ITC slips 3% after Q3; few brokerages cut target after hotel biz demerger

Shares of cigarette-to-fast moving consumer goods (FMCG) company slipped 2.6 per cent in morning deals and logged an intraday low at Rs 429.65 per share. Around 9:52 AM, ITC share price was down 2.34 per cent at Rs 431.05 per share. In comparison, the BSE Sensex was down 0.24 per cent at 77,870.85. 

 

In the third quarter ended December 31, 2024, ITC reported a 7.51 per cent year-on-year (Y-o-Y) drop in consolidated net profit to Rs 4,935 crore as compared to Rs 5,335 crore. The revenue for Q3 rose 7.7 per cent rise to Rs 20,350 crore from Rs 18,880 crore in the same period last year. 

 

The cigarettes segment recorded a 7.8 per cent Y-o-Y increase in revenue to Rs 8,944.83 crore, while the non-cigarette FMCG (fast moving consumer goods) business recorded a 4 per cent Y-o-Y growth in revenue to Rs 5,427.70 crore. The hotel's business was reported as “discontinued operations” in the financial update in line with applicable Indian Accounting Standards. 

 

The Q3 numbers were in-line with most brokerages' expectations. As per them, while the FMCG segment performance disappointed, the cigarette business fared well. Post Q3, the brokerages maintained their positive stance on ITC stock but most cut target price and EPS estimates given the demerger of hotel business.  

 

BOB Capital maintained a 'Buy' rating but cut the target to Rs 551 per share from Rs 556 given reasonable earnings visibility in the cigarette (share gains from illicit trade) and FMCG businesses. 

  Emkay Global also reitered 'Add' on ITC but cut target to Rs 490 per share from Rs 520. The brokerage believes that Q3 delivery was muted, but had few positives – 6 per cent cigarettes volume, 4 per cent other FMCG revenue growth and 8 per cent top line growth, while Earnins before interest and tax (Ebit) also grew 1 per cent.

 

Similarly, Antique Broking iterated 'Buy' but cut the target price to Rs 542 per share from Rs 577.  The brokerage revised its EPS estimates downwards by 2 per cent-4 per cent for FY25-27E in view of the demerger of ITC Hotels. 

 

Nuvama Institutional Equities took a cautious stance given the ongoing urban slowdown, inflation in key raw materials, and weak profitability in FMCG and paperboards, paper, and packaging segment; The brokerage retained a ‘Buy’ for a target price of Rs 571 per share. 

Motilal Oswal continued with a 'Buy' call on ITC with a target of Rs 550 per share. The brokerage believes ITC’s core business of cigarettes has shown steady performance. With stable taxes on cigarettes, analysts anticipate sustainable growth in the segment. 

 

The brokerage sees ITC enjoying industry-leading growth over peers in FMCG business due to its category presence. However, it cut earnings per share (EPS) estimates by 4 per cent for FY25 and 5 per cent for FY26, mainly due to the impact of the hotel business demerger with effect from January 2025.