Key Business Metrics: Q2 20261
– New reporting structure: Standalone (core businesses) vs. Consolidated (including ITC Infotech India Limited, Surya Nepal Private Limited and ITC Hotels Limited)
– Gross Revenue up +7.1%, excluding Agriculture business, driven by Cigarettes and FMCG
– Overall EBITDA up +2.1% (ex-paper, up +3.2%); EBITDA margin of 35.1%, up +185 bps
– Profit after tax: +4.1%
– Q2 2026 EPS (consolidated): ₹4.09 (up +2.5%)
Q2 2026 Segment Highlights
Cigarette Segment:
– 41.6% weight in gross revenue, 82.9% weight in operating profit in Q2 2026
– Net segment revenue and operating profit are up +6.7% (net of Excise Duty/NCCD on sales: +6.8%) and +4.3%, respectively
– Tax stability supporting volume recovery from illicit trade. Market position reinforced through focused product portfolio & commercial interventions. Premium segment & new innovations continue to gain robust traction
– Leaf tobacco cost remains elevated; moderation in leaf tobacco procurement prices witnessed in current crop cycle
Other Segments:
– FMCG (revenue is up +6.9%, operating profit is down -0.3%): Growth momentum sustained amidst GST transition & excessive rains; revenue up +8% ex-Notebooks. Notebook segment continues to operate under deflationary conditions due to low-priced paper imports & opportunistic play by local/regional competition. Premium portfolio & New Generation channels sustain high growth trajectory. Digital-first & Organic portfolio reaches ₹1,100 crore annual run rate. Segment EBITDA margin up +50 bps to 10% on sequential basis. Input prices of major commodities remain elevated; impact mitigated through focused cost management initiatives, premiumization & calibrated pricing actions. Trade & marketing investments sustained at competitive levels to support growth and market position.
– Agri Business segment (revenue is down -31.2%, operating profit is up +1%): Strong growth in tobacco leaf exports (crop development expertise, good product quality & strong customer relationships). Value-added Agri portfolio relatively subdued due to delayed customer orders amid US tariff uncertainty
– Paperboard, Paper & Packaging (revenue is up +5%, operating profit is down -21.2%): Low-priced Chinese & Indonesian supplies, subdued realizations & elevated wood prices continue to impact the Industry; Initial signs of moderation in wood prices with improving availability.
Summary:
The core cigarette business is in good shape (although the profit growth still lags the revenue growth) and the demand conditions seem to show signs of improvement in the overall consumption (FMCG) space. Nevertheless, elevated input costs (leaf, wood etc.), instability of the export-driven Agriculture business as well as the circumstantial factors continue to put pressure on ITC’s profitability.
Following a relentless rally from the Covid lows, ITC shares tripled and hit the key ₹400 level in mid-2023. Since then, ITC has been mostly trading above the key ₹400 level (with all-time high at ₹499 adjusted for the ITC Hotels spin-off) in an increasingly narrow range. The ₹400 level has served as a strong support on the downside as the investors wait for the business environment to improve and ITC Management’s interventions to pay off.
Q2 2026 Results could been seen as a sign of recovery as the core FMCG segments are performing better. The most noteworthy development is the further 50bps sequential improvement in FMCG EBITDA margin to 10% – although it is still well below the 11.2% reported in FY24. Considering that this is the fourth consecutive quarter of FMCG margin improvement and the core cigarette segment performs well, there are more reasons to believe that the bottom is in for the ITC shares. We continue to believe that ₹400 will serve as a strong support on the downside and ITC shares will progressively appreciate over the next 12-24 months to make a new all-time high – as the consolidated EPS approaches ₹20.
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