ITC Q3 net may fall 3%, cigarette volume seen slipping 2-3%

Demonetisation is likely to hit cigarette volume growth of ITC in December quarter. According to CNBC-TV18 poll, ITC is likely to report net profit at Rs 2564.2 crore in October-December down 3.3 percent from Rs 2652.8 crore in corresponding quarter last fiscal. During the quarter, its total income may marginally fall 0.5 percent at Rs 9130.4 crore compared to Rs 9176.7 crore in year-ago period.

In Q3, EBITDA is seen falling 2.3 percent at Rs 3521 crore versus Rs 3605.2 crore while margins may stand at 38.6 percent versus 39.3 percent (year-on-year).

Analysts polled by CNBC-TV18 expect 2-3 percent decline in cigarette volumes. They say demonetisation impact may be limited on cigarette Volumes due to inelastic demand. The company raised prices on 30 percent of cigarette portfolio by 14-15 percent in second half of December.

However, joker in the pack could be higher market share from unorganised contraband segment due to demonetisation and channel stocking ahead of Budget announcement on February 1. Expectations are weak from FMCG and hotels busines due to demonetisation  and discretionary nature of products.