Digital brands, premium FMCG to drive ITC's growth ambitions

ET Intelligence Group: Amid continued pressure on its cigarettes business, ITC's future growth will depend on the success of strategies such as premiumisation, distribution expansion, the scaling up of digital-first brands including Yoga Bar and Prasuma, a recovery in the paperboards business, and a higher contribution from fresh foods and value-added agri products.

The company's September-quarter performance highlighted the growing importance of its non-cigarette businesses as a sharp increase in taxes continued to weigh on cigarette volumes and profitability. Strong growth in FMCG, paperboards, agri and digital-first brands helped cushion the impact.

While cigarette taxation, commodity inflation and geopolitical uncertainties remain key risks, the pace of growth in ITC's increasingly diversified portfolio will be crucial for sustaining long-term growth beyond its traditional cigarettes business.


After remaining range-bound for the past three months, the stock has gained 5.1% in two trading sessions since the company reported its September-quarter results on Monday evening.

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The FMCG business continued to emerge as a key growth driver, with the FMCG-others segment delivering its highest growth in 14 quarters, led by strong demand across foods, biscuits, snacks, dairy, personal care, notebooks and home-care categories. The segment's margin expanded by more than 50 basis points year-on-year and on a sequential basis, despite inflationary pressures, supported by an improved product mix, cost-management initiatives and calibrated pricing actions.

Meanwhile, digital-first brands such as Yoga Bar, Prasuma and Mother Sparsh maintained strong momentum, posting 70% year-on-year growth and crossing a combined annual revenue run rate of more than ₹1,800 crore.

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The paper business also maintained strong momentum, driven by improved demand and the integration of Century Pulp & Paper, while the agri business continued to benefit from growth in value-added products and exports.

Analysts believe these businesses, along with the scaling up of the fresh foods portfolio, will act as key earnings growth drivers.

Religare Broking has maintained a 'buy' rating on the stock with a target price of ₹408, implying a 46% upside from Wednesday's closing price of ₹279.7.

The stock's trailing price-to-earnings (P/E) multiple of around 18.2 is below its five-year average of 26.