Reviews

Published: Aug 21, 2023
Updated: Aug 21, 2023

ITC's Winning Streak Continues: Strong Q1 Results and Hotel Business Demerger Spark Optimism

The future looks brighter than ever for ITC as the conglomerate posts impressive Q1 results for FY24 and secures approval for the demerger of its hotel business. This strategic move has caught the attention of analysts, igniting a wave of positive outlooks for the company's growth trajectory and stock performance.

Upbeat Target Revisions:

Market watchers are upping the ante on ITC's potential. The conglomerate's standout performance in Q1 and the green signal for the hotel business demerger have led to a flurry of positive adjustments. These optimistic changes speak volumes about the confidence analysts have in ITC's future prospects.

Thriving Across Divisions:

ITC's exceptional Q1 performance has exceeded expectations across multiple fronts. Notably, the cigarette and FMCG segments have stood out. The cigarette business boasted an impressive 8.5% YoY volume growth, a feat attributed to stable tax conditions and effective measures to combat illicit trade. This growth has translated into an 11% YoY increase in the cigarette business' EBIT, underlining its promising trajectory.

Similarly, the FMCG sector has made its mark. With a remarkable 16% surge in sales, both urban and rural markets have been captivated by ITC's offerings. This expansion can be traced back to enhanced distribution and innovative product lines. Not to be overlooked, the FMCG segment's EBIT margin stood at 8.3%, defying expectations and showcasing a substantial YoY improvement of 375 basis points.

Cheering for ITC's Hotels Business:

The spotlight is shining brightly on ITC's hotel business, especially after the game-changing demerger announcement. The decision to spin off the hotel arm has not only injected clarity but has also signalled ITC's dedication to its shareholders' interests. With a 1:10 share entitlement ratio, shareholders are set to receive shares in the new hotel entity for every 10 ITC shares they hold.

Hotels Business on the Rise:

Market watchers are eagerly embracing the exciting prospects of ITC's hotels business. The addition of six new hotels in F1Q speaks volumes about the positive momentum this segment is experiencing. Bolstered by a pipeline of management contracts, ITC's hotels are expected to make waves as additional properties open their doors in the coming quarters. Impressively, the hotel segment's EBIT margin surged to 21.9%, surpassing expectations and reflecting a 165 basis point YoY increase. This growth is attributed to elevated RevPAR, captivating F&B offerings, and a keen focus on strategic cost management.

Anticipating Upcoming Momentum:

As the journey continues, analysts predict that ITC's hotels business will gather even more momentum from Q2 onward. With major events like the Cricket World Cup, a robust festive season, and an upswing in foreign inbound travel during H2, the horizon looks promising for ITC's hotels segment.

ITC's impressive Q1 performance and the strategic hotel business demerger have sent ripples of positivity through the market. The company's success across various sectors and the untapped potential of its hotels business make ITC a name to watch closely. As it navigates through a strategic expansion, ITC's trajectory promises growth and exciting opportunities on the horizon.