ITC Ltd, the Kolkata-based diversified conglomerate and India’s largest cigarette manufacturer, is slated to announce its September quarter results (Q2FY22) later in the day.
Experts seem to have quite a divided opinion about the growth of the company and expect the standalone revenue to grow by about 10 percent-14 percent on a year-on-year (YOY) basis from Rs 11,976 crore reported in the same quarter previous year. They expect profit after tax (PAT) to register a growth of about 6 percent-12 percent from Rs. 3,232 crore reported last year.
Analysts expect the cigarette volumes to grow by ~10 percent YOY which coupled with price rise will add to the revenue growth.
Motilal Oswal expects a 12 percent growth in cigarette volumes and sees strong growth in the revenue of hotel business on the back of a rebound in demand. It expects YOY revenue growth of 15.5 percent and gross and EBITDA margins to remain flat at 57.5 percent and 36.4 percent, respectively. Based on this, it expects the company to report a PAT of Rs 3,810 crore with YOY growth of 17.8 percent.
Analysts at Kotak Institutional Equities have a more conservative approach this quarter and expect revenue to grow by 7 percent on a YoY basis, and witness a marginal decline of 1 percent on a QoQ basis. They say, “We model 8.5 percent YOY growth in cigarette volumes and 11 percent YOY growth in cigarette sales aided by ~2.5 percent price/mix”. They forecast 10 percent YoY growth in cigarette EBIT.
Kotak estimates, “2 percent YOY revenue growth in FMCG segment, aided by Sunrise acquisition (modest 2 percent decline off high base excl. Sunrise acquisition); it implies 2-year revenue CAGR of 6-7 percent (excluding lifestyle, stationery, and Sunrise businesses)”.
FMCG EBIT margin is likely to decline by 120 bps YOY versus peak margin of 6.7 percent in the base quarter largely due to gross margin pressure, as per Kotak. On a sequential basis, EBIT margin is expected to improve. Hotel revenues are seen at Rs180 crore with Rs 50 crore EBIT loss. They expect the PAT to grow 5.5 percent on a YOY basis to Rs 3,433 crore.
A report by Phillip Capital suggests a high YOY growth of 23 percent for revenue on the back of improvement in cigarette sales and FMCG business. It expects gross and EBITDA margins to expand by 170 bps and 180 bps, respectively owing to favorable product mix and expect a YOY increase of 28 percent in PAT at Rs 4,114 crore.
The estimates of Axis Securities show revenue to grow by 5.4 percent on a YOY basis and decline by 2.6 percent on a quarterly basis.
“We expect underlying cigarette volumes to grow by 8 percent YOY on (13 percent decline in base quarter); FMCG to grow at a modest 5 percent on a high base, hotels to see a strong recovery backed by improved occupancy levels”, suggests Axis report. It expects EBITDA margins to be flat on a YOY basis owing to a better mix (improved contribution from cigarettes, strong recovery in hotel division) and better contribution from FMCG. PAT is expected to grow by 6.6 percent to Rs 3,445 crore aided by other income and overall operating performance.
As per analysts, key factors to watch out for include the outlook on Hotels division, cigarette demand and price trends, adoption of newly-launched products, and performance of Agri and Packaging divisions.
The stock closed at Rs 236.70 on Tuesday, up Rs 3.3 (1.41 percent) from its previous close. It has generated returns of 40 percent in the last one year, 13 percent in this financial year, 12 percent in the past 3 months, and the stock has been flat in the past one month.
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