Cigarette-hotel-to-FMCG major ITC is expected to show good performance in quarterly earnings on Tuesday as profit is likely to increase 10 percent year-on-year to Rs 2,673 crore with likely cigarette volume growth of 3-4 percent in Q2.
Volume growth may be boosted by modest price hike of 5-6 percent and higher proportion of sales from sub 65mm cigarettes (that attract lower excise duty). In Q2FY16, the company had a 15 percent decline in cigarette volume.
According to average of estimates of analysts polled by CNBC-TV18, revenue during the quarter is seen rising 9 percent to Rs 9,725 crore on yearly basis. Operating profit may grow 8 percent YoY to Rs 3,850 crore but margin may shrink 40 basis points to 39.6 percent in the quarter ended September 2016.
Analysts expect cigarette revenue growth at 7-8 percent for the quarter. It contributes 60 percent to total revenue and 90 percent to EBIT (earnings before interest and tax).
FMCG business growth is expected to be 9-10 percent but there may be a loss at EBIT level. Hotels sales growth is likely to be 2-3 percent and agri trading growth at around 10 percent (against 10 percent decline in Q2FY16).
Paperboards & packaging business is expected to show 2-3 percent growth on yearly basis.
The stock gained 35 percent since Budget day's low of Rs 179 as excise duty hike of 10 percent in Budget was below expectations.
Analysts bet on this stock due to attractive valuations. Cigarette volume growth has regained positive momentum for two quarters after 12-13 quarters of decline
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