ITC results preview: ITC likely to report mid-to-high single digit revenue growth for Q2

ITC, the cigarette-to-soap maker, is expected to report a mid-to-high single digit year-on-year revenue growth for the second quarter of this fiscal, driven by strong performance in its non-cigarette FMCG, Hotels and Agri segments, which are likely to register good growth during the period.

However, the overall Ebitda margin may witness a y-o-y decline during the July-September quarter on account of raw material inflation and subdued performance of paper board business, among others, according to analysts.

Domestic brokerage firm Nuvama Institutional Equities said ITC’s revenue is expected to grow 7.2 per cent year-on-year for Q2 FY25.

“We forecast sales shall grow 7 per cent y-o-y, but EBITDA margins are likely to be flattish due to some raw material inflation and negative pricing in notebooks and stationery,” Nuvama commented on the expected growth of the non-cigarette FMCG segment.

On the hotels segment, the brokerage firm said sales are likely to grow around 12 per cent y-o-y. The conglomerate’s overall gross margin is likely to expand 18 basis points y-o-y to 57.5 per cent, whereas the Ebitda margin to decline 137 bps y-o-y to 35.1 per cent during the second quarter.

Profit after tax is likely to grow 1.5 per cent y-o-y, said Nuvama.

According to Japanese brokerage firm Nomura, the conglomerate’s revenue is expected to grow 7.9 per cent year-on-year during Q2 FY25.

On a quarter-on-quarter basis, it is likely to rise 5 per cent. However, ITC to see “slightly lower volume growth” in Q2 compared to Q1 levels.

The international brokerage firm expects gross margin and Ebitda margin to decline 254 bps and 199 bps y-o-y at 55 per cent and 34.5 per cent, respectively, during the July-September quarter. It said the company is expected to report around 1.9 per cent y-o-y growth in its adjusted PAT.

“Overall consumer demand in Q2 saw marginal improvement as rural demand improved given low inflation and good monsoon and higher sowing. However, urban demand growth was seemingly soft quarter-on-quarter, possibly due to weakened jobs data, as the RBI consumer confidence index was trending lower in many quarters. Above-average rains and floods also impacted out-of-home and beverages categories in 2QFY25,” Nomura said on the India Consumer sector in its research report on October 3.

Kolkata-headquartered ITC is scheduled to declare its second quarter results on Thursday.

Sharekhan by BNP Paribas said ITC’s sales in value terms is expected to grow by 6.4 per cent y-o-y, while adjusted net profit is likely to witness a 2.2 per cent y-o-y increase in the second quarter of FY25.

“Cigarette business revenues are expected to grow by around 7 per cent y-o-y, with volume growth at 3 per cent y-o-y, while non-cigarette FMCG business is expected to grow by 8 per cet y-o-y. Hotel business is expected to grow by 15 per cent y-o-y; Agri business is expected to grow by 6 per cent y-o-y, while Paper business is likely to be flat y-o-y,” it said in a report.

Domestic brokerage firm Axis Securities expects around 7.4 per cent y-o-y revenue growth for ITC during the second quarter. “We expect Cigarette to grow 6 per cent y-o-y (2 per cent volume), FMCG to grow at 7 per cent y-o-y, hotels 10 per cent y-o-y, papers (decline) and agri to grow 15 per cent y-o-y,” the brokerage firm said in its note on October 11.

“Ebitda margin is expected to decline y-o-y on account of subdued performance of paper board business,” it said, adding Ebitda margin is expected to decline 129 bps to 35.6 per cent. Q2 FY25 PAT is likely to witness a 1.2 per cent rise, according to Axis Securities.