ITC Q3 results preview: Conglomerate expected to report high-single-digit revenue growth, margin pressure likely to persist
Cigarette-to-soap maker ITC Ltd is expected to report a high-single-digit revenue growth for the third quarter this fiscal, driven by good performance in its cigarette, hotels and agri segments.
However, margin pressure is likely to continue due to input cost inflation, and net profit for the quarter may decrease on a year-on-year basis, according to brokerage firms.
Domestic brokerage firm Nuvama Institutional Equities said ITC’s revenue is expected to grow 8 per cent year-on-year for Q3FY25. “Cigarette volumes shall grow 3.5 per cent y-o-y and post a slight compression in margins due to RM inflation. We anticipate net revenue/EBIT to grow 7.5%/5.5% y-o-y,” Nuvama said, adding for non-cigarette FMCG it estimated weak sales and profit numbers during the third quarter.
Sales in the Hotels segment are likely to grow 16 per cent y-o-y, aided by strong wedding and ongoing holiday season. Agri sales are likely to grow 20 per cent y-o-y due to higher tobacco sales, the brokerage firm said.
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“Overall gross margin is likely to expand 325 basis points y-o-y to 55.2 per cent, whereas EBITDA margin shall decline 235 bps y-o-y to 34.2 per cent. We reckon adjusted PAT shall decrease 11 per cent y-oy due to higher other income and lower tax rate in the base,” it added.
Mirae Asset Sharekhan expects the diversified conglomerate’s sales to grow 7.7 per cent y-o-y in Q3FY25, while adjusted profit after tax is likely to fall 10.8 per cent y-o-y.
“We estimate 3.6 per cent cigarette volume growth, margin pressure to continue due to input cost inflation. High food and input inflation to reflect in slow growth and margin decline in FMCG. Paper continues to remain under pressure whereas Hotels & Agri are expected to perform well,” PL Capital said in its report on ITC Ltd.
Notably, Kolkata-headquartered ITC Ltd had fixed the effective date for the demerger of its Hotels business on January 1, 2025. Accordingly, the record date was fixed as January 6 to determine the shareholders of ITC Ltd to whom equity shares of ITC Hotels would be allotted pursuant to the demerger.
As per the share entitlement ratio of 10:1, shareholders holding 10 shares of ITC Ltd received one share of ITC Hotels post-demerger as on the record date. Following the demerger of ITC Hotels from ITC Ltd, shares of the hospitality company were listed on the stock exchanges last month.
On Thursday, ITC Ltd’s stock opened at Rs 450.10 apiece on BSE. The stock closed at 448.25 on Wednesday.
