ITC gains nearly 3%, hits over two-month high in weak market

Brokerages expect strong growth for ITC's FMCG business led by price hikes, strong traction in discretionary categories (due to high mobility) & strong growth in education & stationary business.

Shares of ITC hit an over two-month high of Rs 348.80, as they gained nearly 3 per cent on the BSE in Friday’s intra-day trade in an otherwise a weak market. The stock of the diversified fast moving consumer goods (FMCG) traded at its highest level since November 14, 2022. It had hit a record high of Rs 362 on November 11.

At 10:51 AM; ITC quoted 1.5 per cent higher at Rs 344.85, as compared to 1.2 per cent decline in the S&P BSE Sensex. The average trading volumes at the counter jumped 1.5 times, with a combined 8.75 million equity shares changing hands on the NSE and BSE.

ITC is the biggest cigarettes and the second largest FMCG company in India with around 78 per cent of market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business, agri & hotels businesses.

The board of directors of ITC is scheduled to meet on February 3, 2023 to consider the unaudited financial results of the company for the quarter and nine months ended December 31, 2022. The company said board will also consider declaration of interim dividend for the financial year ending on March 31, 2023.

The brokerages estimate strong growth for ITC’s FMCG business led by price hikes, strong traction in discretionary categories (due to high mobility) & strong growth in education & stationary business. ITC is expected to witness strong growth in cigarettes volumes during the quarter.

“ITC is expected to witness 5.9 per cent revenue growth on the back of strong growth in cigarettes, FMCG, paperboard & hotels business. Agri business is expected to see sales decline mainly due to restriction on wheat & rice exports during the quarter. We estimate 10.3 per cent cigarettes sales growth led by 7 per cent volume growth,” analyst at ICICI Securities said in result preview.

FMCG business is expected to see strong 19.2 per cent growth led by traction in discretionary categories, price hikes taken in the last one year and recovery in education & stationary business. The brokerage firm estimates 12.6 per cent growth in operating profit on account of operating leverage in cigarettes & softening of palm oil prices. It estimates 8.4 per cent growth in net profit during the quarter.

“Cigarette volumes are likely to expand by 7.5 per cent. FMCG is likely to post 17 per cent growth with QoQ margin improvement. Paper business will grow 10 per cent, while Hotel revenues will grow by 32.5 per cent. Overall PAT expected to grow by 11.8 per cent,” the brokerage firm Prabhudas Lilladher said in earnings preview.

Sharekhan expect growth momentum in the cigarette sales volumes to sustain with government actions on curbing illicit cigarette sales. The hotels business is expected to post strong performance in H2 due to a strong business period. Non-cigarette FMCG revenues would grow in double digits while margins might improve sequentially in the coming quarters, the brokerage firm said.