ITC Q1 FY26 results preview: What to expect

After delivering consistent but unspectacular growth last year, ITC’s April–June 2025 quarter (Q1 FY26) will test whether its newer ventures meaningfully boost overall performance alongside its cash-cow cigarette unit. The conglomerate is slated to announce results on August 1, 2025. Investors are watching for steady cigarette volumes, improving fast-moving consumer goods (FMCG) profits, and a continued post-pandemic uptick in hotels and other businesses to offset lingering weakness in paper and agribusiness. With the hotels division in the process of being demerged and one-off impacts (like new hotel launch costs) largely behind, this quarter could shine a light on the true earnings power of ITC’s diversified portfolio.

The year that was (FY25 recap)

• Resilient overall, but profit flat: ITC navigated FY25 with about 7 per cent revenue growth but essentially flat net profit, as strength in cigarettes and agri was offset by headwinds in paper, hotels, and input costs. Full-year consolidated EBITDA rose modestly, indicating a resilient core despite a “challenging macro-economic and operating environment”.
• Cigarettes steady: A stable tax regime and crackdown on illicit trade aided legal cigarette volume recovery, yielding about 6 per cent YoY growth in cigarette revenue in Q1 FY25. For the full year, the heavy-weight cigarette segment provided a reliable earnings anchor with high margins.
• FMCG scaling up: ITC’s non-cigarette FMCG arm (staples, foods, personal care) grew in the mid-single digits. In Q1 FY25, FMCG revenues rose 6.3 per cent YoY with a 10.4 per cent uptick in segment pre-tax profit as the division benefited from improved scale and product mix. This segment crossed Rs 5,500 crore revenue last year, contributing roughly 27 per cent of Q1 FY25 sales.
• Mixed bag in others: The hotels business rebounded strongly from pandemic lows – Q1 FY25 revenue jumped 14 per cent – but startup costs from the new ITC Ratnadipa in Colombo crimped hotel profit (segment PBT down 9 per cent YoY). Agribusiness revenues surged 22 per cent in Q1 last year on value-added agri exports (wheat, leaf tobacco), even as higher commodity costs pinched agri margins. In paperboards, cheap Chinese imports and rising wood prices drove a 7 per cent drop in revenue and a 46 per cent plunge in profit for Q1 FY25, a drag that persisted through the year.
• Expansion and demerger moves: Management and shareholders approved the spin-off of ITC’s hotels arm (ITC Hotels) in FY25, aiming to unlock value without sacrificing control. At the July 2025 AGM, CEO Sanjiv Puri announced a Rs 20,000 crore investment push over five years, expressing “unwavering confidence” in India’s growth and ITC’s plans to build a “future tech, climate positive, innovative and inclusive enterprise”. This war-chest is earmarked to scale up ITC’s newer businesses and infrastructure.

How last year’s Q1 looked (Q1 FY25 baseline)

In the year-ago quarter (Q1 FY25), ITC delivered consolidated net profit of around Rs 5,092 crore on revenue of Rs 20,030 crore. Profit was essentially flat (+0.3 per cent YoY) while revenue climbed 7.5 per cent YoY, implying some margin compression. EBITDA margin was dented by weakness in low-margin segments (agri and paper) even as the core consumer businesses held firm. Key segment highlights from that quarter:

• Cigarettes: Revenue Rs 8,842 crore (+5.8 per cent YoY), with volumes up in low-single-digits and segment pre-tax profit up 6.3 per cent. Stable excise taxes enabled ITC to avoid any price shocks, helping volume recovery in legal cigarettes.
• Branded FMCG: Revenue Rs 5,499 crore (+6.3 per cent YoY); segment EBIT grew faster at +10 per cent YoY, as operating leverage improved. Categories like packaged foods (noodles, snacks, biscuits) and personal care saw growth despite a subdued consumer demand environment.
• Hotels: Revenue Rs 713 crore (+14 per cent YoY) on a continued travel rebound, but higher operating costs (including new properties) led to lower YoY profit (PBT Rs 122 crore, –9 per cent). The hospitality segment was still normalizing post-Covid, with new hotels coming on stream.
• Agribusiness: Revenue Rs 6,998 crore (+22 per cent YoY) driven by robust wheat and leaf tobacco exports, though segment profit (PBT Rs 345 crore) dipped ~2 per cent due to leaf tobacco cost inflation and depreciation from a new nicotine plant.
• Paperboards: Revenue Rs 1,977 crore (–6.8 per cent YoY) as global pulp price drops and imported competition hit volumes; segment profit fell nearly 46 per cent to Rs 256 crore. This cyclical low in paper hurt consolidated margins significantly.

Notably, more than half of ITC’s revenue now comes from non-cigarette segments, but cigarettes still accounted for the lion’s share of profits (over 80 per cent of pre-tax earnings in Q1 last year). This mix underscores both the progress in diversifying the top line and the continued dominance of the tobacco business in the bottom line.

