Shares of diversified FMCG heavyweight ITC moved slightly higher on Tuesday, November 3, as the market absorbed a steep decline in the company's second quarter profit for FY27. Investors appeared to look past near-term pressure stemming from higher cigarette taxes and rising input expenses. In trading on the National Stock Exchange, ITC shares reached Rs. 268.30, marking an increase of Rs. 1.90 or 0.71 percent from the previous session's closing price of Rs. 266.40. The stock commenced trading at Rs. 269.05 and touched an intraday peak of Rs. 270 per share.
Annual Price Performance and Trading Range
Over a broader twelve-month timeline, ITC has seen substantial downward adjustment, falling roughly 35.86 percent. Despite this protracted weakness, the current market price reflects a slight buffer from its lowest level in recent months. The stock's 52-week low stands at Rs. 252.80, positioning the current valuation about 6 percent above its yearly floor. The movement indicates an attempt by market participants to find price stability around historical support zones.
Second Quarter Financial Metrics and Cost Pressures
The company's quarterly scorecards revealed notable headwinds across key profitability metrics. ITC's consolidated net profit for the quarter ending September dropped 18.45 percent to Rs. 4,229.33 crore, compared to Rs. 5,186.55 crore generated in the corresponding quarter of the previous fiscal year. Management attributed the contraction to an uptick in overall expenses as well as raw material inflation tied directly to the ongoing war in the Middle East. Standalone net profit also contracted 20.07 percent year-on-year to finish at Rs. 4,137 crore.
Notwithstanding the bottom-line compression, operational indicators showed pockets of stability. ITC stated that its EBITDA margin widened by 50 basis points year-on-year in spite of broader inflationary headwinds, driven by solid traction across all non-cigarette operational segments. Market observers were already prepared for subdued earnings. Ahead of the announcement, Motilal Oswal had projected a 28 percent year-on-year drop in cigarette EBIT, pointing to squeezed margins caused by price revisions that failed to fully absorb cost spikes.
Segment Breakdown and Cigarette Tax Headwinds
Total segment results for the September period came in at Rs. 5,156.55 crore, down from Rs. 6,320.72 crore recorded during the same period a year earlier. The primary driver of this contraction remained the subdued financial performance within the cigarette division. CLSA highlighted that while standalone revenue rose 3 percent year-on-year during the quarter, standalone EBITDA decreased 17 percent under the burden of an unprecedented increase in cigarette taxation.
In contrast to the tobacco operations, the paperboards, paper, and packaging vertical demonstrated positive operational momentum. Segment revenue advanced to Rs. 3,015.85 crore, up from Rs. 2,219.92 crore in the prior-year period. This acceleration in industrial packaging and paper operations helped offset some of the drag experienced across traditional consumer categories.
Brokerage Perspectives and Revised Target Levels
Financial brokerages delivered a mixed assessment of ITC following the earnings release, with several adjusting their target prices downward. Morgan Stanley lowered its target price on the counter to Rs. 312 from Rs. 340 while preserving an Equal Weight stance. UBS maintained its Buy call but trimmed its target to Rs. 345 from Rs. 350. Jefferies retained a Buy recommendation with an unchanged target price of Rs. 350.
Among other institutional views, JPMorgan reiterated a Neutral stance with a target of Rs. 310, and Macquarie held its Neutral rating at Rs. 300. In a slight divergence, CLSA marginally raised its target price to Rs. 390 from Rs. 388. Meanwhile, Goldman Sachs observed that quarterly numbers largely aligned with street expectations, emphasizing that momentum across non-cigarette verticals continues to accelerate.
Outlook on Cigarette Pricing and Segment Stabilization
The pace of prospective earnings recovery will depend significantly on pricing dynamics within the tobacco franchise. JPMorgan expects that portfolio realignments combined with staggered price hikes will gradually mitigate the decline in cigarette EBIT. Analysts project that additional price interventions in the RSFT category should support stabilization in operational margins by the fourth quarter of the fiscal year.
