Nomura upgrades ITC shares to 'Buy' rating
Quarterly results and expected recovery in cigarette profitability boosted investor confidence.
1ITC shares gain momentum
ITC shares rose 3% after the company announced its Q1 2026 financial results. Nomura analysts upgraded the stock to 'Buy', attracting investor interest. The company reported a 28% year-on-year revenue growth, although net profit declined by 27%. The mixed results reflected both operational strengths and cost pressures in the current economic environment.
2Nomura's upgrade rationale
Nomura cited ITC's attractive risk-reward profile and potential recovery in cigarette profitability as key reasons for the upgrade. Analysts noted the company's strong performance in the FMCG segment as another positive factor. ITC's diversified business model offers long-term growth potential, making it appealing to value investors seeking stable returns in volatile market conditions.
3Revenue growth vs profit decline
ITC's quarterly revenues reached 28.3 billion Indian rupees, marking significant growth. However, rising input costs and operational expenses reduced net profit to 3.2 billion rupees. The company aims to improve profitability through cost management and efficiency measures. Pricing power in the cigarettes segment continues to protect margins despite regulatory challenges.
4Short-term risks identified
ITC management warned that imported inflation, weak monsoon rains, and reduced kharif crop sowing could pose near-term risks. Geopolitical tensions in West Asia may also disrupt global supply chains. While these factors might impact Q2 performance, the company emphasized its resilient long-term strategy and diversified revenue streams.
5Cigarette profitability recovery
Nomura forecasts a recovery in ITC's cigarette segment profitability in coming quarters. Absorption of tax hikes and growth in premium products should support this improvement. The relative resilience of tobacco consumption in India continues to stabilize cash flows. Cigarettes contribute approximately 80% of ITC's total profits.
6FMCG segment expansion
ITC's fast-moving consumer goods division has shown steady growth over five years. The company has increased market share in food, personal care, and home care products, achieving over 10% operating margins. Rural market penetration and premiumization trends are accelerating FMCG growth.
7Competitive landscape
ITC competes with Godfrey Phillips and VST Industries in the Indian market. Its vertical integration and diverse brand portfolio provide competitive advantages. Flagship FMCG brands like 'Aashirvaad' and 'Sunfeast' rank high in consumer preference surveys. The company's distribution network reaches over 6 million retail outlets nationwide.
8Investment implications
Nomura's upgrade demonstrates ITC shares' resilience despite macroeconomic uncertainties. Potential cigarette profitability recovery and FMCG growth could support the stock. However, short-term cost pressures and agricultural risks warrant investor caution. ITC remains an attractive option for long-term investors seeking stable returns from a diversified conglomerate.
Original article: Economic Times — Nomura, ITC hisselerini 'Al' önerisiyle yükseltti