ITC Q3 Results: Cigarette Woes, Hotel Triumphs, and Analysts’ Jaw-Dropping Predictions! What’s Next?

ITC’s shares witnessed a decline in early trade on Tuesday, responding to the company’s Q3 results, which revealed lower-than-expected cigarette volumes. The stock fell by 1.84% to ₹441.70 on the BSE.

Q3FY24 Financial Performance

The conglomerate reported a consolidated net profit of ₹5,335 crore for Q3FY24, reflecting a 6% growth compared to the same period the previous year. However, the revenue from operations rose by 2% YoY to ₹19,484 crore.

EBITDA and Margin Analysis

In Q3FY24, Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) declined by 3.2% to ₹6,024 crore. The EBITDA margin contracted by 180 basis points YoY to 36.6%.

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FMCG Segment Resilience

The FMCG segment showed resilient performance with a 7.6% YoY revenue increase, and the EBITDA margin expanded to 11.0%.

Cigarettes Segment Challenges

The cigarettes segment faced challenges with consolidation on a high base, resulting in a 2% YoY decline in volumes. However, it saw a 5% QoQ increase.

Hotels Segment Success

ITC’s Hotels segment achieved its best-ever quarter with an 18% YoY growth in revenue and a 57% YoY increase in PBIT. The EBITDA margin improved by 470 bps YoY to 36.2%.

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Business Segmentation and Dividend Declaration

The Agri Business segment was impacted by trade restrictions, while the Paperboards, Paper, and Packaging Segment faced challenges. The ITC board declared an interim dividend of ₹6.25 per share for FY24.

Analysts’ Outlook and Ratings

Analysts have adjusted their earnings estimates for ITC, citing weaker volumes in the cigarette business and ongoing pressure in the Agri business. Despite near-term challenges, some maintain a positive long-term view on the stock.

Brokerage Firm Perspectives

  • Emkay Global Financial Services expresses hope for a recovery in Q4FY24E and maintains a positive long-term view. The brokerage firm has cut its topline expectations, leading to a 3-5% earnings cut.
  • Nuvama acknowledges that Q3FY24 revenue and PAT exceeded estimates, but EBITDA fell below expectations. They maintain a ‘Buy’ call and reduce the target price to ₹535 per share from ₹560 earlier.
  • Antique Stock Broking remains positive on ITC’s performance, citing momentum in cigarette market share gains and strong FMCG and Hotels business. They maintain a ‘Buy’ recommendation but reduce the target price to ₹499 per share.

Conclusion

Despite short-term challenges, analysts and brokerage firms express optimism in ITC’s long-term prospects, emphasizing better execution and supportive macros in diversified businesses.

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