ITC Q4 preview | Net profit to grow 14%, cigarette volume growth pegged at 13%

Apart from cigarettes, FMCG and hotels businesses are also set to fire. Brokerages expect 15 percent revenue growth for FMCG and 72 percent for hotels on a low Omicron-impacted base

Cigarette-to-soap maker ITC is expected to report a 14 percent year-on-year jump in standalone consolidated net profit at Rs 4,764.4 crore, when it announces its March quarter results on May 18.

As per a poll of brokerages, topline (excluding excise duty) is expected to grow 4 percent year-on-year to Rs 16,152 crore on the back of 13 percent cigarette volume growth. More than a third of ITC‘s overall revenue comes from cigarettes.

On the operating front, overall EBITDA (earnings before interest, taxes, depreciation and amortization) margins are expected to remain flat sequentially at 38 percent, but expand 400 basis points year-on-year.

One basis point is one-hundredth of a percentage point.

Apart from cigarettes, FMCG and hotel businesses are also set to fire. Brokerages expect 15 percent revenue growth for FMCG and 72 percent for hotels on a low Omicron-impacted base.

Meanwhile, paperboards and agri businesses might underperform. The company’s agri business has taken a hit due to restrictions imposed on wheat and rice exports by the government during the year.

“We forecast moderation/normalization in paperboards margin to 24.2 percent, down 210 basis points sequentially and 18.8 percent year-on-year decline in agri sales (versus 37 percent decline in previous quarter),” according to analysts at Kotak Institutional Equities.

Like every other quarter, investors will be keenly eyeing any announcement on the demerger of ITC’s hotel business. Management commentary on raw material prices, agri business outlook and dividend announcement are also key monitorables.

Earlier in February this year, ITC distributed an interim dividend of Rs 6 per share to its investors. Back in 2022, the company paid dividend to its shareholders on two occasions – Rs 6.25 per share in May and Rs 5.25 per share in February.

Most brokerages, including JP Morgan, Nomura, Jefferies, Motilal Oswal and ICICI Securities, currently have a ‘buy’ rating on the stock, with target prices in the range of Rs 450-Rs 475.

On May 17, the stock ended at Rs 428.05 on the NSE, up 0.97 percent from the previous close.

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