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With softer inflation and FMCG price cuts, the income-to-cost balance has improved gradually. “Macro indicators suggest steady improvement, leading to anticipated volume growth from 2024-25 to 2025-26,” say Research Analysts Pratik Bipinchandra Prajapati and Tanu Jindal from Motilal Oswal. Here are the factors that may require a reassessment of the sector soon.
Kaustubh Pawaskar, DVP Fundamental Research at Sharekhan, expects ITC margins to consistently improve. Non-cigarette FMCG business, hotel business, and cigarette volume growth will drive recovery. Further correction would imply attractive valuation considering ITC s strategies and positive business performance. The stock is trading at around 19 times FY26 earnings which is at a discount to its historic average. We should expect the stock to recover from here as major uncertainty is over now.
The stake sale in ITC is good news also because BAT is now unlikely to sell more shares in near future for it doesn t want its shareholding in ITC to fall below 25%. BAT s ownership in ITC has now fallen to 25.5% from 29% earlier.
A prolonged rural slowdown is dragging demand for packaged consumer goods. A revival later this year depends on monsoons and post-election government spending