ITC to share Q1 results today. Profit to growth in double-digits, margins to expand

ITC is expected to report a double-digit growth in profit despite tepid sales growth. A high growth in hotels business is likely but agri business may see a decline on a high base amid continued ban of wheat exports. Better sales mix and falling raw material prices may, nonetheless, aid margins. All eyes would be on further commentary on hotels business and any corporate action in IT business.

Sharekhan expects ITC to report 11.3 per cent YoY rise in net profit at Rs 4,640 crore compared with Rs 4,169 crore in the same quarter last year. It sees sales for the quarter rising 2.5 per cent YoY to Rs 17,729 crore from Rs 17,290 crore in the corresponding quarter last year. Operating profit margin is seen expanding 266 basis points to 35.3 per cent from 32.7 per cent YoY, thanks to softening of raw material prices.

"Cigarette business revenues are expected to be up 13 per cent YoY aided by 9-10 per cent volume growth, while non-cigarette FMCG business is expected to grow by 16 per cent YoY. Hotel business is expected to grow 30 per cent YoY aided by sustained strong demand. Paper business is expected to grow 15 per cent YoY, while Agri business is likely to decline 25 per cent YoY.

Kotak Institutional Equities sees profit rising 14.9 per cent YoY to Rs 4,791.80 crore on a 4.6 per cent YoY rise in sales at Rs 18,087.10 crore. Ebitda margin is seen expanding 205 basis points.

"We estimate 9.3 per cent YoY growth in cigarette volumes, translating into 12 per cent YoY growth in cigarette sales. Our estimate imply fairly steady growth (4-year CAGR) trends in cigarette volumes. We expect cigarette EBIT margin to contract by 50 bps QoQ (flat YoY) owing to some inflation in tobacco prices. In the FMCG segment, we estimate 13 per cent YoY revenue growth and 140 bps QoQ contraction in EBIT margin to 8.5 per cent. We expect 15 per cent growth in hotels (EBIT margin of 21 per cent). Agri business is expected to decline by 23 per cent YoY (on a high base and continued impact of ban on wheat exports) while paperboards could be flat YoY (muted demand and price correction)," it said.

Phillip Capital, in fact, sees sales for ITC falling 3 per cent YoY to Rs 16,624.50 crore. It sees profit at Rs 4,712 crore, up 13 per cent YoY.

Mid-single digit cigarette volume growth on back of market share gains, focus on innovation and return to normalcy.

FMCG business growth may moderate as pricing anniversaries. Agri and paper to see significant correction in overall pricing. Ebitda margin to see 534 basis points expansion owing to improved sales mix, Phillip Capital observed.

Also read: Gift Nifty signals a tepid start: ITC, Vodafone Idea Q1 results; stocks in F&O ban; TVS Supply IPO & more

Also read: Stocks in news: ITC, Adani Ports, Tata Steel, Nykaa, Vodafone Idea, HDFC Bank & CarTrade