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ICICI Securities Report
'Stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enable green shoots of volume recovery from illicit trade' – Excerpt from ITC Ltd. press release.
We note ITC after a long time has highlighted supportive macro translating to gains from illicit segment. Any more indications of slowdown in illicit trade will be taken as a big positive.
Q1 cigarette volumes were broadly flat (versus pre-Covid levels) – the risk of change in consumer behaviour due to prolonged lockdowns (exhibited by consensus) can also be put to rest.
Fast moving consumer goods revenues grew 19% YoY (13.3% on three-year compound annual growth rate basis) with management using multiple levers to offset inflationary pressure; discretionary and out-of-home categories grew well.
Hotels business had a good quarter with sharp improvement in margin profile being the key highlight (32.5% Ebitda margin). Agri business and paperboards also reported good performance.
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