ITC Q2 results today: Can 2022’s third biggest Nifty gainer deliver?

FMCG major ITC is all set to report a strong set of quarterly earnings later today, thanks to healthy cigarette demand, continued recovery in the hotels business and higher realisations in the paper and paperboards segment.

If one goes by analyst estimates, the Kolkata-based company would report cigarette volume growth of 13-15 per cent on a year-on-year (YoY) basis. Sales would grow in excess of 20 per cent while profit may also rise in double digits, analysts said. Margin is seen improving sequentially, but is likely to fall YoY.

All eyes would be on cigarette volumes, FMCG business’ EBIT margin and outlook on paper, agri and hotel businesses, analysts said.

ITC as a stock has delivered a solid 59 per cent return in 2022 so far, which is the third highest among Nifty50 constituents. Adani Enterprises (up 91.80 per cent) and Coal India (up 63 per cent) are the only two index stocks delivering better returns than ITC this year.

HDFC Securities is expecting the FMCG major to report adjusted profit of Rs 4,190 crore, up 13.3 per cent YoY. It sees sales jumping 24.4 per cent YoY to Rs 16,860 crore. EBITDA margin may come in at 32.5 per cent, down 151 basis points YoY (up 172 basis points Q0Q).

“We model 18 per cent YoY growth in cigarette revenue, with volume growth of 15 per cent YoY. The non-cigarette business is expected to grow 42 per cent YoY. We model 14 per cent YoY growth in FMCG. We expect cigarette Ebit to grow 18 per cent YoY. We model other-FMCG Ebit margin at 5.5 per cent,” HDFC Securities said.

Motilal Oswal Securities sees cigarette volume growth at 13 per cent. It sees profit rising 14.1 per cent to Rs 4,220 crore. This brokerage expects a gross margin expansion of 230 bps sequentially on better cigarette mix and reduction in lag from hotels business.

“Watch out for hotels revenue growth and profitability as leisure and business travel return to normal,” it said, adding that outlook on the agri, paper & packaging and hbusinesses are the key monitorables.

Meanwhile, Elara Securities sees ITC profit at Rs 4,180 crore, up 13.1 per cent YoY. It sees sales at Rs 15,402 crore.

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