ITC Q2 Results Preview: Revenue expected to rise 7% with cigarette volume growth seen at 3% YoY; margins may fall

ITC Q2 Results Preview: ITC, the cigarette-to-hotel conglomerate, is set to announce its earnings for the second quarter of FY25 on Thursday, October 24. ITC Q2 results are expected to be marked by a modest revenue growth along with a minor uptick in profit.

ITC is estimated to report a mid-to-high single digit revenue growth during the quarter ended September 2024, on a year-on-year basis, led by strong performance in its non-cigarette FMCG, Hotels and Agri segments.

According to brokerages tracked by Livemint, ITC’s Q2 revenue is expected to grow by 7% to ₹17,540 crore from ₹16,394 crore in the year-ago quarter. The company’s net profit in Q2FY25 is expected to rise by 3% YoY to ₹5,075 crore.

“Unseasonal monsoon rains disrupted supply chains, impacting sales in some regions. However, the upcoming festive season in Q3 is expected to revive the demand,” brokerage firm Motilal Oswal said.

At the operating level, earnings before interest, tax, depreciation and amortization (EBITDA) during the June-September quarter is expected to rise 4% to ₹6,283 crore, while EBITDA margin may narrow by around 110 basis points (bps) to 35.8% YoY, due to higher employee cost, increased advertisement spends and higher other expenses.

ITC Cigarette Business

ITC’s cigarette business showed stable volumes and pricing, with the portfolio continuing to grow, aided by improvements in product mix.

Kotak Institutional Equities expects ITC cigarette volume growth during the September quarter at 3% YoY, translating into 7% growth in net cigarette sales. It expects cigarette EBIT growth at 5% YoY, with 115 bps YoY decline in EBIT margin, due to some inflation in leaf tobacco and other inputs but partly mitigated through improved mix, cost management and calibrated pricing.

Other Segments

ITC FMCG segment revenue growth is estimated at 6.5% YoY with no major sequential price adjustments and EBIT margin is likely to be at 8.4%, up 10 bps YoY. FMCG business growth was driven by atta, biscuit, and snacks portfolios.

ITC Hotels business is expected to see 10% growth and ~60 bps YoY increase in EBIT margin to 20%, according to Kotak Institutional Equities.

Agri business growth is expected to be up 15% YoY, while paperboards growth is expected to decline 4% YoY due to tough operating conditions and report an EBIT margin of 13.5%.

Phillip Capital expects some margin pressure in cigarette, FMCG business, Agribusiness and paper which will drag the operating performance.

ITC Stock Price

ITC share price has remained largely muted this year as the stock has fallen over 6% in one month. ITC stock price has inched 2% lower in three months and delivered over 12% returns in six months. ITC shares have gained over 4% year-to-date (YTD) and rallied more than 10% in the past one year period.

At 1:15 pm, ITC shares were trading 0.16% lower at ₹480.95 apiece on the BSE. 

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