ITC stock analysis

Stock overview

Ticker	ITC
Sector	FMCG, Agri, Paper and Packaging
Market Cap	₹ 5,40,000 Cr
CMP (Current Market Price)	₹ 410
52-Week High/Low	₹ 528/ ₹ 399
P/E Ratio	26.7x
Dividend Yield	3.2%
Beta	0.85 (Moderately volatile stock)

About ITC

ITC stands as a diversified powerhouse, balancing strong cash flows from its cigarette business with rapid growth in FMCG, hotels, and agri-exports. With consistent earnings and a solid dividend yield, is ITC a must-have in your portfolio? Let’s find out.

Key drivers of growth:

1. FMCG growth & Market leadership

• ITC’s FMCG business contributes ~70% to revenue (Revenue from Hotels is excluded as it is not a demerged entity) with strong brands in packaged foods, personal care, and stationery.
• Margin expansion in FMCG driven by operating efficiencies and premiumization.
• Recent launches in the health & wellness segment catering to changing consumer preferences.

2. Cigarette business

• ITC maintains a ~75% market share in India’s legal cigarette market.
• Despite regulatory headwinds, steady pricing power and brand loyalty keep margins high.
• No tax hikes in Budget 2025 likely to keep the sales and profitability momentum sustained

3. Agri & Paperboard segments

• ITC’s agri division benefits from growing global food demand, especially in wheat and spices.
• Paperboards & packaging segment sees robust demand from e-commerce and sustainability trends.

Here’s a detailed breakdown of ITC revenue sources in Q3 FY 2025 : 

Recent Financial Performance (Q3 FY25)

Metric	Q3 FY 25	Q3 FY 24	YoY Growth
Revenue	₹ 18,953 cr	₹ 17,483 cr	+8%
EBITDA	₹ 6,197 cr	₹ 6,024 cr	+3%
PAT	₹ 5,638 cr	₹ 5,572 cr	+1%
ARPU	₹ 245	₹ 208	+18%

Highlights:

• Revenue growth of 8% YoY, driven by growth in cigarette and the agro business
• Dividend payout remains strong, making ITC a stable dividend play.
• FMCG Cigarettes – Strong growth of 8% YoY in Revenue, driven by volumes- Premium segment & new innovations continue to gain robust traction
• FMCG Others – Revenue up 4% YoY amidst muted demand conditions. Atta, Spices, Snacks, Frozen Snacks, Dairy, Premium Personal Wash, Homecare & Agarbatti drove growth
• Agri Business ̶ Leaf & Value Added Agri products (Coffee & Spices) were the key growth drivers
• Paperboards, Paper & Packaging – Performance reflects the impact of low priced Chinese & Indonesian supplies in global markets (including India), muted domestic demand & subdued realisations

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Key Competitor analysis 

Metric	ITC	Godfrey Phillips	VST Industries
P/E Ratio	26.7x	30.1x	23.1x
Market Cap (cr)	₹ 5,40,000	₹ 28,000	₹ 5,000
Revenue (Q3)	₹ 18,953 cr	₹ 1,380 cr	₹ 370 cr
Dividend yield	3.2%	1.02%	4.1%

Comments : 

1. ITC is a behemoth in the cigarette space : commanding a very high market share of 75%-80%
2. ITC commands a higher P/E than the industry owing to the fact that it has diversified revenue streams with high growth potential.
3. Subdued demand and cost pressure likely to pose near term challenges for ITC.

Valuation insights

When we value a company like ITC, we’re asking two questions:

• Is it cheap or expensive compared to how it’s been in the past—or to other companies?
• How much money could it make in the future, and what does that mean for its stock price now?

As per Discounted Cash Flow analysis:

It estimates the intrinsic value of ITC based on expected future cash flows:

• Intrinsic Value Estimate: ₹500 per share
• Upside Potential: 21%
• Assumptions : 
  • WACC: 9.8%

• Cost of Equity: 11.5%
• Cost of Debt: 7.2% (Post-tax)

Key risks to watch

1. Regulatory Risks: Higher cigarette taxes or stricter advertising laws may impact sales.
2. FMCG Competition: Intense rivalry from HUL, Nestlé, and regional brands.
3. Global Agri Market Volatility: Fluctuations in commodity prices can affect export margins.

Technical outlook on ITC share

• Resistance Level: ₹470 (Recent high)
• Support Level: ₹435 (200-day moving average)
• RSI (Relative Strength Index): 58 (Neutral, with slight bullish bias)
• Trading Volume: Consistently high, indicating institutional interest.

ITC stock recommendation

Current Stance: BUY with a 12-month target of ₹500.

Rationale:

FMCG growth acceleration

Stable cigarette business cash flows

Resilient dividend yield & valuation comfort

Risk-Reward Profile: Low-to-moderate risk with consistent cash flow generation.

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Conclusion

ITC remains a well-diversified consumer business, offering a mix of growth, stability, and strong dividends. With healthy earnings growth, improving margins, and sector tailwinds, ITC continues to be a solid long-term investment. Investors can accumulate at ₹430 levels for steady returns.