Target: ₹475

CMP: ₹427.10

We maintain a positive stance on ITC with Add and SOTP-based Mar-26 TP of ₹475, as we believe headwinds are in the base.

We expect performance to gradually improve; for cigarettes, we expect ITC to enhance execution and sustain mid-single-digit volume growth with accelerated growth in the industry. Our on-the-ground checks suggest increased actions to counter competitive aggression in RSFT segment. With leaf tobacco prices turning favourable, we see profit growth improving.

Similarly, in other FMCG and paper segments, growth and margins will gradually recover. For paper, anti-dumping duty would be key to address dumping from China, while raw material prices would ease with enhanced plantation, aiding margin from FY27E. We expect improving outlook for agri to aid overall topline growth and have minimal profitability impact, as shift to value-added portfolio would be key.

We believe margin stress (low visibility on recovery), weak topline delivery (amid enhanced competition), and BAT stake sale overhang have driven 20 per cent correction in stock from peak of Sep-24. We see improving outlook ahead for ITC and expect acceleration in earnings growth.

Recent stock correction with BAT diluting stake has created an entry opportunity with a decent upside. With stake sale overhang contained in the near term, we expect the stock price to react to the expected improvement in financials.

Published on June 10, 2025