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ITC Q3 Preview | Cigarette volumes could return to pre-Covid levels, strong growth likely in FMCG & hotels

ITC Cigarette business contributed nearly 40 percent and FMCG accounted for 27 percent to total revenue in September 2021 quarter.

February 03, 2022 / 08:40 AM IST


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ITC, the second largest FMCG company in terms of market-capitalisation, is expected to deliver healthy growth in FMCG backed by strong product portfolio and hotels segment with higher mobility, while the cigarette volumes could return to pre-Covid levels in the quarter ended December 2021 on a low base of last year. The company will release earnings scorecard on February 3.

In past few days, the stock has gained nearly 10 percent, partly backed by no change in taxes on tobacco and cigrette in the Union Budget, but since the start of October 2021, it has corrected nearly 2 percent.

Overall, analysts largely expect 6-8 percent growth in revenue and flat to 5 percent year-on-year increase in profit compared to year-ago period. Cigarette volume growth could be in the range of 8-10 percent and FMCG segment may deliver around 9-12 percent growth YoY.

Cigarette business contributed nearly 40 percent and FMCG accounted for 27 percent to total revenue in September 2021 quarter.

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"Cigarette business revenue is expected to increase by 9-10 percent with volume expected to reach 100 percent of pre-COVID level. Non-cigarette FMCG business is expected to grow by 9 percent, aided by a strong product portfolio. Hotel business is expected to deliver strong growth due to higher mobility," said Sharekhan which sees 3 percent growth in adjusted profit and 8 percent in revenue for December 2021 quarter.

Remember cigarette volumes fell 8 percent YoY in December 2020 quarter dented by Covid crisis. But overall the company has been increasing its focus on FMCG segment that cigarette, which has gradually been reflecting in its numbers.

Kotak Institutional Equities expects 9 percent YoY growth in cigarette volumes and 10.5 percent YoY growth in cigarette sales aided by 1.5 percent price-mix. "We forecast 11.4 percent YoY growth in Cigarette EBIT."

In the FMCG segment, "We estimate 12 percent YoY revenue growth aided by Sunrise acquisition (up 7 percent YoY organic revenue growth ex-Sunrise)," said Kotak which sees 6.6 percent YoY growth in revenue and 4.5 percent growth in profit for Q3FY22.

ITC had completed acquisition of Sunrise, a spice manufacturer, in July 2020, for Rs 2,150 crore.

Among other business segments, agri & paperboard businesses is likely to witness 16.5 percent & 23.3 percent sales growth, respectively, said ICICI Direct which estimates hotels business to register 41.3 percent revenue growth with normalisation of occupancies to the pre-Covid levels. However, ARRs (average room rate) are still below pre-Covid levels.

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first published: Feb 3, 2022 08:40 am
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