ITC Q1 net profit seen up 19% to Rs 1271 cr

Cigarette major ITC is expected to report a rise of 18.8% in its first quarter FY12 net profit to Rs 1,271 crore against Rs 1,070 crore in the year ago period.

Net sales are likely to go up by 14% to Rs 5,504 crore from Rs 4,816 crore year-on-year.

EBITDA too is seen going up 17% to Rs 1,915 crore versus Rs 1,637 crore in the corresponding quarter last fiscal year.

EBITDA margin is likely to improve to 34.7% against 33.8% year-on-year.

Factors

Expect margins to improve slightly on a YoY basis as the PBIT margin expands in its cigarette business and contribution of its agri business declines

All businesses are expected to do well

Cigarette

Expect cigarette volume growth of 8% - benefiting from no increase in excise duties and lower primary sales in 4QFY11

Price increases in January 2011 and an improving sales mix will enable 18% growth in cigarette PBIT and 100 basis points margin expansion

FMCG sales

Estimate a 20% increase in FMCG sales and around 30% decline in EBIT losses

Improving profitability in the food, education and lifestyle retail businesses will drive the decline in EBIT losses

Others

Paper margins are likely to stay sequentially stable at 21.2% but a decline from peak 1QFY11 levels of 23.7% is likely

Agri Business is expected to sustain growth with stable margins expected in 1QFY12

Hotel margins are likely to improve by 170bp due to the recovery in occupancy and the impact of an ARR hike in 3QFY10

What to look for

Cigarette volume growth: Expected to rebound strongly to 8% in1QFY12 and by 7% in FY12

Sales growth and loss reduction in the New FMCG business