ITC Q4 results preview: Cigarettes, sales growth FMCG biz, PAT; key factors here
ITC Ltd will report its fourth quarter results for FY23 on May 18. In addition to the results, the company’s board of directors will also consider and recommend a final dividend for fiscal year 2022-2023. The share price of the FMCG player will therefore be central. In Q4FY23, the cigarette and FMCG businesses could post double-digit sales growth, while post-Covid pent-up demand is likely to boost the hotel business. Agribusiness may see a drop in turnover.
ITC said in its regulatory filing earlier this month that a meeting of the company’s board of directors has been convened for Thursday, May 18, 2023, including to:
– Consider and approve the audited stand-alone and consolidated financial results for the quarter and twelve months ended March 31, 2023.
– consider and recommend a final dividend for FY23.
What to Expect in ITC’s Q4 Earnings?
In the preview note, ICICI Direct Research said, “We estimate sales growth of 6.3% for ITC, led by strong 15.9% growth in cigarette business. We estimate ~13% volume growth in cigarettes. In addition, it is expected that the FMCG business will see 19.1% sales growth due to strong traction in the food, luxury goods and stationery categories.The hotel segment is estimated to grow by 77.8% due to post-covid-19 pent-up demand.Growth in the cardboard segment will expected to moderate as RM prices have fallen and companies factoring in price cuts. The segment is likely to grow 7.6% in Q4. Agribusiness is likely to see a 25.4% decline in sales due to export restrictions on wheat.”
Further, the note from the brokerage said, “We expect gross margin improvement of 340 basis points and comparable operating margin expansion to 35.3%. Net profit is expected to grow 17.2% to €4,911.8 crore.”
Meanwhile, Axis Securities expects ITC’s cigratte business to grow 16% year-on-year (13% volume), FMCG 14% (average volume growth), led primarily by price growth, hotels (continued strong momentum), paper (recovery) and agri to decline on high basis.
EBITDA margins are also expected to grow 450 bps due to GM’s expansion, better mix, operational leverage and cost savings.
Further, Sharekhan has forecast a 13% yoy growth in ITC’s cigarette business aided by 10-11% volume growth, while the non-cigarette FMCG business is expected to grow 19% yoy. The hotel business is expected to grow 70% yoy, helped by continued strong demand. Paper trade is expected to grow 15% yoy, while agribusiness is likely to decline 30% yoy.
Additionally, in Sharekhan’s note, “gross margin and OPM are likely to improve by 335 bps and ~320 bps year-over-year, helped by softening raw material prices and better operational efficiencies,” adding, “in line with 14% year-over-year growth in operating profit, PAT is expected to grow 14% yoy.”
One of the key factors to watch according to Axis Securities is — ITCs — demand outlook on rural versus urban, competitive intensity; RM Trends, Outlook for Hotels and Agribusiness.
Overall, ICICI Direct expects ITC sales to reach €17,459.1 crore in Q4FY23, up 6.3% YoY and 1.1% QoQ. EBITDA will likely be up €6,157.4 crore, higher at 17.9% YoY but lower at 1.1% quarter on quarter. In the same way, it is taken into account that PAT gets by €4,911.8 crore up 17.2% YoY but down 2.4% sequentially.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. We recommend that investors consult certified experts before making investment decisions.
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