ITC Jumps 4% as Cigarette Revenue Surges 81%, Jefferies Upgrades to Buy

The Quick Take

• ITC shares jumped ~4% after cigarette revenue surged 81% year-on-year in Q1 FY26
• Jefferies upgraded ITC to Buy citing improved earnings visibility and durable cigarette margins
• Hotels and agribusiness segments also improved, broadening the earnings base beyond tobacco

ITC Limited (NSE: ITC) gained approximately 4% on Monday after reporting an 81% year-on-year surge in cigarette business revenue for the June quarter, the company's highest-grossing segment. The jump reflects both volume recovery and price realization gains following excise duty stability in the Union Budget, which removed a key overhang that had suppressed ITC shares through much of FY25. Jefferies responded by upgrading the stock to a Buy rating, citing improved earnings visibility and the segment's capacity to sustain high margins through the medium term. The hotel and agribusiness divisions also reported improved performance, demonstrating breadth beyond tobacco.

The ITC re-rating story is significant for Indian large-cap portfolios. The company carries a weight of roughly 2.5% in the Nifty50 and BSE Sensex, and a Jefferies Buy upgrade — combined with the strong Q1 print — is likely to prompt similar actions from domestic brokerages, creating a cascade of positive estimate revisions that can sustain buying pressure over multiple sessions. FMCG peers with exposure to excise-sensitive product categories will also be watched, as ITC's cigarette revenue surge signals that budget-tax stability is flowing through to volume normalization across the category.

ITC's forward outlook hinges on whether the cigarette segment can maintain its pricing power through Q2 FY26. GST escalation risk and competitive dynamics with smaller manufacturers remain background concerns. Notably, ITC materially underperformed the Nifty during FY25, making current valuations reasonable relative to its earnings growth trajectory. Institutional investors who had been underweight ITC through the underperformance phase may use the Jefferies catalyst as a re-entry signal, particularly with FMCG sector re-rating themes gaining traction in the current market cycle.

Synthesized from 2 sources.