ITC Q1 Results Review - Unchanged Taxation On Cigarettes To Sustain Formalisation: ICICI Securities

ICICI Securities Report

ITC Ltd.’s Q1 FY25 exhibited a resilient performance with improving cigarettes volumes growth trajectory to ~2.5% YoY, despite calibrated price hikes to navigate cost inflation. Importantly, unchanged taxation on cigarettes will likely sustain market share gain trajectory from illicit industry (~25% of overall cigarettes industry).

FMCG business displayed resilience against subdued demand conditions (+6% YoY; 10% two year compound annual growth rate) with continued improved profitability (operating leverage, input cost deflation, pricing and cost optimisation).

Hotels business witnessed another resilient quarter (+11% YoY) despite lower wedding days. Formal cigarettes industry continues to have tailwinds of:

1. stability in taxes and

2. deterrent action by enforcement agencies.

We expect the formal industry to drive volume growth (from peak levels) if these tailwinds sustain. Inflation in key input prices across business segments is expected to limit margin expansion. Maintain Add.

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