ITC Limited has reported its financial results for the quarter ended June 30, 2025 (Q1 FY26), showcasing strong topline growth but muted profit expansion due to a high base and steady cost pressures in its non-cigarette businesses. While the company’s revenue jumped sharply year-on-year, net profit remained largely flat, prompting mixed reactions from market participants.

Key Financial Highlights (Q1 FY26)

• Consolidated Net Profit: ₹5,343 crore, up 3% YoY

• Standalone Net Profit: ₹4,912 crore, nearly flat compared to ₹4,917 crore last year

• Revenue from Operations: ₹23,129 crore, up 19.8% YoY

• Standalone Revenue: ₹21,059 crore, up 19.7% YoY

• ROE: 28% | ROCE: 37% | P/E Ratio: ~15x

• Stock Price: ₹417 (as of result day), ~16% below 52-week high of ₹498

Strong Revenue Growth Led by Agri and FMCG Segments

ITC’s overall performance was underpinned by robust growth in the agri business, which surged nearly 39% year-on-year. The segment benefited from favorable procurement conditions and healthy exports of rice, wheat, and spices.

The FMCG (non-cigarette) division also contributed positively, rising more than 5% YoY. Flagship brands such as Aashirvaad, Bingo, Classmate, and Savlon continued to gain market share amid steady rural demand and improving distribution.

Cigarette Business Remains Resilient

The cigarette segment, ITC’s core cash-generating business, reported approximately 8% growth, driven by stable volumes and efficient distribution. Despite regulatory overhang and flat taxation in recent budgets, the segment maintained its growth momentum.

Pricing remained stable, helping the company preserve its market leadership while offsetting modest cost inflation.

Other Businesses : Steady Contribution from Hotels and Paperboards

The hotels and paperboards segments delivered steady, if unspectacular, growth. Hotel occupancy and average room rates remained resilient despite seasonality, while the paperboards segment saw modest demand recovery and improved realisations.

Together, these divisions continue to diversify ITC’s revenue streams and reduce over-reliance on cigarettes.

Management Commentary : Focus on Rural Reach and Cost Control

The management reiterated its strategy of building a multi-engine growth model. Over the past three years, ITC has expanded its rural distribution by over 40%, helping the company tap into semi-urban and Tier-II/III markets with its growing FMCG portfolio.

The company expects easing commodity prices, lower interest rates, and stable inflation to support margin recovery and stronger earnings growth in the upcoming quarters.

Valuation and Market Reaction

ITC’s stock closed slightly higher at ₹417 post-results. While the earnings were largely in line with street estimates, the stock continues to trade about 16% below its 52-week high of ₹498 seen in September 2024.

At a trailing P/E of ~15x, ITC trades at a steep discount to large FMCG peers such as Hindustan Unilever and Nestlé India, whose valuations range between 45x and 65x earnings. Analysts remain divided some see scope for rerating, while others await stronger profit traction from the non-cigarette portfolio.

Outlook : Defensive Play with Structural Upside

Despite subdued net profit growth in Q1, ITC’s results reinforce its position as a diversified and defensive stock. The company’s strong agri export performance, resilient cigarette volumes, and steady FMCG growth provide a stable base in a volatile macro environment.

Looking ahead, key catalysts include:

• Urban consumption revival in H2 FY26

• Margin expansion in the FMCG segment

• Policy clarity on tobacco taxation

• New product launches and innovation pipeline

With strong cash flows, industry-leading return ratios, and consistent dividends, ITC remains a compelling long-term story for investors seeking stable growth and income.