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ITC Q3 profit may grow over 18% driven by lower corporate tax

Cigarette, FMCG others and paper segments could report around 6-8 percent growth in revenue, while cigarette volume growth could be in the range of 2.5-3.5 percent YoY.

January 31, 2020 / 08:11 AM IST
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Cigarette-to-FMCG major ITC on January 31 is expected to report double-digit growth in Q3FY20 profit driven largely by a lower corporate tax.

According to brokerages, the bottom line is seen rising more than 18 percent YoY, with revenue growth in the range of 6-7 percent for the quarter ended December 2019.

The top-line growth is likely to be driven by all segments, with hotels (over 15 percent YoY) and agri (over 10 percent YoY) businesses showing double-digit growth but impacted by low-demand sentiment and liquidity crunch in the market.

Cigarette, FMCG and paper segments could report around 6-8 percent revenue growth, while the cigarette segment could be in the 2.5-3.5 percent range YoY.

"We model 2.5 percent YoY increase in cigarette volumes and 3.5 percent increase in realisation (portfolio-level). We forecast 8.8 percent YoY growth in cigarette EBIT," said Kotak Institutional Equities, which expects 18.4 percent YoY growth in profit and 7.2 percent in revenue YoY.


The brokerage expects 6.5 percent, 17 percent and 10 percent YoY growth in FMCG, hotels and agri-business, respectively.

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PhillipCapital, which expects 20 percent growth in profit and 5.5 percent in revenue, feels cigarette volume growth (up 3 percent YoY) could taper down due to unfavourable base, loss of market share to GPI and VST, price hikes in economy segment and rural slowdown.

At operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) may see 7-12 percent growth YoY and margin expansion could be more than 100bps YoY in Q3FY20.

"EBITDA margin is expected to be up by 134 bps YoY to 39.9 percent on account of improved product mix, stepped up investments and expansion in newer categories," said Narnolia which sees EBITDA growth of 10 percent YoY.

"Gross margin shall see healthy improvement (up 42bps YoY) due to run-down of high-cost inventory and import substitution of imported cigarette. EBITDA margin (up 117bps YoY) could see slight improvement on price hikes in the value segment, improving profitability from FMCG business, and significant improvement in cyclical and capex-intensive (hotels, paper) on industry upturn," said PhillipCapital which sees EBITDA growth of 8.7 percent YoY.

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Moneycontrol News
first published: Jan 31, 2020 08:11 am
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