ITC records sharpest intra-day gain in two months ahead of Q1 results

Shares of ITC moved higher by 3 per cent at Rs 213.60 on the BSE in the intra-day trade on Friday, on back of heavy volumes, ahead of its April-June quarter (Q1FY22) earnings on Saturday, July 24. In comparison, the S&P BSE Sensex was up 0.39 per cent at 53,041 levels at 02:20 pm. Trading volumes on the counter more-than-doubled with a combined 36 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

The stock of the fast moving consumer goods (FMCG) company recorded its sharpest intra-day gain in the past two months. Prior to this, the stock had rallied 4.8 per cent in the intra-day trade on May 14, 2021 ahead of its January-March quarter (Q4FY21) result.

Despite today's outperformance, the stock of ITC has underperformed the market by a wide margin. In the past three months, it has gained 3 per cent, as against a 11 per cent rally in the S&P BSE Sensex. Moreover, in the past one year, the stock has added 6 per cent as compared to a 39 per cent surge in the benchmark index.

The FMCG sector witnessed a high growth during the June quarter on the back of lower sales in the base quarter, which was marred by country wise strict lockdown. Though Q1FY22 also witnessed the adverse impact of a second Covid-19 wave and subsequent state wise lockdowns, the impact on supply chain was minimal with industry, government and trade channels' preparedness. That said, similar to previous lockdowns, consumption of some discretionary & out of home categories were adversely impacted.

According to analysts, ITC is likely to post a strong show in Q1FY22, helped by a low base and recovery in cigarettes sales. They eye a solid double-digit profit and revenue growth on a yearly basis, although the quarter-on-quarter (QoQ) performance could disappoint.

“We expect ITC to witness 29.3 per cent revenue growth led by 33.7 per cent growth on cigarettes segment mainly on account of severe adverse sales in base quarter. Though we believe cigarettes sales would have been impacted due to second Covid-19 wave, stocking at dealers levels in April would have off-set the negative impact,” ICICI Securities said in result preview.

Similarly, paper segment sales are expected to grow 50.4 per cent with sustained recovery in user industry. FMCG segment is likely to witness growth of 12.8 per cent during the quarter. We expect 19.6 per cent sales decline in agri segment due to high base & muted hotels segment sales due to second Covid-19 wave. Operating margins are likely to expand 355 bps to 31.4 per cent. We expect net profit to grow 33.4 per cent to Rs 3,125 crore, the brokerage firm said. CLICK HERE FOR BROKERAGES VEIW