Sustaining cigarette volumes, FMCG recovery key monitorables for ITC stock

ITC reported healthy volume performance in the April-June quarter of 2025-26 (Q1FY26), but margins remained under pressure.

- Devangshu Datta

Consolidated revenue (ex-hotel business) in Q1FY26 grew by 21 per cent year-on-year (Y-o-Y) to ₹21,490 crore, led by cigarette and agri businesses. Gross margin contracted 700 bps Y-o-Y to 52.4 per cent, due to high food inflation and the rising input costs of leaf, wood.

The earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin contracted 510 basis points (bps) Y-o-Y to 31.7 per cent while EBITDA grew 4 per cent Y-o-Y to ₹6,820 crore. Profit before tax (PBT) and adjusted profit after tax (PAT) grew by 4 per cent and 5 per cent, respectively.

Gross cigarette sales grew 8 per cent Y-o-Y to ₹9,550 crore and volume growth was 6 per cent. Cigarette EBIT (earnings before interest and tax) grew 4.6 per cent Y-o-Y to ₹5,500 crore and EBIT margin contracted 190 bps Y-o-Y to 57.6 per cent due to escalation in leaf tobacco costs. The sharp cost escalation in leaf was partly offset by an improved product mix, calibrated pricing hikes, etc.