ITC Q2 Review: Goldman Sachs, Citi Maintain 'Buy' Betting On Strong Cigarette Growth, FMCG Rebound

Major financial institutions, including Goldman Sachs (GS) and Citi, have maintained a strong positive outlook on ITC, primarily driven by robust performance in the core cigarette segment and the expectation of significant margin recovery across its diverse business portfolio in the latter half of the fiscal year.

Goldman Sachs upgraded its target price to Rs 490 from Rs 480, while Citi holds its Buy rating with a target price of Rs 500.

The consensus is that ITC's second quarter performance was largely in line with expectations, setting the stage for accelerated earnings and margin expansion, particularly in the second half.

The brokerages place the focus on the conglomerate's strategic positioning in cigarettes. Both brokerages noted the continued strong growth in the cigarette business. Goldman Sachs anticipates that margins in this segment are poised for a recovery in the second half.

Citi specifically highlights that, while growth remains strong, the true benefit of consuming lower-cost leaf tobacco is still awaited, which is expected to bolster future margins. Citi also pointed to the company’s anticipated strategic interventions designed to effectively counter competition in this key business area.

Beyond its core segment, ITC is showing resilience and growth in its non-cigarette businesses. Goldman Sachs reported strong Fast-Moving Consumer Goods or FMCG performance, even in the face of temporary Goods and Services Tax (GST) transition headwinds. Citi corroborated this positive view, noting a tangible growth recovery in the Other FMCG business.

Further, the Paper business is also showing signs of stabilisation. Goldman Sachs observed that margins in the Paper segment have begun a gradual recovery, with further improvement likely throughout the remainder of the Financial Year.

Goldman Sachs expects an earnings acceleration in the second half across all key business segments, moving beyond the Q2 results. Citi is even more bullish on the long-term margin trajectory, suggesting that a pronounced recovery could likely materialise starting from Financial Year 2027 Estimated.

This expectation of second half acceleration and long-term margin improvement provides the foundation for the maintained 'Buy' ratings and the higher Target Prices.