Cigarette sales on the rise? ITC Q2 results show 7% rise in revenue

ITC’s Q2 results showed slightly more positive results than was expected, primarily because of its strong agriculture performance; but its core sector – cigarettes showed a 7 percent growth primarily indicating company recovering some of its lost markets.

ITC has been facing near-tern margin pressures across its core sector which includes FMCG, paper, and cigarettes. ITC’s cigarette-based revenues grew 7 percent in Q2FY25 with an estimated 3 percent rise in volume. However, inflation in leaf tobacco led to a 155 bps drop in operating margins. company has mand se pressures but re are signs of possible price hikes for sustaining growth. Cigarette EBIT growth too slowed to 5.1 percent, down from 6.5 percent in previous quarter.  Channel checks indicated early signs of ITC regaining lost market share in cigarettes, leading to a possible growth boost in second half of FY25, but EBIT will only be impacted if company increases prices to combat tobacco leaf price.

ITC’s FMCG sales grew 7 percent but rising costs affected margins. Its hotels performed well with a 12 percent growth in revenue and a 15 percent rise in EBITDA. agriculture business of company which is its main growth engine has witnessed a 47 percent growth during same quarter in contrast, paper business showed only a 2 percent increase. 

Among brokers observing stock, Nirmal Bang retained its 'hold' rating with a target price of Rs 515, reflecting a 9 percent upside. Emkay Global held an 'add' rating with a target price of Rs 520, citing resilience of ITC's cigarette business, where revenue grew by 7 percent and volumes by 3 percent. ITC stocks witnessed a 2.41 percent growth during day's trade while selling at Rs 483.05 apiece.