broad based growth across segments like atta, spices, soaps and notebooks.

Growth was driven by distribution expansion, stocking in trade channels and mild recovery in demand. EBITDA margins expanded by 150 basis points year-on-year to 11% due to scale leverage and softening commodity prices.

JM Financial points out that growth was softer than expected due to high base and competitive pressures in some categories.

Hotels & Others

The hotels business saw 21% revenue growth driven by higher room rates and F&B sales. However, occupancy rates were flattish due to lesser banquetings and weddings. EBITDA margins expanded by 170 bps to 30.7% on higher ARRs.

The paperboards and specialty papers business revenues declined by 9.5% due to lower export demand and realizations. EBIT more than halved due to negative operating leverage. Agri business revenues declined marginally by 1.7% on lower wheat exports.

Costs and Profits

On the margin front, ITC’s gross margins expanded by 10 bps year-on-year to 53.2% aided by mix improvement. However, EBITDA margins contracted marginally by 13 bps to 34.4% due to lower leverage in some businesses.

In terms of input costs, the brokerages point out that while commodity prices have softened sequentially, costs remain elevated year-on-year. JM Financial highlights that cigarette margins contracted by 125 bps due to high input costs which could only be partly mitigated by pricing actions. However, FMCG margins expanded due to softening costs.

Going ahead, the brokerages remain positive on ITC’s growth outlook.

Nuvama Research expects revenue momentum to remain healthy driven by cigarettes, FMCG and hotels. It believes ITC is well placed to navigate slowing demand given focus on premiumization across businesses.

JM Financial also expects healthy volume growth in cigarettes given innovations and distribution reach. It sees margin outlook to be stable.

Antique Stockbroking expects steady cigarette volume growth and strong momentum in FMCG and hotels businesses. However, it sees near term pressure in paper and agri businesses.

Overall, the Q2 performance reflects steady growth momentum for ITC amid slowing demand environment. Cigarettes business continues to consolidate market share through premiumization and distribution reach. The non-cigarettes FMCG business is sustaining double-digit growth through widening distribution and product portfolio. Hotels business is witnessing strong rebound in travel demand.

However, near term margin outlook remains cautious given high input costs and normalizing demand trends. ITC’s focus on premiumization, innovations and cost optimization will be key to navigate the slowing growth and margin pressures.