ITC Q2 results: Profit may rise up to 6%, cigarette volumes may grow at 2.5-3.5%

ITC is likely to report 2-6.5 per cent year-on-year (YoY) growth in net profit for the September quarter on a 5-8 per cent rise in sales. Cigarette volumes are seen growing 2.5-3.5 per cent YoY, while the overall gross margin is seen expanding 18-20 basis points. All eyes would be on demand outlook on Hotels and Agri businesses, competitive intensity and raw material trends.

Analysts said while key businesses may report decent sales growth, paper business may see some contraction.

MOFSL said ITC's cigarette business showed stable volumes and pricing, with the portfolio continuing to grow, aided by improvements in product mix. It is modelling in a 3.5 per cent YoY growth in cigarette volumes for the quarter. Margins in cigarette and FMCG business expected to remain stable YoY at 59.5 per cent and 8.2 per cent, respectively. The paper segment remained weak, while the agriculture segment and hotel businesses performed well for the quarter, the brokerage said.

The brokerage sees adjusted PAT for ITC at Rs 5,120 crore, up 4.5 per cent YoY. Sales are seen at Rs 18,760 crore, up 5.5 per cent. Ebitda margin is seen at 35.8 per cent.

YES Securities pegged ITC's standalone profit at Rs 5,247 crore, up 6.5 per cent. It sees sales rising 8.1 per cent YoY at Rs 17,893 crore.

"We expect ITC’s overall topline to grow by 8.1 per cent YoY as we expect YoY volume growth in cigarette business to be 3 per cent. Other-FMCG, Hotels and Agri businesses are expected to grow at 8 per cent, 13 per cent and 15 per cent YoY respectively. While for paper, we continue to build pressure on a YoY basis," it said.

At the company level, gross margin and Ebitda margin are seen up 20 bps and 40 bps YoY to 57.5 per cent and 36.9 per cent, respectively.

Nuvama Institutional Equities sees ITC's core profit rising a mere 2 per cent YoY at Rs 5,003 crore on 7 per cent YoY sales at Rs 1,77,49 crore. It sees cigarette volumes at 2.5 per cent. It sees FMCG sales growing 7 per cent YoY, hotels' 12 per cent and agri's 5 per cent. Paper sales are seen contracting 5 per cent YoY. Overall gross margin is likely to expand 18 bps YoY to 57.5 per cent, whereas Ebitda margin may decline 137 bps YoY to
35.1 per cent, the brokerage said.

Elara Securties sees ITC's Q2 profit at Rs 5,109 crore, up 3.8 per cent. Sales are seen at Rs 17,437 crore, up 5.4 per cent.

Analysts noted that unseasonal monsoon rains disrupted supply chains, impacting sales in some regions.