ITC stock news: ITC Q4 Preview: Cigarette, hotels, agri biz to drive up to 23% sales growth

ITC is scheduled to publish its March quarter numbers on Wednesday, May 18.

Analysts project the company’s net revenue to grow in the range of 11-23 per cent year-on-year (YoY). Though, sequentially, it is likely to be much lower. Net profit is estimated to grow 5-15 per cent YoY.

Analysts at brokerage firm Sharekhan said cigarette business revenue is expected to increase by 12-13 per cent YoY with volume growth of 11 per cent. It expects the non-cigarette FMCG business to grow by 5 per cent due to lower volume growth.

According to them, the hotel business is expected to continue to deliver strong growth due to higher mobility and pent-up demand while agri-business is expected to register strong double-digit growth led by higher exports.

Shares of the company have spiked recently as investors believe the war in Europe that has upended the food availability across the world, would ultimately benefit the company. Analysts’ expectation affirms that.

Though, “higher input costs would lead to a 270 bps YoY decline in gross margin and a 137 bps YoY decline in operating margin. Sequentially, margins are expected to remain flat. PAT to grow by 4 per cent during the quarter,” Sharekhan said.

Axis Securities also expects cigarette volume to grow by 7-8 per cent YoY and the FMCG segment to grow at a modest 3 per cent on weak consumer sentiments. Meanwhile, it projects hotels (strong demand), papers and agri (geopolitical crisis) businesses to see strong growth.

The broker has outlined the highest growth estimates among brokerages. It sees PAT growth at 15 per cent driven by 23 per cent growth in sales. “Expect EBITDA margins would decline modestly despite gross margin contraction on account of operating leverage benefits (hotels, paper) and cost rationalization,” it further said.

At the end of the December quarter, ITC reported net profit growth of 13 per cent and sales growth of 31 per cent.

YES Securities, which projects Q4 sales growth at 14 per cent and profit growth at 5 per cent, said strong margin performance will continue for ITC, led by operational efficiency.

According to brokerages, key monitorables for Q4 are:

– Hotels & FMCG division outlook

– Cigarette demand and price trends, and

– Performance of Agri and Packaging divisions going ahead