ITC Q3 Results Review - Short Term Hiccup; Maintain 'Buy': Axis Securities

Axis Securities Report

ITC Ltd.’s Q3 FY24 results were below estimates on the operating front. The revenue grew by 1% YoY to Rs 16,314 crore owing to subdued performance in cigarettes (flat volume growth) on account of high base and continued drag in agri – down 2% YoY / paper board business – down 10%.

FMCG revenue grew ~8% YoY owing despite subdued demand conditions led by new product development. Hotel business maintained its stellar performance, up by 18% YoY led by retail, meeting, incentives, conferences and exhibitions and strong traction from the ICC World Cup.

Gross margins stood at 58%, down 50 basis points owing to a sequential increase in key raw material prices – tobacco, wheat, maida and sugar. Ebitda declined 3% YoY while Ebitda margins stood at 36.9% (down by 177 bps YoY), due to higher opex.

The reported profit after tax was Rs 5,572 crore (up 11% YoY) on account of higher other income and lower taxation.

• Cigarettes (~78% of Ebit) – ITC’s cigarettes revenue grew 3.6%YoY (flat volume growth) on account of high base, while Ebit grew 2% YoY, while Ebit margins declined 75 bps YoY to 62.6% owing to higher raw material (tobacco).

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