ITC dips 1%, nears near 52-wk low; analysts decode stock's underperformance

Business Standard

4 days ago

ITC share price today
Share of fast moving consumer goods (FMCG) company, ITC hit an over three-month low at ₹405.70, falling nearly 1 per cent on the BSE in Wednesday's intra-day trade ahead of the June quarter results on Friday, August 1, 2025. The stock was trading at its lowest level since April 7, 2025. It had hit a 52-week low of ₹391.50 on March 3, 2025.
In the past six months, ITC has underperformed the market by declining 7 per cent, as compared to 6 per cent rally in the BSE Sensex and 0.6 per cent gain in the BSE FMCG index.
ITC Q1 results on August 1, 2025
ITC has informed stock exchanges that the meeting of the board of directors of the company was scheduled for Friday, August 1, 2025 to consider and approve the unaudited financial results of the company along with the segment-wise revenue, results, assets and liabilities for the quarter ended June 30, 2025 (Q1FY26).
Why is this FMCG stock under pressure?
ITC is currently reeling under all-round pressure led by high leaf tobacco price impact on cigarette margins, slow demand and high input cost pressure impacting FMCG margins, first decline after covid year and significant decline in Paper and paperboard EBIT margins from normal level of 19-21 per cent to current 9.5 per cent led by high costs of wood and significant dumping (China, Korea and Indonesia) impacting end product prices.
Analysts at PL Capital believe margin pressures will start subsiding by end of 1H26 led by ~10 per cent decline in leaf tobacco prices in current season which will start benefiting the company post Q2, FMCG sales and margins should start recovering on expected improvement in demand and peaked out input costs in wheat, edible oils and recent price hikes, likely softening of wood prices from H2 and hopes of an anti-dumping duty in Paper board.
ITC has corrected from ₹525 to current levels and trades at 21xFY27. The stock offers 3.5 per cent dividend yield with a favorable risk reward as growth bounces back from 2H26, the brokerage firm said.
Meanwhile, FMCG demand remained steady in Q1FY26, though weak urban consumption and an early monsoon impacted summer-centric categories such as beverages and cooling products (hair oil and talc). A few companies are expected to benefit from pricing-led growth, particularly in essentials such as tea, biscuits, and oils, while others may face pressure due to weak summer sales and increased competition in oral care. Higher input costs are likely to weigh on margins, with most companies expected to report a contraction in profitability, according to analysts at Elara Capital.
For Q1FY26E, the brokerage firm expects gross margins to contract by 195bps year-on-year (YoY), impacted by higher input costs and an unfavorable product mix. earnings before interest, taxes, depreciation, and amortization (EBITDA) margin is expected to decline by 120bps YoY, with EBITDA growth for FMCG coverage universe estimated at 1 per cent. Companies such as ITC, Godrej Consumer, Tata Consumer, Marico, Colgate, Mrs. Bectors Food, and Jyothy Labs are likely to report a margin contraction of >100bps YoY, analyst said.
Mirae Asset Sharekhan believes large improvement in volume growth could be seen in H2FY26 in a stable demand environment. On the margin front, margins are likely to remain lower in the coming quarters and if input prices stabilise in the coming months, the brokerage said they might see margin expansion from H2FY26.
ITC is focusing on de-risking its business model by reducing dependence on its core cigarette business (affected by regulatory and tax hurdles for the past few years) by scaling up the fast-growing consumer goods, paperboard, paper & packing (PPP), and agri businesses. Post the demerger of the asset-heavy hotels business, the return profile of ITC will substantially improve in the coming years, the brokerage firm had said in the Q4 results update.