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Published: July 29, 2024
Updated: July 29, 2024

ITC Q1 Earnings Preview: Moderate Profit Growth with Stable Cigarette Volumes Expected

Overview of Expected Results

ITC Ltd is anticipated to release a modest set of quarterly results for Q1, showing a net profit increase between 2-6% year-on-year (YoY) with a 6-7% rise in sales. The cigarette volume growth is expected to be within the 2-3% range, though the operating profit margin may decline by up to 150 basis points compared to the previous year.

Expected Financial Performance

For the June quarter, net profit is projected to rise by 2.2% YoY to approximately Rs 5,012 crore, up from Rs 4,903 crore in the same period last year. Net sales are expected to increase by 6.8% YoY to around Rs 16,907 crore, up from Rs 15,828 crore in the prior year. The operating margin is anticipated to be 38%, a decrease of 146 basis points YoY.

Cigarette business revenues are predicted to grow by 7% YoY, with a volume growth of 2.5% YoY. The non-cigarette FMCG business is expected to grow by 9% YoY. The hotel business and paper business are both expected to see 9% and 2% YoY growth respectively, while the agri-business may decline by 2% YoY.

Projections for Revenue and Profit

Q1 profit is estimated to be around Rs 5,047.60 crore, marking a 3% YoY increase. Revenue is expected to be approximately Rs 17,999 crore. The Ebitda is forecasted to rise by 2.5% to around Rs 6,408 crore, with the Ebitda margin at 35.6%, down by 151 basis points.

Analysis of Business Segments

A higher profit figure is seen at approximately Rs 5,426.30 crore, up 6.3% YoY. Sales are projected at around Rs 18,362 crore. There is an anticipation of a 3% YoY volume growth in the cigarettes business for the first quarter of FY25. Despite the rural recovery not being evident, government initiatives are expected to drive consumption.

Insights on Margins and Future Outlook

ITC has faced recent challenges with tepid volume growth in cigarettes and margin pressure in both the paper and agri segments. Margins are unlikely to improve due to higher leaf tobacco prices.

Margins in the Agri and Paper sectors are expected to begin improving from Q3 FY25 onwards, with FMCG sustaining steady growth and margin expansion.

ITC's Q1 results are expected to show moderate profit growth and stable cigarette volumes. While some challenges persist, particularly in the agri and paper sectors, gradual improvements are anticipated in the coming quarters.