Diversified conglomerate ITC Ltd. reported a resilient performance for the second quarter of fiscal year 2026, with a 4.1% year-on-year (YoY) increase in standalone net profit to Rs. 5,180 crore. However, the company's top line faced significant pressure, with revenue from operations declining by 2.4% YoY to Rs. 19,382 crore, largely due to a steep fall in its agri-business segment.
The market reacted with caution to the mixed set of numbers, as investors weighed the underlying strength of the core Cigarettes and FMCG businesses against the sharp, policy-induced downturn in the agri segment. For investors seeking clarity, the results paint a picture of a company navigating a challenging environment with operational discipline, managing to grow profits even as overall revenue fell.
Table of Contents
- ITC's Q2 Financials: Looking Beyond the Headline Numbers
- The Story of Two Halves: How Did ITC's Segments Perform?
- The Investor's Bottom Line: A Resilient Core
- What Do Analysts Recommend for ITC Stock?
- Frequently Asked Questions (FAQs)
ITC's Q2 Financials: Looking Beyond the Headline Numbers
A closer look at the financials reveals that the headline revenue decline masks the health of ITC's consumer-facing businesses.
Key Financial Highlights for Q2 FY26
/content-assets/3825ebb989404ec786f04a5efd309071.png)
The single biggest factor dragging down the top line was a massive 31.2% YoY decline in revenue from the Agri-Business segment, primarily due to government restrictions on wheat and rice exports. Crucially, excluding the agri-business segment, ITC's gross revenue grew by a healthy 7.1% YoY, indicating solid performance in its other divisions.
The Story of Two Halves: How Did ITC's Segments Perform?
ITC's strength lies in its diversified sources of revenue, which provided a buffer against the agri-business downturn.
-
FMCG - Cigarettes: This segment remains the company's cash cow. It delivered a strong performance with a 7.5% YoY growth in segment revenue and a 7.2% increase in Segment EBIT, driven by a stable tax environment and market share gains.
-
FMCG - Others: The non-cigarette FMCG business demonstrated resilience, with revenue growing 7.4% YoY. This was led by strong growth in staples (Aashirvaad), snacks (Bingo!), and personal care products. The segment's EBITDA margin also expanded by 75 basis points YoY, reflecting better scale and cost efficiencies.
-
Paperboards, Paper & Packaging: This segment faced headwinds from low-priced Chinese imports, and revenue declined by 5% YoY. However, the company is witnessing a sequential uptick in demand.
-
Hotels Business: It's important to note that the Hotels business was demerged into a separate entity, ITC Hotels, effective 1 January 2025. ITC Ltd. continues to hold a stake in this entity. In its own Q2 results, ITC Hotels reported a robust 74% YoY surge in net profit, indicating a strong recovery in the hospitality sector.
The Investor's Bottom Line: A Resilient Core
For investors, the key is to look past the headline revenue decline and understand the underlying dynamics.
-
Core Businesses are Strong: The solid growth in the Cigarettes and FMCG-Others segments is the most important takeaway. These businesses, representing the core consumer portfolio, are performing well.
-
Profit Growth Amidst Revenue Decline: The ability to grow profit by over 4% while revenue fell is a testament to ITC's operational efficiency. The company managed its expenses effectively (down 4.2% YoY), leading to margin expansion at the net profit level.
-
Agri Volatility is a Known Factor: The agri-business is inherently cyclical and subject to government policies. While the 31% drop is significant, the strength of the other segments provides a crucial buffer.
What Do Analysts Recommend for ITC Stock?
The analyst community has taken a nuanced view of the results. While acknowledging the near-term challenges, most remain positive about the long-term story.
-
Goldman Sachs maintained a 'Buy' rating and raised its target price to Rs. 490.
-
Citi also maintained a 'Buy' rating with a target price of Rs. 500.
-
The general consensus is that the stock remains attractive due to its defensive characteristics, strong dividend yield, and the long-term growth potential of its FMCG business.
Frequently Asked Questions (FAQs)
1. What was ITC's net profit in Q2 FY26?
ITC reported a standalone net profit of Rs. 5,180 crore, a 4.1% increase year-on-year.
2. Why did ITC's revenue decline in Q2?
The 2.4% decline in overall revenue was primarily due to a 31.2% year-on-year drop in the Agri-Business segment, which was impacted by government restrictions on wheat and rice exports.
3. How did ITC's cigarette and FMCG businesses perform?
The core consumer businesses performed well. The Cigarettes segment revenue grew by 7.5% YoY, and the FMCG-Others segment grew by 7.4% YoY.
4. What is the status of the ITC Hotels demerger?
The demerger of the hotel business into a separate entity, ITC Hotels Limited, was effective from 1 January 2025. ITC Ltd. continues to hold a stake in the new company.
5. What is the investment outlook for ITC stock?
The outlook remains positive for long-term investors. Analysts see the core businesses as strong and resilient. The recent dip in the stock price could be seen as an opportunity to accumulate a high-quality, defensive stock for a long-term portfolio.