ITC Q2 Results Review - Growth Sustains; Margin Stressed: ICICI Securities

ICICI Securities Report

ITC Ltd.’s Q2 FY25 exhibited a resilient revenue growth performance with a stable performance across segments with cigarettes volumes growth trajectory stable at ~3% 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 (+5% YoY; 8% two year CAGR) with margins moderating due to commodity inflation.

Hotels business witnessed another resilient quarter (+12% YoY). 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. Margins were under pressure due to commodity inflation across business segments and inferior mix (higher share of agri business). Maintain Add.

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