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Cigarette-hotel-to-FMCG major ITC is expected to report stable earnings for the quarter ended September 2018 on October 26. Profit growth is likely to be in the range of 6-17 percent YoY, driven by strong margin performance.
"With improving margins in the FMCG business and higher realisations in the cigarette business, net profit is likely to grow 17.2 percent YoY," ICICI Securities said.
Prabhudas Lilladher estimated 13.1 percent PAT growth on cigarette volumes and improved profitability in FMCG and hotels segments while Kotak Securities expects bottomline to grow 6.5 percent YoY.
Topline
Revenue growth for the quarter is expected to be moderate to good compared to year-ago.
ICICI Securities expects ITC to post 9.1 percent sales growth, ably supported by strong growth from cigarettes, FMCG and paper segments. Prabhudas Lilladher also sees 9.1 percent growth while Motilal Oswal expects 8 percent sales growth.
But Kotak Securities sees 0.7 percent rise in revenue YoY. "We bake in modest acceleration in YoY growth for other FMCG, hotels and paperboards segments for the quarter," it said.
Cigarettes
Kotak Securities expects 2.5 percent increase in cigarette volumes YoY, but other brokerages see 6-7 percent growth in volumes on a low base. In Q2FY18, volumes degrew by around 6 percent YoY.
Cigarette operational numbers are expected to be better. "There could be 7.5 percent increase in gross realisations (portfolio-level). We forecast 8.8 percent YoY growth in cigarette EBIT," Kotak said.
Motilal Oswal expects cigarette EBIT to grow 12 percent YoY while Prabhudas Lilladher sees the same at 6.6 percent for the quarter.
Axis Capital said it modelled 11 percent revenue growth in core cigarette business led by 7 percent volume growth (low base) and around 4 percent price/mix-led growth (carry-forward pricing), which is likely to drive around 10 percent EBIT growth.
Other Segments
FMCG is likely to post double-digit growth while hotels and paper segments may register good growth.
"FMCG business is likely to post low double-digit growth and solid jump in EBIT (low base, margin improvement). Among other businesses, hotels is likely to post good revenue/EBITDA growth," Axis Capital said.
ICICI Securities as well as Motilal Oswal said FMCG segment is likely to post 16 percent growth in sales on the back of new launches during the quarter. The paper business is likely to post 10 percent growth in sales, according to ICICI.
Operational Numbers
Operational numbers are expected to grow in double digits for the quarter ended September 2018 with EBITDA (earnings before interest, tax, depreciation and amortisation) rising 13-18 percent and likely margin expansion of 130-250 bps YoY.
ICICI Securities expects EBITDA growth at 17.8 percent while Prabhudas Lilladher as well as Axis Capital expects 13 percent growth each.
"We have factored in EBITDA growth of 15.4 percent YoY and EBITDA margin expansion of 250bp YoY to 39 percent in Q2FY19," Motilal Oswal said.
Key issues to watch out for
> Trends in cigarette volumes
> Demand outlook for FMCG categories and segmental profitability
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