Worst seems behind; risk-reward favourable; upgrade to Buy

Research evidence excerpt

Worst seems behind; risk-reward favourable; upgrade to Buy

Nomura | ITC 2 August 2026

Company profile

ITC is a diversified conglomerate with businesses spanning cigarettes, FMCG, agri business, paperboards & packaging, hospitality and information

technology. Its products are marketed under 25+ mother brands, including Aashirvaad (branded wheat flour), Sunfeast (biscuits), Yippee (instant

noodles), Bingo (salted snacks), B Natural (juices), ITC Master Chef (frozen foods), Savlon (household & personal care) among others. It has a total

distribution reach of c.7mn retail oulets for its FMCG products, and over 200 manufacturing units across the country.

Valuation Methodology

We value ITC on SoTP basis on Jun-28F: (1) Cigarette valued at 15x P/E, (2) FMCG at 28x EV/EBITDA, (3) Agri at 1.5x EV/Sales (4) Paperboards

at 8x EV/EBITDA (5) IT business at 18x P/E (6) Others (Food Tech etc) at 5x EV/Sales (7) Hotels at 20% holding company discount to Market Cap

and (8) Cash at actual. Our valuation implies a target price of INR 340. The benchmark index for this stock is Nifty50.

Risks that may impede the achievement of the target price

Risks: 1. Higher-than-expected volume growth 2. Faster-than-expected shift from the legal tobacco industry to the illicit segment, 3. Higher-than-

expected demand for new product launches, 4. Higher-than-expected input for cost inflation in the non-cigarettes business

ESG

Environmental: increasing renewable energy contribution, water/carbon emission cut, usage of recyclable packaging for products. Social: Projects

for water and sanitation management improving lives of women and children childhood development program, no labor complaints. Governance:

50% independent board directors, 100%/75% independent directors on audit/ remuneration committees.