ITC Q3 preview: Cigarette volume may remain resilient; FMCG biz to grow 6%

Tobacco-to-fast-moving consumer goods (FMCG) conglomerate ITC will announce its Q3FY25 numbers on Thursday, February 6, 2025. In the third quarter (Q3FY25) brokerages tracked by Business Standard expect ITC's adjusted net profit to decline 3.5 per cent in the quarter ended December 31, 2024, on average, to Rs 5,151.12 crore as compared to Rs 5,340 crore a year ago. PAT is likely to decline due to the low tax rate in the base quarter.

 

However, on a sequential basis, the PAT is expected to rise 3.2 per cent.

 

In Q3, the revenue of ITC, on average, is pegged at Rs 18,395.42 crore as compared to Rs 19,484.5 crore a year ago which implies a slip of 5.5 per cent year-on-year (Y-o-Y). On a quarter-on-quarter (Q-o-Q) basis, the revenue is estimated to slip 3.9 per cent. Analysts and investors will keep an eye out for management's commentary on FMCG, cigarette business growth outlook.

 

Here's how brokerages expect ITC to perform in Q3:

HDFC Securities: The brokerage expects low single digit cigarette volume growth owing to increased competitive intensity. Further, the FMCG business is likely to grow 6-7 per cent revenue growth owing to urban slowdown.

 

Besides, Earnings before interest, tax, depreciation and amortisation (Ebitda) margin is expected to remain flat sequentially due to inflationary pressure related to the raw material index of the cigarette business and adverse business mix which is higher salience from the agriculture segment.

 

HDFC Securities pegged the Ebitda for Q3 at Rs 6155.7 crore as compared to Rs 6,024.3 crore a year ago. Ebitda margin is expected at 34.1 per cent as compared to 36.9 per cent a year ago and 33.1 per cent in Q2. 

 

They expected Q3 adjusted PAT at Rs 4,975.4 crore as compared to Rs 5,577.6 crore a year ago.

 

Motilal Oswal: The brokerage expects the cigarette business to show stable volumes and pricing, with the portfolio continuing to grow, aided by improvements in product mix. Analysts anticipate 4 per cent volume growth in the cigarette business in Q3FY25, along with 7 per cent Y-o-Y sales growth in cigarette business and 5 per cent Y-o-Y sales growth in FMCG business.

 

Further, cigarette Earnings before interest and tax (Ebit) is likely to grow 6 per cent Y-o-Y with 70 basis points (bps) decline in margins due to a rise in leaf tobacco prices.

 

In the FMCG business, they expect 3 per cent de-growth in Ebit with 60 bps decline in margins as price hike lags raw material inflation. The paper segment is forecasted to remain weak, while the agriculture segment and hotel business are expected to perform well during the quarter.

 

Centrum Institutional Research: In Q3, analysts expect cigarette volume/value to grow by 4 per cent/5 per cent, followed by other FMCG/hotel/agriculture to grow by 5.5 per cent/15 per cent/20 per cent in Q3.

 

Given the rising competition, higher input and leaf tobacco cost, a cut in operating margins is forecasted. They expect Ebitda margin to decline by 172 bps to 34.2 per cent Y-o-Y from 35.9 per cent and net profit is likely to decline 10.6 per cent Y-o-Y to Rs 4.983.8 crore as  compared to Rs 5,577.6 crore.

 

JM Financial: As per the brokerage cigarette volume may remain resilient at 3 per cent resulting in sales growth of 7 per cent. Ebit growth could be  lower due to raw material inflation.

 

Analysts pegged Ebitda for Q3 at Rs 6,337.5 crore as compared to Rs 6,024.3 crore a year ago. Ebitda margin is expected at 33.4 per cent as against 34.5 per cent Y-o-Y. FMCG sales and margins are likely to moderate given weak demand and high raw material prices.