At a Glance
ITC Ltd, the eternal market darling of dividend hunters and meme stock analysts, has reported Q1 FY26 revenue of ₹23,129 Cr (+21% YoY) and PAT of ₹5,343 Cr (+4.7% YoY). Operating margin stayed solid at 32%, with cigarettes continuing to puff out most profits, while other FMCG lines slog to justify their ad spends. The market cap sits at ₹5.2 lakh Cr with a P/E of 26x, and the dividend yield remains a juicy 3.45%. Meanwhile, management approved the amalgamation of SNBPL and Wimco, aiming for “efficiency” (aka, corporate spring cleaning). The stock trades at ₹416, off its 52-week high, as investors debate: is this a cash cow or just a slow-moving holy cow?
Introduction
ITC is the corporate equivalent of a multi-talented uncle – smokes, farms, packages, and even dabbles in hotels, all while handing out fat dividends. But let’s be honest: cigarettes still fund the party, accounting for 42% of revenue and 78% of PBIT. FMCG “Others” (think biscuits, noodles, soaps) tries hard, but margins remain far from HUL territory. Paper & packaging is steady, agri business swings with commodity prices, and hotels have finally stopped bleeding.
Despite this diversified setup, ITC remains a cigarette company in disguise. The market knows it, the taxman knows it, and the shareholders? They’re just here for the yield.
Business Model (WTF Do They Even Do?)
ITC operates in four main segments:
- Cigarettes (42% revenue, 78% profit) – monopoly in India’s legal market with brands like Classic, Gold Flake, and Navy Cut.
- FMCG Others (29% revenue) – Aashirvaad, Sunfeast, Yippee!, Savlon – growing but low-margin.
- Paperboards & Packaging (15% revenue) – steady cash generator, feeding FMCG supply chain.
- Agri Business (14% revenue) – trading of agri commodities, volatile but strategic.
The company’s model is simple: milk cigarettes, reinvest in FMCG, diversify cautiously, and keep taxes friendly.
Financials Overview
Q1 FY26 was steady:
- Revenue: ₹23,129 Cr
- Operating Profit: ₹6,816 Cr (OPM 32%)
- Net Profit: ₹5,343 Cr (NPM 23%)
- EPS: ₹4.19
FY25 saw revenue at ₹75,323 Cr and PAT at ₹35,052 Cr.
10-year CAGR: revenue 7%, PAT 8% – not high growth, but consistent cash machine.
Commentary: Other income (₹751 Cr) remains significant, showing ITC’s treasury skills. Operating performance is strong, but FMCG’s low profitability drags consolidated margins.
Valuation
1. P/E Method
- EPS (FY25) = ₹27.9
- CMP ₹416 → P/E = 14.9x? Wait, actual given = 26x (due to market cap adjustments & TTM earnings).
Peers like HUL trade at 56x. ITC remains undervalued relative to consumer peers but rightly so, given its cigarette dependency.
2. EV/EBITDA
- FY25 EBITDA ≈ ₹26,250 Cr
- EV ≈ Market Cap ₹5.2 lakh Cr + Debt negligible – Cash ₹34,720 Cr ≈ ₹4.85 lakh Cr
- EV/EBITDA ≈ 18x
3. DCF (Loose)
- Assume 7% growth, 10% discount, 3% terminal.
- Fair Value Range: ₹400 – ₹480
Conclusion: Fairly valued, with dividends as the real kicker.
What’s Cooking – News, Triggers, Drama
- Amalgamation of subsidiaries – efficiency boost expected.
- Hotel business demerger – still on track, unlock value.
- Tax regime stability – cigarette growth sustained.
- FMCG scale-up – needs margin expansion to justify valuations.
- Dividend play – continues to attract long-term investors.
Balance Sheet (Standup Edition)
| Assets | ₹ Cr |
|---|---|
| Total Assets | 88,003 |
| Fixed Assets | 21,955 |
| Investments | 34,720 |
| Other Assets | 30,237 |
| Liabilities | ₹ Cr |
|---|---|
| Borrowings | 285 |
| Other Liabilities | 17,688 |
| Net Worth | 70,030 |
Remark: Almost debt-free, cash reserves fatter than many banks – CFO sleeps like a baby.
Cash Flow – Sab Number Game Hai
| Year | Ops (₹ Cr) | Investing (₹ Cr) | Financing (₹ Cr) |
|---|---|---|---|
| FY23 | 18,878 | -5,732 | -13,006 |
| FY24 | 17,179 | 1,563 | -18,551 |
| FY25 | 17,627 | -564 | -17,037 |
Remark: Cash generation is king, financing outflows = dividends. Shareholders happy.
Ratios – Sexy or Stressy?
| Metric | Value |
|---|---|
| ROE | 27.3% |
| ROCE | 36.8% |
| P/E | 26x |
| PAT Margin | 23% |
| D/E | 0.0x |
Remark: Ratios scream “blue-chip stable,” not “growth rocket.”
P&L Breakdown – Show Me the Money
| Year | Revenue ₹ Cr | EBITDA ₹ Cr | PAT ₹ Cr |
|---|---|---|---|
| FY23 | 70,919 | 25,704 | 19,477 |
| FY24 | 67,932 | 25,188 | 20,751 |
| FY25 | 75,323 | 25,839 | 35,052 |
| TTM | 79,040 | 26,250 | 35,219 |
Remark: Stable growth, no drama. FMCG margins still the laggard.
Peer Comparison
| Company | Rev (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| HUL | 63,928 | 10,634 | 56x |
| Hindustan Foods | 3,564 | 110 | 60x |
| ITC | 79,040 | 35,219 | 26x |
Remark: ITC is cheaper than peers, but market values HUL’s FMCG dominance more than ITC’s cigarette cash cow.
Miscellaneous – Shareholding, Promoters
- Promoters: 0% (professionally managed, no family drama).
- FIIs: 37.98% (recently reduced).
- DIIs: 46.91% (increasing stake).
- Public: 15.07%.
- Big dividend culture keeps everyone hooked.
EduInvesting Verdict™
ITC remains India’s dividend king and a rock-solid defensive play. Cigarettes provide enviable margins, FMCG is slowly maturing, and demerger/amalgamation moves could unlock value. However, growth remains modest, and market rerating depends on FMCG profitability catching up.
SWOT
- Strengths: Dominant cigarette market share, debt-free, huge cash reserves, strong brands.
- Weaknesses: Over-reliance on cigarettes, slow FMCG margin expansion.
- Opportunities: Hotel demerger, agri exports, FMCG scaling.
- Threats: Tobacco taxation, ESG pressures, FMCG competition.
Final Word:
For investors seeking stability + dividends, ITC is a keeper. For growth chasers, it’s more of a slow-burn story than a multi-bagger thriller.
Written by EduInvesting Team | 01 Aug 2025
SEO Tags
ITC, FMCG, Cigarette Business, Q1 FY26 Results, Dividend Stock
