Should you buy, hold or sell ITC shares post Q3; here’s what analysts say

Shares of ITC dropped over 2% in early trade on Friday, extending losses for the third straight session, as investors reacted to its December quarter results. The sentiment was dented as some analysts are cautious about the FMCG heavyweight’s near-term outlook amid ongoing urban slowdown, higher inflation, and weak profitability in FMCG and paperboards, paper & packaging segments.

Continuing its losing streak, ITC share price slide 2.3% to hit a low of ₹431.1 on the BSE, while the market capitalisation declined to ₹5.39 lakh crore. The FMCG stock has fallen over 5% in three sessions amid weakness in the broader market.  

Early today, ITC shares opened marginally higher at ₹441.95 after ending 1.5% lower at ₹441.40 in the previous session. In a similar trend, ITC Hotels shares were trading marginally lower at ₹172 level.

For the third quarter ended December 2024, ITC reported 7% year-on-year decline in its consolidated net profit at ₹4,935 crore compared to ₹5,335 crore in the same period last year. The company delivered consolidated revenue growth (ex-hotel business) of 9% YoY in Q3 FY25, mainly led by the cigarette business. EBITDA grew by 2% YoY to ₹6,360 crore.

The board of the cigarette-to hotel conglomerate declared an interim dividend of ₹6.50 per share for FY25, payable between March 6 and March 8, 2025, to eligible shareholders.

Should you buy, hold, or sell ITC shares post Q3

Motilal Oswal has reiterated ‘BUY’ rating on ITC with target price of ₹550 per share. The brokerage has cut earnings per share (EPS) estimates by 4% for FY25 and 5% for FY26, mainly due to the impact of the hotel business demerger which came into effect in January 2025.

“ITC’s core business of cigarettes has shown steady performance. With stable taxes on cigarettes, we anticipate sustainable growth in this business. While the FMCG sector is seeing moderation due to the rising commodity prices, ITC is enjoying industry-leading growth over peers due to its category presence (large unorganised mix, under-penetrated, etc.),” it says in a report.

JM Financial has also maintain ‘BUY’ call on the stock, with revised price target of ₹515, saying that pace of recovery in FMCG needs to be watched due to heightened competitive scenario in foods. Demerger of Hotels business will reduce the capex intensity and aid improvement in return on invested capital (ROIC), it says.

Another domestic brokerage house Nuvama has also retained ‘BUY’ on ITC shares with a price target of ₹571. “We stay cautious in near term given ongoing urban slowdown, inflation in key RM and weak profitability in FMCG and paperboards, paper & packaging segment,” it says in a note.

Acquisition of Prasuma to boost presence in frozen food segment

In a separate development, ITC announced the acquisition (in three tranches) of ‘Prasuma’ a major player in frozen, chilled, and RTC foods. Prasuma's brands include ‘Prasuma’, ‘Meatigo’ and ‘Prasuma Momo Kitchen’ offering diverse products. The company has proposed an initial investment of ₹131 crore for 43.8% stake, with further investments planned over three years.

The brokerages believe that the acquisition will help ITC become a full stack player in the frozen food segment.

“This implies an EV/sales of 2.3x (based on FY24 turnover), and 1.5x (based on current ARR of ₹200 cr) – which in our view is reasonable given the brand’s visibility is good and allowing ITC to strengthen its presence in high growth frozen food market (estimated at over ₹10,000 cr),” Nuvama says in its report.

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