Shares of ITC gains over 4% to intra-day high of Rs 491 on NSE today after the diversified conglomerate announced its financial results for the quarter ended September 2024. ITC Ltd reported a consolidated net profit of Rs 4,993 crore for Q2 FY25, reflecting a modest 2% increase from Rs 4,898 crore in the corresponding quarter last year. However, this profit came slightly below Dalal Street estimates of Rs 5,079 crore.
Revenue Growth Surpasses Expectations
Revenue from operations rose by 15.6% year-on-year (YoY) to Rs 22,282 crore, beating market expectations of Rs 18,068 crore. ITC’s diverse business portfolio, spanning cigarettes, FMCG, hotels, agriculture, and paperboards, contributed to the robust revenue growth.
EBITDA and Margins
The cigarette-to-hotels conglomerate posted an EBITDA of Rs 6,335 crore for the July-September quarter of 2024. Margins stood at 32.8%, reflecting solid operational efficiency despite slightly missing profit forecasts.
Segment-Wise Performance Of ITC
Cigarettes Business
The cigarettes segment, ITC’s core business, reported a revenue increase of 7% YoY, rising to Rs 8,879 crore from Rs 8,328 crore in the same period last year. Profit before tax (PBT) for the segment also saw a 5% YoY growth, reaching Rs 5,242 crore.
FMCG-Others Business
ITC’s FMCG-others segment posted revenues of Rs 5,585 crore for the quarter, up 5% from Rs 5,303 crore a year ago. The PBT for this division grew slightly to Rs 444 crore, indicating steady demand in the FMCG sector.
Hotels Business
The hotels division had a strong quarter, with revenue growing 17% YoY to Rs 789 crore, compared to Rs 675 crore in Q2 FY24. Despite the healthy revenue growth, the PBT for the hotels business dipped to Rs 117 crore, down from Rs 133 crore in the same period last year, reflecting increased operational costs or other margin pressures.
Agribusiness
ITC’s agribusiness segment delivered impressive growth, with PBT rising 25% YoY to Rs 447 crore, compared to Rs 359 crore in the corresponding period last year. Revenue for the agribusiness surged 47% YoY, reaching Rs 5,845 crore, driven by higher demand and stronger pricing in the agricultural market.
Paperboards Business
The paperboards segment saw a marginal revenue increase of 2% during the quarter. However, PBT for the division declined by 25% YoY, falling to Rs 235 crore from Rs 313 crore in the previous year, indicating challenges in profitability within this segment.
Brokerages on ITC
Goldman Sachs on ITC
Goldman Sachs has reiterated its ‘buy’ rating on ITC, raising its target price to Rs 525 from Rs 515. In its latest report on the company, the brokerage highlighted a steady performance during the second quarter, despite facing a challenging consumption environment.
According to the report, ITC’s cigarette business showed good growth, contributing positively to overall performance. However, the FMCG segment faced margin pressures due to rising input costs, which weighed on profitability. Meanwhile, the hotel segment remained healthy, and the paperboard, paper, and packaging business saw a strong quarter, compensating for weakness in other areas.
Nomura on ITC
Nomura has reiterated its ‘buy’ rating on ITC, setting a target price of Rs 555, highlighting strong sales performance despite margin pressures across segments in Q2.
According to the report, cigarette volumes grew by 3% year-on-year, surpassing the estimated 2.5%, though margins in this segment contracted by 145 basis points year-on-year. The FMCG segment saw in-line growth of 5.4%, but also faced a margin contraction of 37 basis points.
The report further noted that ITC’s hotel segment held up well, while the paperboard and packaging segment showed improved sales. Additionally, the agri-business segment delivered a positive surprise, contributing to the company’s overall performance.
Morgan Stanley on ITC
Morgan Stanley has reiterated its ‘overweight’ rating on ITC, with a target price of Rs 554. According to the brokerage’s report, ITC showed several key positives in Q2, including robust net revenues from cigarettes, strong momentum in the hotel business, and a rebound in the agri segment.
However, Morgan Stanley noted challenges for ITC, such as weak home consumption, inflationary pressures on food inputs and tobacco leaf, and an overall softness in the paper segment. These factors impacted the company’s performance amid an evolving market environment.
Citi on ITC
Citi has reaffirmed its ‘buy’ rating on ITC with a target price of Rs 560, noting another mixed performance in the second quarter. According to Citi’s report, ITC’s headline revenue exceeded expectations, primarily driven by strong growth in the agri-business segment. However, profitability faced pressure across multiple segments, impacting overall margins.
The report highlighted that cigarette revenue grew by 7% year-on-year, net of excise, aligning with Citi’s expectations. Despite segmental pressures, ITC’s diverse portfolio helped achieve steady revenue growth in the quarter.
Stock Performance in Last One Year
ITC shares have demonstrated mixed returns across multiple time frames. Over the past month, the stock has given a negative returns of 9.05%. The last six months have seen even more impressive results, with a substantial increase of 9.98%, indicating a strong upward trend.
Year-to-date, ITC shares have surged by 2%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered return of over 8% in the last twelve months.
(Disclaimer: Views, recommendations, and opinions expressed are personal and do not reflect the official position or policy of Financial Express.com. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)