What to watch in Q1 FY26

1. Cigarette volume and pricing stability: The core cigarette division is expected to post steady mid-single-digit volume growth again in Q1 FY26, building on last year’s recovery. Analysts estimate about 4-5 per cent higher volumes translating to around 6 per cent revenue growth YoY, assuming no excise tax hike. However, inflation in leaf tobacco prices may compress cigarette EBIT margins by on the order of 150-200 basis points. Investors will look for management commentary on volume trends and pricing power – any sign of a volume slowdown or margin squeeze in this cash-cow segment would be concerning.
2. FMCG demand and margins: ITC’s packaged foods and personal care business is entering Q1 on a somewhat tepid demand footing. In the broader sector, volume growth has been modest (HUL saw around 4 per cent in Q1) amid still-recovering rural demand. ITC’s own FMCG revenue is forecast to rise only around 4-5 per cent YoY in Q1, implying flattish volumes in some categories. A key monitorable is the FMCG EBIT margin, which is likely under pressure from input cost inflation (edible oils, packaging, etc.) and lagging price hikes. Management’s comments on rural consumption trends, competitive intensity, and any price increases or cost-cutting measures will be crucial to gauge if FMCG growth can re-accelerate in coming quarters.
3. Agribusiness and paperboard swings: These two segments could make a notable difference to ITC’s consolidated performance this quarter. Agribusiness may deliver strong growth again – some estimates peg agri revenue up by about 17-25 per cent YoY on continued momentum in wheat, rice and tobacco exports. This would provide a nice top-line boost, provided margins hold up (Q1 is typically a seasonally strong quarter for agri). Conversely, the paperboards and packaging vertical is still in a downcycle; any improvement (or further deterioration) here will impact overall margins. Analysts expect paper revenue to remain subdued (low-to-mid single-digit growth) with profit still depressed by cheap imports and high raw material costs. Watch for any signs of demand “green shoots” or easing cost pressures in paper – or signals that the bottom of the cycle is near – which could swing sentiment on ITC’s industrial segment outlook.
4. Post-demerger optics and one-offs: Q1 FY26 will be the first quarter reported after demerging the hotels business (which is now a separate entity). ITC’s standalone numbers will exclude hotels, so year-over-year comparisons should ideally adjust for that. The consensus profit estimate for ITC is around Rs 5,040 crore (up 2.6 per cent YoY) on Rs 18,300+ crore revenue (up 7 per cent YoY), assuming like-for-like comparisons without hotels. Investors should watch how ITC presents these numbers (pro-forma vs reported) and any updates on the demerger’s final implementation. Additionally, any “nasty surprises” or one-off items are a risk to watch for – e.g. large provisions, regulatory charges or tax adjustments. Fortunately, no major exceptional items are anticipated this quarter; no new tobacco tax or duty changes came in the last Union Budget, and the legal dispute that hit Q3 FY25 has seen no further developments. A clean, controversy-free quarter would let the focus stay on operational performance.

Peer pulse

ITC’s results will be viewed in context of how other consumer sector players fared in April–June 2025:

• Hindustan Unilever (HUL): The FMCG bellwether reported 4 per cent YoY revenue growth and 8 per cent PAT growth for Q1 FY26, with underlying volumes up 4 per cent. This steady but unspectacular performance underscores a still-muted demand environment. HUL managed to expand profit despite just modest sales growth, indicating continued cost discipline.
• Dabur India: The home and personal care maker saw its Q1 FY26 net profit rise only 3 per cent YoY, as consumer sentiment remained soft and unseasonal weather hit its beverage sales. Dabur’s low single-digit growth reinforces the theme of a mild recovery in the FMCG space, especially in rural-focused categories.
• ITC Hotels: ITC’s demerged hotels subsidiary (now a separate listed company) posted an impressive 54 per cent YoY jump in consolidated net profit to Rs 133 crore in Q1 FY26. Revenue for ITC Hotels soared over 20 per cent as travel and hospitality demand stayed strong. This robust showing by the hotels arm bodes well for ITC’s remaining 40 per cent stake in that business and highlights the value creation from the demerger. (By contrast, when the hotels segment was under ITC in Q1 FY25, its profit had declined on a high base; the turnaround now is clearly visible in the standalone hotel entity’s results.)

Overall, consumer-facing peers have seen moderate growth, with outperformance in niche areas (like ITC’s hotels or some food categories) and continued challenges in others. Strong results from ITC’s own subsidiaries (e.g. hotels) and associates can bolster sentiment, but the core comparison will be how ITC’s cigarettes and FMCG growth stack up against the sector’s single-digit norm.

Stock check

The ITC stock currently trades around Rs 410 per share, hovering closer to its 52-week low (Rs 390 in April 2025) than to its 52-week high (Rs 528 in September 2024). At Rs 410, the share price is roughly 18 per cent lower than a year ago, significantly underperforming the Nifty 50 index over the same period. This pullback follows a strong rally in 2022–2023, and reflects tempered investor sentiment in 2024–2025.

