ITC hits 52-wk low ahead of Q3 nos this week; here's what brokerages expect

Shares of ITC slipped over 1 per cent to hit a 52-week low of Rs 232.15 apiece on the BSE in the intra-day session on Tuesday. The fast moving consumer goods (FMCG) company is slated to announce its December quarter results for the current fiscal (Q3FY20) on Friday (January 31). 

At 12:55 pm, the scrip was trading 0.83 per cent lower at Rs 232.70 apiece on the BSE. The benchmark S&P BSE Sensex, on the other hand, was trading flat at 41,196 levels, up 41 points or 0.1 per cent. The S&P BSE Fast Moving Consumer Goods index was quoting 0.28 per cent lower at 11,788.5-mark. 

ITC is expected to deliver sales, earnings before interest, tax, depreciation, and amortisation (EBITDA) and adjusted profit after tax (PAT) growth of 5.7 per cent, 7 per cent and 14.8 per cent YoY, respectively in 3QFY20. Cigarette volume is likely to grow at 3 per cent YoY on a base of 7 per cent growth while cigarette segment earnings before interest and tax (EBIT) is expected to grow at 7 per cent YoY, said analysts at Nirmal Bang Securities in its earnings preview note. "Mirroring the industry, Other-FMCG business growth will be subdued at 5 per cent YoY. We are building in EBITDA margin expansion of 50 basis points (bps), led by gross margins," the brokerage said. 

Analysts at KRChoksey expect the company's top line (sales/revenue) to grow 5.7 per cent YoY and 1.8 per cent QoQ to Rs 12,080 crore, mainly due to good traction in non-cigarette space such as hotels, agri business and paper. Cigarette volumes are likely to be affected due to moderate volumes as a result of competitive intensity, rural slowdown and health awareness. EBITDA is expected to be almost flat QoQ and up 6.3 per cent YoY at Rs 4,597 crore. Further, net profit of the company is expected to come in at Rs 3,951 crore, up 23 per cent YoY and down around 2 per cent on QoQ basis. The brokerage notes that reduction in tax rates will lead to net profit margin expansion. 

KEY THINGS TO WATCH OUT FOR

Diversification into FMCG space (Frozen food), status of Delectable Technologies acquisition, guidance on price and volume, new product launches and product mix,  demand outlook for FMCG and Cigarette segment, and potential hike in cigarette tax are some of the key things to watch out for when the company announces results on Friday.