Earnings Outlook
Consumer goods business to drive ITC's Apr-Jun PAT
This story was originally published at 23:15 IST on 19 July 2024
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By Avishek Rakshit
KOLKATA – An overall uptick in the performance of its consumer goods and hotels businesses is expected to help ITC Ltd report a 4.6% on-year growth in its net profit at 51.3 bln rupees during the quarter ended June, according to the average of estimates from 11 brokerages. Its revenue is expected to grow nearly 7% on year to 169.3 bln rupees.
Sequentially, the soap-to-cigarette conglomerate is expected to register a net profit as well as revenue growth of 2.1% each. The company posted a net profit of over 49 bln rupees in the year-ago period, and 50.2 bln rupees in Jan-Mar. Its revenues were at 158.3 bln rupees in the year-ago period, and 165.8 bln rupees in the March quarter.
Amongst the brokerages, Motilal Oswal Financial Services Ltd had the highest revenue and net profit estimate for ITC at 183.6 bln rupees and 54.3 bln rupees, respectively. Nirmal Bang Equities Pvt Ltd had the lowest revenue and net profit estimates of 162.9 bln rupees and 49.8 bln rupees, respectively. ITC will declare its Apr-Jun earnings on Aug 1.
The revenue growth, according to sector analysts, is likely to be driven by the non-cigarette consumer goods business, and volume growth in the cigarette business. Although cigarette sales account for around 47% of the company's annual revenues, it accounts for over 70% of the company’s annual profits. Although ITC diversified into several sectors like agricultural trading, paper, foods, stationery, hotels, among others, the company's performance in cigarette sales is the key determinant of its financial results.
In a report, Kotak Institutional Equities said that ITC's cigarette sales are expected to grow 2% in terms of volume. An improvement in the sales mix, together with volume growth, may translate into a 7% revenue growth for ITC from cigarette sales, the brokerage said.
Motilal Oswal Financial Services estimates a 3% volume growth in cigarette sales, and Nuvama Wealth Management Ltd estimated it to be in the range of 2-3%. However, brokerage KR Choksey Research estimated a modest 1% volume growth in cigarette sales.
On the non-cigarette consumer goods front, a majority of the brokerages estimated a 7-7.5% revenue growth. Although rural consumption remained muted, Motilal Oswal Financial Services said government initiatives could have driven consumption which benefitted ITC.
Nuvama Wealth Management said ITC's hotels business is likely to grow 8% owing to an uptick in travel and tourism and hosting of events and conferences. ITC's hotels division will be hived off into a new subsidiary, with ITC being the largest shareholder. ITC has received approval for the demerger from the National Company Law Tribunal and the Competition Commission of India.
ITC is expected to report earnings before interest, tax, depreciation, and amortisation, or EBITDA, of 65.2 bln rupees, according to the average of estimates from 10 brokerages. Its EBITDA is expected to be in the range of 61.9-70.7 bln rupees.
Nuvama Wealth Management said that the overall gross margin, that is inclusive of all the business verticals of ITC, is likely to expand by 103 basis points to 60.5%, but the EBITDA margin shall decrease by 79 bps to 38.7%. KR Choksey Research said that EBITDA margins could contract by 226 basis points, due to the continued pressure on the company's paperboards business which is facing subdued demand due to weak global consumption and availability of cheaper imported alternatives in India.
Today, shares of ITC closed 0.9% higher at 474.6 rupees on the National Stock Exchange.
Following are the Apr-Jun earnings estimates of ITC Ltd based on reports compiled by Informist from 11 brokerage houses:
Broker Name | Net Sales (in million rupees) | Net Profit (in million rupees) | EBITDA (in million rupees) |
Axis Securities Ltd | 1,65,380.00 | 49,820.00 | 63,490.00 |
Emkay Global Financial Services Ltd | 1,70,215.00 | 52,070.00 | 66,349.00 |
HDFC Securities Ltd | 1,64,360.00 | 52,018.00 | 65,078.00 |
Kotak Institutional Equities | 1,67,133.00 | 50,286.00 | 63,331.00 |
KR Choksey Research | 1,81,218.00 | 51,492.00 | 66,326.00 |
Motilal Oswal Financial Services Ltd | 1,83,622.00 | 54,263.00 | 70,667.00 |
Nirmal Bang Equities Pvt Ltd | 1,62,860.00 | 49,092.00 | 61,887.00 |
Nuvama Wealth Management Ltd | 1,66,324.00 | 52,319.00 | 64,367.00 |
Prabhudas Lilladher Pvt Ltd | 1,66,988.00 | 51,754.00 | 66,125.00 |
Sharekhan Ltd | 1,69,070.00 | 50,120.00 |
|
YES Securities (India) Ltd | 1,65,014.00 | 50,656.00 | 64,311.00 |
Average | 1,69,289.45 | 51,262.73 | 65,193.10 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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