ITC Ltd is likely to report a healthy 10.5 percent year-on-year (YoY) growth in net profit in Q2 FY24, primarily led by sales of cigarettes, price hikes in FMCG products, and strong demand in the hotels segment. The cigarette and FMCG company will announce its Q2FY24 earnings on October 19.
ITC Ltd's Q2FY24 net profit is likely to come in at Rs 4,889 crore for the July-September quarter, per the mean consensus of four brokerage estimates. Standalone revenue for the quarter is expected to grow 4.6 percent YoY to Rs 17,216 crore. Operating profit margins are likely to rise moderately, by 68 basis points YoY to 37 percent.
Where is the growth likely to come from?
ITC’s cigarette segment is expected to grow 8.9 percent in value and 5 percent in volume considering a normal base and increased out-of-home consumption, said Shirish Pardeshi and Soham Samanta of Centrum Institutional Research.
Also read: FMCG Q2 preview | Revenue growth to slow on patchy rains and food inflation
The company’s FMCG segment is expected to report YoY revenue growth of 12 percent on the back of price hikes, said Kotak Institutional Equities.
The hotel segment may report a 12.5 percent YoY jump, with strong domestic tourism demand and heightened demand from corporate bookings, said Pardeshi and Samanta of Centrum.
ITC’s board approved the demerger of ITC Hotels in August. Under the terms of the demerger, shareholders will get one share of the hotel business for every 10 shares held in ITC. The new entity will be listed in about 13 months.
Raw materials
Prices of key raw materials for ITC, sugar and wheat, have increased on a (YoY) as well as on a quarter-on-quarter (QoQ) basis. Wheat prices have surged 5.4 percent and 8.1 percent on a YoY and QoQ basis, respectively, as per Prabhudas Lilladher, while sugar prices have gone up by 6 percent YoY and 3 percent QoQ in the July-to-September quarter.
The biscuit category has not seen any significant price hikes over the last six months. However, ITC’s Sunfeast Marie Light, Sunfeast Glucose, and Sunfeast’s Mom’s Magic biscuits have seen price hikes ranging from 5-15 percent.
“In the soap category, most companies took price cuts due to increasing competitive intensity. Except for Lux, other brands have taken price cuts in the range of 0-4 percent,” said BNP Paribas in a report dated September 25. Palm oil, a key ingredient in soap manufacturing, has corrected 4.2 percent YoY in Q2FY24, as per Prabhudas Lilladher.
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