ITC Q4 Preview: Profit may fall 1% YoY; Cigarettes, agri to drive revenue growth
Diversified conglomerate
ITC
is expected to post moderate revenue growth, led primarily by its
cigarettes
and agri businesses. According to an average estimate of five brokerages, revenue is seen rising 2 per cent year-on-year (YoY). The same estimates revealed that profit is likely to fall 1 per cent .
Cigarette revenue is projected to rise by about 7 per cent year-on-year, driven by 4.5 per cent volume growth. The company may see a decline of 195 basis points in cigarette EBIT margins this quarter, but easing tobacco prices could support a recovery in coming quarters.
The
agri business
is anticipated to deliver strong double-digit growth, benefiting from higher commodity prices, especially leaf tobacco. In contrast, the
FMCG
segment is expected to post 4.5 per cent revenue growth, with muted profitability due to raw material inflation in key inputs like edible oil, wheat, and potatoes.
The paperboard segment may remain subdued with modest revenue growth of 3.7 per cent , facing headwinds from weak demand, lower realizations, and competition from low-cost Chinese imports. EBIT margins here are expected to hover around 10 per cent , suggesting they may have bottomed out.
Overall, excluding the recently demerged hotels business, ITC's like-for-like gross sales are estimated to grow around 6.5 per cent YoY, while EBIT could decline slightly by 0.5 per cent , reflecting margin pressures across key business segments.
Here's what brokerages expect from ITC Q4:
Antique broking
ITC's revenue is likely to be driven by cigarettes and the agri business. Cigarette revenue/ EBIT to grow 7 per cent / 4 per cent driven by ~3 per cent volume growth. FMCG business to report 2 per cent growth, while profitability would be muted due to rise in commodity prices. The agri business should report strong double digit growth in revenue, with profitability benefiting from an increase in prices of leaf tobacco and other agri commodities. Paper performance could be muted.
Kotak Equities
We estimate cigarette volume growth at 4.5 per cent YoY, translating into a 7 per cent growth in gross cigarette sales. We expect cigarette EBIT growth at 3.5 per cent YoY, with a 195 bps YoY decline in EBIT margin, due to some inflation in leaf tobacco and other inputs (leaf tobacco prices are expected to ease and should aid margin recovery by 2Q/3QFY26).
Motilal Oswal
The cigarette business is expected to show stable volumes and pricing, with the portfolio continuing to grow, aided by improvements in the product mix. We model 4.5 per cent volume growth in the business in 4QFY25. We expect 6 per cent YoY sales growth in the cigarette business and 2 per cent YoY sales growth in the FMCG business. The FMCG business continues to see pressure in urban demand.
The paper segment remained weak as an influx of cheap Chinese paper has prompted regional players to offer more discounts to customers. The agriculture segment performed well during the quarter.
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