# ITC Shares Rise Over 0.7% After Q2 Net Profit Declines 18% Under Tax and Inflation Pressure

> ITC stock traded marginally higher on Tuesday following an 18.45% drop in consolidated September quarter net profit. While higher cigarette levies weighed on earnings, brokerage houses issued divergent target prices as non-cigarette businesses showed resilience.

**Type:** article · **Category:** Money · **Published:** 2026-11-03 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/money/sitnbara-timahi-ke-munaphe-men-18-se-adhika-ki-giravata-ke-bada-bhi-itc-ke-sheyaron-men-dikha-sudhara-55586 · **Language:** English
**Tags:** ITC, Share Price, Q2 Results, FMCG, NSE, Brokerage Targets

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.

## What this means for you
ITC's quarterly earnings performance and stock movement directly influence retail equity holders and broader FMCG market sentiment.

- **For Equity Shareholders:** The stock's 0.71 percent rise despite an 18.45 percent profit decline suggests market pricing had already factored in tax increases. Investors tracking the counter can monitor the Rs. 252.80 yearly low as a primary benchmark support level.
- **For Long-Term Investors:** With the shares down roughly 35.86 percent over the past year, current levels trade near annual valuation lows. Brokerages maintaining targets between Rs. 300 and Rs. 390 point to measured upside potential over extended horizons.
- **For Consumers:** Anticipated staggered price adjustments in tobacco categories to offset tax pressures will likely raise retail prices. Buyers should anticipate potential product cost revisions heading into the final quarters of the fiscal cycle.
- **For Market Participants:** Revenue expansion in the paperboards and packaging segment highlights the resilience of diversified non-cigarette assets. Traders assessing defensive portfolio plays can gauge how operational margin expansion of 50 bps supports bottom-line durability.

## Why this happened
A combination of unexpected tax escalations on tobacco and geopolitical cost inflation triggered the drop in ITC's quarterly earnings.

- **Geopolitical Supply Shocks:** Ongoing war in the Middle East drove up international raw material prices and logistics costs. This systemic inflationary pressure elevated total operating expenses across operational divisions.
- **Elevated Cigarette Taxation:** An unprecedented increase in cigarette levies weighed heavily on segment profitability, leading to a 17 percent contraction in standalone EBITDA. As the primary earnings contributor, this operational drag eroded consolidated margins.
- **Lagging Price Interventions:** Price adjustments implemented by the management during the period proved insufficient to offset the sudden increase in levies. This imbalance contracted segment EBIT margins before broader portfolio pricing could take full effect.

## Questions & Answers

### 1. What was ITC's consolidated net profit for the second quarter?
ITC reported a consolidated net profit of Rs. 4,229.33 crore for the September quarter, down 18.45% from Rs. 5,186.55 crore a year earlier.

### 2. How did ITC shares trade on Tuesday, November 3?
The stock traded at Rs. 268.30, up 0.71% or Rs. 1.90 from the previous close of Rs. 266.40, hitting an intraday high of Rs. 270.

### 3. What factors caused the drop in quarterly profit?
The profit decline was driven by higher overall expenses, raw material inflation linked to the Middle East war, and increased cigarette taxes.

### 4. Which brokerage assigned the highest price target for ITC?
CLSA assigned the highest target among the covered firms, raising its target price to Rs. 390 from Rs. 388.

### 5. How did the paper and packaging segment perform during the quarter?
The paperboards, paper, and packaging division posted revenues of Rs. 3,015.85 crore, up from Rs. 2,219.92 crore in the prior-year period.

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