ITC (ITC IN) – Q2FY27 Result Update – Worst seems over, expect gradual recovery – Upgrade to ‘ACCUMULATE’
Published on 02 Nov 2026
ITC reported 8% decline in cigarette volumes, however EBIT increased by Rs4.7bn QoQ as it continued to increase prices to pass on excise burden. We estimate that ITC would have passed on more than 75-80% of burden so far, suggesting that steady recovery should continue. FMCG growth and margins have been positive across Food, HPC, Stationary, however margin trajectory needs to be watched out for given rising input costs, although demand remains steady so far. Paper business will likely gain from 1) extension of MIP 2) integration of century paper and higher prices, although input costs remain elevated. We expect gradual recovery to set in across businesses, however demand trends and any potential increase in cigarette duty need to be watched out for. We believe worst seems over, although cigarette volumes recovery will be gradual. However, downside seems limited given ~50% decline from the peak and 5% dividend yield. Upgrade to Accumulate from Hold.
