ITC to report Q3 numbers today: Profit could decline on weak cigarette business
The ITC stock has rallied 12 percent in February so far, especially after the Budget as government didn't propose any higher taxes on cigarettes
February 11, 2021 / 07:30 AM IST
Cigarette-FMCG-hotel-to-paper major ITC is likely to report 8-9 percent year-on-year decline in profit for the quarter ended December 2020 dented by weak cigarette business.
Revenue from operations may also be reported muted in Q3FY21 as all segments, barring other FMCG, may see tepid performance. Cigarette business volumes could fall 6-8 percent YoY with its EBIT declining 7-10 percent compared to the corresponding period, though month-on-month there may be improvement, while FMCG, other businesses could remain strong with double-digit growth for the quarter.
The stock has rallied 12 percent in February so far, especially after the Budget as government didn't propose any higher taxes on cigarettes, which contribute 40-45 percent to the company's revenue.
The company will declare its December quarter earnings on February 11, along with an interim dividend for the current financial year.
"We model 8 percent decline in cigarette volumes, 1 percent growth in cigarette segmental sales (gross) led by 9 percent price/mix (net sales decline would be marginally higher than volume decline). We forecast 10 percent YoY decline in cigarette EBIT," said Kotak Institutional Equities which sees 9 percent YoY decline in profit and 3.3 percent fall in revenue.
In the FMCG segment, the brokerage expects health and hygiene portfolio growth to moderate a tad and discretionary portfolio recovery to continue. "We model 10 percent and 117 percent YoY growth in FMCG revenues and EBIT respectively. We model 320 bps YoY expansion in FMCG PBIT margin."
According to Emkay Global, FMCG momentum may continue with sales growth of 15 percent, similar to Q2FY21 and a 156 percent rise in EBIT. "We estimate for other divisions to record flat sales and EBIT decline of 24 percent," said the brokerage which feels profit could decline 8 percent YoY and revenue could increase 1 percent YoY in Q3FY21.