ITC - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 4.4

📊 Financial Overview: ITC Ltd exhibits strong financial fundamentals with a stellar ROCE of 36.9% and ROE of 27.9%, indicating excellent capital efficiency. The company is debt-free, enhancing its financial resilience. EPS stands at ₹28.2, and the P/E ratio of 26.3 is significantly below the industry average of 52.2, suggesting attractive valuation. The PEG ratio of 2.86 indicates moderate overvaluation relative to growth. PAT grew modestly QoQ from ₹4,912 Cr to ₹5,113 Cr, a 2.76% increase. The stock is trading near its 50 DMA (₹410) and 200 DMA (₹418), showing technical stability.

💼 Business Model & Competitive Edge: ITC operates a diversified business across FMCG, hotels, paperboards, agribusiness, and tobacco. Its wide distribution network, strong brand portfolio, and pricing power in cigarettes provide a durable moat. The FMCG segment continues to grow steadily, supported by innovation and premiumization. Its sustainability initiatives and digital transformation further strengthen its long-term positioning.

📉 Valuation & Entry Zone: With RSI at 61.5 and MACD at 3.66, the stock shows mild bullish momentum. A favorable entry zone lies between ₹405–₹415, offering a good margin of safety for long-term investors, especially given its 52-week low of ₹390.

📈 Long-Term Holding Guidance: ITC is a strong long-term hold due to its diversified revenue streams, high return ratios, and consistent dividend payouts. Investors should monitor FMCG margin expansion, hotel recovery, and regulatory developments in the tobacco segment for future performance.

✅ Positive

• High ROCE and ROE reflect strong operational efficiency
• Debt-free balance sheet enhances financial stability
• Attractive P/E compared to industry average
• Dividend yield of 3.41% adds income stability

⚠️ Limitation

• PEG ratio of 2.86 suggests moderate overvaluation
• FII holdings declined by 0.59%
• Limited PAT growth QoQ (2.76%)

📉 Company Negative News

• Concerns over regulatory risks in tobacco segment
• Stock down ~11% from 52-week high of ₹472

📈 Company Positive News

• FMCG segment continues to grow with margin improvement
• Hotels and paperboards showing strong recovery post-pandemic
• DII holdings increased by 0.50%, indicating domestic confidence

🏭 Industry

• FMCG sector benefits from rising consumption and premiumization
• Industry P/E of 52.2 reflects high growth expectations
• Regulatory environment remains a key variable for tobacco players

🧾 Conclusion

ITC is a fundamentally strong and diversified conglomerate with high return metrics, attractive valuation, and consistent dividends. While regulatory risks persist in its tobacco business, its FMCG and hotel segments offer long-term growth. Investors may consider accumulating near ₹405–₹415 for steady compounding and income generation.