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ITC Q4 results today: Analysts see flattish quarter amid dip in margins

ITC Q4 results: ITC may report a flattish quarter with steady cigarette volume, weak paper volumes, offset by healthy hospitality sales revenue

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ITC

Nikita Vashisht New Delhi
ITC Q4 results: ITC stock price was trading with a positive bias on Thursday, ahead of the company's January to March quarter (Q4) earnings for financial year 2023-24 (FY24). ITC stock price gained 0.5 per cent intraday, and was quoting 0.15 per cent higher at Rs 440 apiece on the BSE at 9:55 AM. By comparison, the S&P BSE Sensex was up 0.33 per cent.

According to analysts, ITC may report a flattish quarter with steady cigarette volume, weak paper volumes, offset by healthy hospitality sales revenue. They also expect margins to decline on a year-on-year (Y-o-Y) basis for the conglomerate.

On the bourses, the stock price of ITC has underperformed the benchmark by rising just 2.5 per cent as against a 20 percent rally in the Sensex index. On a year-to-date basis, the stock price of ITC has slipped 5 per cent thus far in calendar year 2024, relative to a 2.7-per cent gain in the 30-stock benchmark.

Here's a brief on what key brokerages expect from ITC Q4FY24 results today:

Motilal Oswal Financial Services
The domestic brokerage pegs ITC's Q4FY24 adjusted net profit at Rs 5,121.6 crore as against an adjusted PAT of Rs 5,119.8 crore Y-o-Y. On a sequential basis, it would be slightly higher than Rs 5,011.6 crore reported in Q3FY24.

MOFSL sees net sales at Rs 18,422.1 crore, up 4.5 per cent Y-o-Y from Rs 17,634.9 crore.

“We expect flat Y-o-Y volume growth in the Cigarettes business. On the margin front, we expect gross margin to decline 160bp Y-o-Y and Ebitda margin to fall 160bp Y-o-Y. Margins in the FMCG business are expected to decrease due to the PLI benefit in the base quarter,” it said in a pre-results report.

Outlook on the agri and paper and packaging businesses will be among the key monitorable, it added.

Elara Capital
This brokerage pegs ITC’s Q4FY24 reported net profit at Rs 5,320.9 crore as against a reported net profit of Rs 5,014 crore Y-o-Y and Rs 5,572 crore in Q3FY24. This would be a 6 per cent Y-o-Y gain but 4.5 per cent Q-o-Q decline.

Operationally, reported revenue is seen at Rs 16,640 crore, up 1.5 per cent on year/1 per cent on quarter from Rs 16,398 crore and Rs 16,483.3 crore, respectively.

Ebitda (earnings before interest, tax, depreciation, and amortisation), meanwhile, is expected to fall around 2 per cent Y-o-Y, but rise 1.3 per cent Q-o-Q to Rs 6,101 crore. It was Rs 6,209.4 crore in Q4FY23, and Rs 6,024.3 crore in Q3FY24.

Nuvama Institutional Equities
Analysts at Nuvama IE expect revenue/Ebitda to dip 1 per cent (Rs 16,232.8 crore) / 0.9 per cent (Rs 6,152.2 crore) Y-o-Y, but core profit after tax is anticipated to grow 3 per cent Y-o-Y to Rs 5,240.8 crore.

Segment wise, it expects cigarette sales to grow 3.4 per cent Y-o-Y (with flat volumes), with four-year CAGR in cigarette volumes staying healthy at 3–4 per cent.

Q4FY24 had a normal base unlike Q3FY24. In Q3FY24, cigarette volumes had dipped 2 per cent Y-o-Y on a high base. The FMCG others segment, meanwhile, shall grow 6 per cent Y-o-Y led by pricing with volume growth in low single digits Y-o-Y. The brokerage expects Ebit margins for FMCG Others to stay flat Q-o-Q, but likely to dip Y-o-Y as the base quarter had high fiscal incentives, which were bunched up.

“Hotel business continues to do well. We expect sales to grow 16 per cent Y-o-Y. Agri sales shall clock a 13 per cent dip Y-o-Y due to restrictions on exports of rice , wheat, etc with margins similar on a Q-o-Q basis. Paper sales shall also continue to be under pressure and are likely to dip 6 per cent Y-o-Y with flat margins Q-o-Q but down Y-o-Y,” the brokerage said in a results preview report.

Kotak Institutional Equities
The brokerage said it expects cigarette volume growth to improve to flat Y-o-Y (versus degrowth of 2 per cent/4.5 per cent/8 per cent in Q3/Q2/Q1), translating into 4.7 per cent/3.8 per cent Y-o-Y growth in gross/net cigarette sales (versus 3.6 per cent/2.3 per cent gross/net growth in Q3). It expects cigarette Ebit growth of 3.5 per cent, marginally below net revenue growth.

That apart, in the FMCG segment, Kotak Institutional Equities estimates 7.7 pet cent Y-o-Y revenue growth with no major sequential price adjustments, and 130 bps Q-o-Q expansion in Ebit margin to 9.6 per cent (amid benign raw material prices and usual seasonality). The brokerage said the Ebit margin of 10.1 per cent in the March 2023 quarter had some benefit of PLI.

“We expect robust 16 per cent growth in hotels (Ebit margin of 27.3 per cent, steady Q-o-Q). Agri business is expected to decline by 13 per cent Y-o-Y while paperboards could decline by 6 per cent Y-o-Y (weak demand and price correction; expect fourth consecutive quarter of revenue decline) and report Ebit margin of 14.1 per cent (versus 14.2 per cent/20 per cent in Q3FY24/Q4FY23),” it said.

In absolute terms, consolidated net sales are pegged at Rs 16,857.6 crore, Ebitda at Rs 6,199.6 crore, Ebit at Rs 5,785.9 crore, reported net profit at Rs 5,051.9 crore, and Ebitda margin at 36.8 per cent.

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First Published: May 23 2024 | 11:02 AM IST

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