ITC Q1 Results Preview: Steady Growth Expected Despite Challenge In Agriculture, Paper Sectors

ITC Ltd. is expected to report a 9.4% increase in revenue, reaching Rs 17,158 crore in the quarter ended June, compared to Rs 15,676 crore in the same period last year. Operating profit is anticipated to rise by 4% to Rs 6,497 crore, though margins are projected to remain flat at 38%. Net profit is forecasted to grow by 5.2%, amounting to Rs 5,160 crore, up from Rs 4,903 crore in the corresponding quarter of the previous year.

Key factors to watch include mid-single-digit volume growth in the cigarettes segment, high-single-digit growth in FMCG volumes, and the outlook on the agriculture and paper businesses, particularly in light of raw material pricing trends.

Demand outlook, competitive intensity, and the performance of the hotels and agribusinesses will also be crucial monitorables.

Cigarette volumes may grow around 3% YoY with a slight improvement in gross margins, though rural recovery appears limited, Motilal Oswal Financial Services Ltd. said.

Axis Securities Ltd. forecasts 6% revenue growth, driven by strong performance in cigarettes, FMCG, and hotels, albeit with a decline in Ebitda margins due to challenges in the agri and paperboard businesses.

• Revenue is expected to rise 9.4% to Rs 17,158 crore versus Rs 15,676 crore.

• Ebitda is expected to rise 4% to Rs 6,497 crore versus Rs 6,250 crore.

• Margins expected to be flat at 38% versus 40% in the year-ago period.

• Net profit is expected to rise 5.2% to Rs 5,160 crore versus Rs 4,903 crore.

Here is what brokerages expect for ITC in the first quarter of fiscal 2025.

• Expects ~3% YoY volume growth in the cigarette business.

• Expects marginal improvement in gross margin of 70 bp YoY.

• Rural recovery was not much visible during the period, but there was an there was an expectation of government initiatives to drive consumption.

• Outlook on the agri, paper and packaging businesses is a key monitorable.

• ITC is expected to see ~3% volume growth in the cigarette business, while sales are estimated to see 8% growth and a favourable mix.

• Expects revenue growth of 3.1%, led by FMCG and hotel businesses.

• Estimates 9.9% growth in FMCG business, largely led by volumes.

• Paper and paperboard businesses remain under pressure due to subdued demand and higher competition from China. Agri business is expected to witness 17% de-growth YoY, mainly due to government restrictions on exports of major commodities (rice and wheat).

• Operating margins to decline by 93 bps in Q1. Paperboard margins would continue to remain under pressure due to the low price of imported paper.

• Monitorables include the success of new products, paper business margins, and trends in packaged foods.

• Expects 6% revenue growth on account of estimated cigarette segment growth of 6% YoY (2% volume), FMCG growth at 7% YoY, and hotels at 8% YoY. Papers and agriculture are expected to remain flat.

• Ebitda margins are expected to decline YoY on account of subdued performance in agri and paperboard business.

• Key monitorables include demand outlook on rural versus urban, competitive intensity, RM trends, hotels, and agri business outlook.