ITC shares – Undervalued in spite of outperformance

ITC shares are gaining today. At 11:10 a.m. 31^st October, 2025, the stock price is up by 1.35%, trading at Rs 424.40. Nifty 50 index is down by 0.35% at this time. In the past one month ITC shares have gained 5.60%. In this period, Nifty 50 index has gained 4.75%.

Net profit in September quarter up by 2%

The company declared its September 2025 quarter result yesterday. Net profit of the company in the September quarter increased year-on-year by 2% to Rs 5,078 crore. This was driven by increase in revenues in its cigarettes business. Around 44% of the revenues of ITC come from its cigarette business. Total revenue of the company in the quarter came down year-on-year by 2% to Rs 19,382 crore.

Stock trading at a lower P/E multiple than industry peers

ITC’s shares are currently trading at a 12-months trailing price-to-earnings (P/E) ratio of around 26. Average P/E ratio at which Nifty FMCG index is currently trading is around 41.74. That makes ITC’s stock much cheaper in valuation when compared its industry peers.

ITC shares have outperformed in the past 5 years

ITC has a 33.34% weight in the Nifty FMCG index. After ITC, the second highest weight in the index is of HUL. In the past 5 years, Nifty FMCG index has given a return of 12.89%. In the same period, ITC’s stock has given a return of 156%. HUL’s shares have given a return of 18.96% in this period. Nestle India’s shares have gained around 48% in the past 5 years. Nifty 50 index has gained 121.43% in the last 5 years. So ITC’s shares outperformed the benchmark indices and most of its industry peers by a wide margin in the last 5 years.

Company demerged its hotel business earlier this year

The company demerged its hotel business earlier this year into a separate listed entity. Its presence in the cigarettes business makes it vulnerable to higher taxation and policy regulation. The company is also facing some challenges from illegal cigarettes sales.

Its presence in the non-cigarette FMCG business gives it some diversification advantage. Some of the top selling non-cigarette FMCG products of ITC include Sunfeast , Aashirvaad etc. Sales of its non-cigarettes FMCG business increased year-on-year by 6.9% in the quarter.

Agri business facing tariff headwinds

ITC is also present in the agri business. ITC sources a large range of agri-commodities such as food grains, marine products, processed food etc from farmers. ITC happens to be one of the largest exporters of agricultural products in India. That makes it also vulnerable to tariffs related trade wars. Higher US tariffs on Indian goods adversely impacts ITC. In the September quarter, revenues from ITC’s agri business came down year-on-year by 31.2% to Rs 3,976 crore. This was the main reason why overall revenue of the company came down in the quarter.

52- week high price of the stock currently is Rs 493.45. 52-week low price of the stock is Rs 390.15. The current price at which ITC shares are trading make them definitely undervalued. The recent GST cuts will benefit a large range of ITC products. Their sales may therefore go up further in future.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.

Source: NSE, ITC