ITC Q2 Results Review - Agri-Business Surprises Again; Margins Take A Hit: Yes Securities

Yes Securities Report

ITC Ltd. Q2 FY25 operating performance was a mixed bag again with beat on topline but margins missed our estimates. Topline growth of 16.8% was supported by strong 47% growth in agri-business driven by value added agri products and leaf tobacco.

Progressive scale-up of export shipments of Nicotine and Nicotine derivative products should provide further aid for the segment. Cigarette business was in-line with ~3% estimated volume growth.

At an overall level, sharp inflation in key inputs and unfavorable mix dragged margins (Ebitda margin down 370 bps YoY).

Going forward, stability in taxes for cigarettes and recovery in rural markets should support growth while it continues to face pressure on margins in the very near-term from inflation in key commodities.

Based on target multiple of ~25 times (three years/five years average forward multiple ~23 times/21 times) on Mar’27E EPS, we arrive at a target price of Rs 540. Maintain Add.

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