ITC share price falls as Q1 results miss estimates. Should you buy the cigarette maker’s stock?

ITC share price fell in early trade on Friday after the cigarette maker’s Q1 results missed Street estimates. ITC share price fell as much as 2.29% to ₹482.40 apiece on the BSE.

The hotels-to-cigarette conglomerate ITC Ltd posted a standalone net profit of ₹4,917 crore in the first quarter of FY25, witnessing a marginal rise of 0.3% from ₹4,903 crore in the corresponding quarter previous year.

The company’s revenue from operations in Q1FY25 rose 7.2% to ₹18,219.74 crore from ₹16,995.49 crore a year earlier. Its cigarettes segment revenue increased 7% YoY to ₹7,918.10 crore with cigarette volume growth of 2.7% YoY.

Hotels business revenue increased 11% to ₹665.56 crore, while FMCG revenue (excluding cigarettes) grew 6.3% to ₹5,491.03 crore. Agri business clocked 22% YoY growth while Paperboards, paper and packaging segment continued to suffer and declined 6.8% YoY.

While ITC’s Q1FY25 revenue was in line with Street estimates, its EBITDA and PAT were lower than expectations. Analysts anticipate sustainable growth in ITC’s cigarette business going ahead and hence, most brokerages have raised ITC share price target after Q1 results.

Here’s what brokerages have to say on ITC Q1 results and ITC share price:

Nuvama Institutional Equities

Nuvama Institutional Equities reckons legal cigarette players shall gain market share from illegal players given no tax hike in the union budget for FY25. Being the largest legal player, ITC would be a key beneficiary. Rains in India are now 2% above normal after a deficit for the past entire month and a likely rural consumption revival H2FY25 onwards shall benefit ITC’s cigarette, FMCG and agri business.

To better account for this, Nuvama increased ITC’s cigarette business target multiple to 24x from 22x. The brokerage firm maintained its ‘Buy’ rating on ITC shares and raised the target price to ₹580 apiece from ₹540 earlier.

Phillip Capital

ITC’s 1QFY25 result was below Phillip Capital’s expectations. The brokerage firm downgraded its Revenue, EBITDA and PAT estimates for FY25 by negative 2%, 4% and 2%, respectively.

It maintained a ‘Buy’ rating on ITC stock and raised the target price to ₹550 per share from ₹490 earlier.

Antique Stock Broking

Antique Stock Broking believes ITC should be able to sustain 3% - 4% cigarette volume growth driven by focused portfolio/ market interventions. Post ITC Q1 results and factoring in an improvement in cigarette performance, the brokerage increased its EPS estimates by 1%/ 3%/ 4% for FY25/ FY26/ FY27.

“We remain positive on ITC's performance driven by the momentum in cigarette market share, gains from superior execution supported by strong momentum in FMCG and Hotel business. We expect a gradual recovery in Agri and Paperboard business,” Antique Stock Broking said.

It maintained a ‘Buy’ recommendation and raised ITC share price target price to ₹553 apiece from ₹511 previously.

Motilal Oswal

ITC’s core businesses of cigarettes and FMCG are witnessing steady growth. Consistent margin improvement further provides confidence in growth without compromising profitability. Capital efficiency will further improve operating cash flow, leading to a healthy, sustainable dividend yield (3-4%). With a stable tax on cigarettes, we anticipate sustainable growth in the business, Motilal Oswal said.

It values the cigarette business at 20x Jun’26 EV/EBITDA from earlier 17x EV/EBITDA. It reiterated a ‘Buy’ call on and raised ITC share price target to ₹575 apiece.

At 9:55 am, ITC shares were trading 0.26% lower at ₹492.45 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.