ITC Q1 Results Review - Resilient Cigarette, But Muted FMCG Performance: Motilal Oswal

Motilal Oswal Report

ITC Ltd. delivered a consolidated revenue growth of 8% YoY (in line) in Q1 FY25. Gross cigarette revenue grew 6% YoY led by volume growth of ~3% YoY (in line), mix improvement, and price hikes. The premium cigarette segment continued to outperform; while the value segment sustained weakness.

FMCG segments delivered 6% revenue growth, adversely impacted by the severe heat waves and slow packaged food growth. The margins were slightly hurt by rising competitive pressure (from local and regional players), increased commodity prices, and weak demand. Ebit margin stood at 8.7%. (estimate: 9.0%) in Q1 FY25.

The paper business continued to face challenges from demand issues, competition from China, lower pulp prices, and higher input costs, resulting in weak revenue and margins. Recovery is anticipated with improvements in domestic demand and a reduction in wood prices following the arrival of new crops.

The agri business exhibited improvement during the quarter; however, stock limits on wheat and restrictions on exports continued to hurt the business.

Hotels sustained healthy performance, though margins were hit by operating deleverage.

We reiterate our Buy rating on ITC with an SOTP-based target price of Rs 575 (premised on 30 times June-26E price/earning).

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