ITC may be in for moderation ahead
₹7,465 crore in Q1. The segment’s earnings before interest and tax (Ebit) increased by 11.2% year-on-year to ₹4,656 crore and contributed 77% of ITC’s total Q1 segment Ebit. This is also the ninth consecutive quarter of double-digit growth in ITC’s cigarette Ebit.
Over the near-to-medium term, Nomura expects 10% plus cigarette Ebit growth to continue despite the optical moderation in volume growth. The performance of ITC’s FMCG (others) business was notable in Q1 with revenue growth at 16% to more than ₹5,000 crore, surpassing this mark for the first time in a quarter. Here, growth was driven by staples, biscuits, noodles, beverages, dairy, agarbatti and premium soaps.
The company saw robust growth in urban and rural markets. Jefferies India’s analysts reckon ITC’s FMCG business revenue growth in Q1 has been one of the best in its coverage. In the hotel business, revenue growth has moderated to 8% in Q1 on a high base.
Relatively fewer wedding dates last quarter and pre-planned renovations weighed on occupancy, curbing the growth to that extent. Performance of agri and paper board businesses was not particularly striking. Meanwhile, ITC’s board approved the hotels business de-merger.
For every 10 shares held in ITC, its shareholders will get one share of ITC Hotels. The indicative timeline for listing ITC Hotels is 15 months. ITC’s shares have fallen by 8% since the company announced its decision to spin-off its hotels business last month.
However, investors are sitting on handsome returns. After rising as much as 52% in 2022, so far in 2023, ITC’s shares have risen by around 36%. The cigarette business has put up a good show in the past few quarters, which is one reason for improved investor sentiment towards the stock.
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