ITC Q2 results today: FMCG stock up 4% in 1 month; can momentum sustain? Earnings preview

ITC is expected to deliver a muted performance for the September quarter, according to analysts. Investors will closely track management commentary on demand trends across rural and urban markets following the recent GST rate cuts, along with updates on competitive intensity, raw material cost movements, and the outlook for the agri business.

Axis Securities sees ITC to report 3.5 per cent YoY jump in profit at Rs 5,148 crore compared with Rs 4,975 crore in the same quarter last year. Revenue is seen rising 5.8 per cent YoY to 19,546 crore against Rs 18,477 crore YoY. The brokerage said it sees cigarettes segment to grow 7 per cent YoY (6 per cent volume growth. The FMCG to segment may see a growth of 5 per cent YoY and Agri 10 per cent. Papers segment may continue to remain weak and may grow at 4 per cent YoY on account of weak demand conditions due to cheap Chinese supplies, it said.

ITC shares are up 4 per cent in the past one month but are down 9 per cent year-to-date. 

Nomura India expects ITC to continue to report more than mid-single-digit volumes, which is higher than its historical average but is lower than its peers’ growth at 25 per cent-plus. While cigarette margins are seen continuing to be under pressure, Nomura believes ITC will start cycling a lower base, and hence will post a marginal improvement in cigarette EBIT growth of 6 per cent against 4 per cent for the past few quarters.

This brokerage expects ITC to report a 2.2 per cent YoY rise in adjusted profit at Rs 5,085 crore on 1.4 per cent jump in sales at Rs 18,906 crore. Volume is seen growing at 6 per cent against 6.5 per cent YoY in Q1 and 3.3 per cent in the year-ago quarter. Ebitda margin is seen at 32.9 per cent against 32.8 per cent YoY. 

Kotak Institutional Equities, which sees ITC Q2 profit at Rs 5,092 crore, said cigarette segment EBIT growth are estimated at 3.5 per cent YoY, with EBIT margin declining 200 bps YoY due to consumption of high-cost leaf tobacco and other inputs. Leaf tobacco prices have moderated in the recent quarters but benefits will be accrued from 2H onwards, it said.

"In the FMCG segment, we estimate (1) 4 per cent YoY revenue growth, as we factor in 300-350 bps impact on growth due to channel destocking in ~75% of FMCG portfolio (noodles, biscuits, snacks, etc.) and (2) EBIT margin at 7.5 per cent (up 60 bps qoq), as RM inflation in some of the key commodities (edible oil, wheat,
potato, etc.) moderated QoQ. Agri business growth/EBIT margin is expected at 10 per cent YoY," it said.