Cigarette, the key business which contributes more than 40 percent to total revenue, is expected to deliver 4-6 percent growth in volumes on a low base of 5 percent drop during Q3FY18, according to brokerages
Cigarette-to-hospitality major ITC is likely to report strong earnings growth for the quarter-ended December 2018, driven by higher realisation in cigarette and performance improvement in other FMCG and hotels businesses.
The stock rallied 7 percent in 2018 but fell 5 percent during the third quarter. The overall gain was a consequence of no change in tax on cigarettes in last several GST Council meetings.
The company is scheduled to declare its Q3 earnings report on January 23.
According to brokerages, profit is expected to show an average 12 percent growth year-on-year.
ICICI Securities, which expects highest profit growth among brokerages considered for this copy, said with improving margins in the FMCG business and higher realisations in the cigarette business, net profit (adjusted for one-offs in the base quarter) is likely to grow 13.8 percent YoY.
Prabhudas Lilladher estimates 11.2 percent YoY increase in PAT on cigarette volumes and improved profitability in FMCG and hotels.
Largely, brokerages expect revenue growth in the range of 9-12 percent for the quarter ended December 2018. Only Sharekhan estimates more than 15 percent growth in topline, driven by growth across segments barring paper business.
"ITC is expected to post 11.4 percent YoY sales growth during the quarter on the back of robust growth from the cigarettes & FMCG segments," ICICI Securities said while Motilal Oswal expects net sales to grow 9 percent YoY.
Cigarette, the key business which contributes more than 40 percent to total revenue, is expected to deliver 4-6 percent growth in volumes on a low base of 5 percent drop during Q3FY18, according to brokerages.
Antique Stock Broking and Edelweiss Securities expect 6 percent volume growth in cigarette business whereas Motilal Oswal and ICICI Securities estimate at 5 percent each. Prabhudas Lilladher and Reliance Securities see 5 percent growth.
Prabhudas Lilladher said cigarette margins are expected to improve marginally on the benefit of price increase taken in Q2 in RST filters whereas Edelweiss Securities said no change in GST rates also leads to no pricing imbalances in the system.
Among others, FMCG, hotels and agri-businesses are expected to show double-digit growth but paper segment growth is likely to remain subdued.
Antique Stock Broking expects continued double-digit growth in other FMCG (non-cigarettes), led by series of dairy product launch, but it will weigh on margin due to high advertising & promotion.
"In FMCG business, we expect around 11 percent revenue growth on a base of 11.8 percent (Q2FY19 saw revenue growth of 12.7 percent on a base of 5 percent)," said Edelweiss Securities that expects hotels business to clock revenue growth of around 10 percent on a base of 9.2 percent and agri-business to clock growth of around 10 percent YoY on a base of negative 8.4 percent growth.
Paper business is expected to be subdued and may record 1 percent revenue growth on a base of -4.2 percent, according to Edelweiss.
Key issues to watch out for
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