ITC’s trailing price-to-earnings (P/E) ratio is about 25 times on a consolidated basis. That multiple is modest relative to pure-play FMCG peers (for example, HUL trades at over 50 times earnings) but higher than global tobacco peers, indicating the market’s balanced view on ITC. The stock’s valuation now prices in its steady cash flows and improved growth prospects, while still accounting for the regulatory and ESG overhang of the cigarettes business. In other words, ITC is no longer the deep-value “cigar butt” it was once considered, but it hasn’t been bid up to exuberant multiples either. With the demerger of hotels and continued profit diversification, some analysts see scope for a further re-rating – but only if earnings growth accelerates beyond the mid-single digits.

Value Research Rating snapshot: ITC scores a full 10/10 on Quality, reflecting its stable earnings and high return on capital from the core business. Its Growth score is 6/10, indicating moderately good growth (helped by mid-teen profit CAGR in recent years). Valuation is rated 5/10, suggesting the stock is neither cheap nor overly expensive at current levels. Momentum comes in very low at 1/10, underscoring the stock’s lackluster price performance in the past year.

The road ahead

Management is likely to emphasize its strategy of pursuing balanced growth across established and emerging businesses, while maintaining high profitability in cigarettes. With the hotels demerger in final stages, ITC’s leadership may articulate how they plan to deploy resources and focus on the remaining four pillars (FMCG, agriculture, paper, and ITC Infotech) in the coming years. The company’s Rs 15,000+ crore annual operating cash flow gives it ample capacity to fund expansion (as evidenced by the planned Rs 20,000 crore capex over 5 years) and reward shareholders via dividends (current yield of about 3.5 per cent). To get investors excited again, however, ITC will need to show that its non-cigarette ventures can start moving the needle on earnings growth.

Investors should listen for:

• Progress on the Rs 20,000 crore investment plan: Concrete projects or acquisitions in the pipeline. This could include new FMCG manufacturing facilities, product line expansions (e.g. in foods or personal care), scaling up ITC’s agri-value chain (such as its ITCMAARS rural platform), and capacity additions in paperboards (especially in sustainable packaging solutions). Clarity on how this capex will drive revenue/EBITDA growth in each division will be key.
• Post-demerger strategy and capital allocation: Now that ITC Hotels is carved out, what is ITC’s plan for its 40 per cent stake in the new entity? Management might discuss whether they intend to gradually monetize that stake or retain it long-term for strategic benefits. Additionally, any hints of further restructuring – for instance, listing the ITC Infotech IT arm or separating other businesses – would be notable (though the company has so far dismissed the idea of a tobacco-FMCG split).
• Outlook on demand and margins: Commentary on rural vs urban demand trends for FMCG (especially after the onset of monsoon), and the trajectory of commodity costs. If input inflation is abating in Q2 onwards (e.g. edible oil, wheat, paper pulp prices easing), ITC could see margin expansion in the second half. Management’s tone on consumer sentiment and pricing power will set expectations for the rest of FY26.
• New product and market initiatives: Any update on recent product launches (such as new flavors in F&B, personal care products, or premium cigarette variants) and their reception. ITC has also been aggressively growing its FMCG exports and online sales – investors may watch for data points on these incremental channels. Furthermore, ITC’s commitment to sustainability (it is already carbon- and water-positive) might translate into new opportunities in green packaging or renewable energy usage, which could be highlighted as part of its long-term vision.

Ultimately, the first-quarter numbers for ITC are less about the headline profit growth and more about the quality of earnings mix. The company has long been in transition from a cigarette-centric giant to a broader consumer conglomerate. A Q1 FY26 showing of solid cigarette profits plus meaningful contributions from FMCG, agri, and other segments (without unpleasant surprises) would go a long way toward validating this evolution. Consistent, commodity-light growth from ITC’s newer businesses would improve its currently low momentum score and could start to narrow the valuation gap with its FMCG peers. On the flip side, if this quarter reveals that staple consumer demand remains soft or cost pressures continue to bite into margins, the market may remain cautious and the stock’s upward momentum could stay elusive a while longer.

In sum, watch the mix, not just the margin: ITC’s Q1 FY26 will be judged on how well its diversified engine is firing beyond cigarettes. A steady core and accelerating peripherals could finally put some spark back into ITC’s stock, whereas any disappointment in the nascent growth engines will remind investors that the company’s transformation is still a work in progress.

ITC’s portfolio is evolving, but clarity on where earnings strength truly lies will only emerge over time. As investors, it’s easy to get swayed by quarterly shifts or demerger headlines. But real wealth is built by staying anchored to strong fundamentals, not chasing short-term moves.

That’s where tools like Value Research Stock Advisor come in — helping you cut through the noise and focus on expert-picked businesses with proven long-term strategies. Whether it’s consumer staples, agri exports, or capital allocation, stay invested with insight.

Disclaimer: This is not a stock recommendation. This story was created with the assistance of artificial intelligence and has been reviewed by human experts for accuracy and is intended for informational purposes only. Please take it with a grain of salt and conduct your own research or consult a financial advisor before making any investment decisions.