ITC Preview | Net profit may rise 4.6% in Q1, cigarette volumes likely to grow 8%

ITC’s revenues from hotels business is expected to grow 14.3 percent YoY in the April-to-June quarter.

Cigarettes-to-hotels conglomerate ITC Ltd is expected to report a net profit of Rs 4,838.8 crore for the April to June quarter on August 14, according to the average of six brokerages polled by Moneycontrol. It shows a 4.6 percent increase over last year and a 10.3 percent growth on a sequential basis.

The company's revenue is pegged at Rs 17,326 crore for the first quarter of FY24, marking a year-on-year increase of 14.9 percent. Sequentially, revenue is likely to decline 4.8 percent.

Its operating profit margin is likely to be 36.2 percent, a 404 basis points expansion on-year, along with a sequential fall of 117 basis points.

Cigarette volumes are expected to grow 8.06 percent YoY in the April-to-June quarter. Kotak Institutional Equities expect the cigarette EBIT margin to contract 50 basis points sequentially and to remain flat on-year because of inflation in tobacco prices.

The FMCG business is expected to grow 13.12 percent on-year. Prices of key raw materials for ITC like wheat and sugar have increased annually by 6 percent and 3.8 percent in Q1FY24, according to a report by Prabhudas Lilladher.

ITC’s revenue from the hotels business is expected to grow 14.3 percent YoY in the April-to-June quarter. The company announced the demerger of its hotel business on July 24. “For ITC, the reorganisation of business will sharpen capital allocation, improve asset efficiency ratios, unlock value for shareholders and enable leverage of institutional synergies," Managing Director Sanjiv Puri said at ITC's 112th Annual General Meeting on August 11.

Kotak Institutional Equities said that ITC’s agri business is expected to decline 23 percent on-year in Q1FY24 on a high base. Another reason for the decline in agribusiness revenues is the banning of wheat exports.