Consolidated performance of conglomerate ITC during the July-September quarter of 2023-24 (Q2FY24). Here’s the analysis of overall performance of the company in Q2 and its business segment wise review.
Table of Contents
ITC quarterly results Q2 FY 2024 – Overall Peformance
- ITC’s consolidated performance for Q2FY24 was broadly in line with brokerage estimates.
- The standalone operating profit increased by 3% year-on-year (Y-o-Y), which was half of what the market had anticipated, primarily due to the underperformance of the paperboard business.
- The cigarette business met expectations, but the non-cigarette FMCG segment lagged behind.
Paperboard Business
- The major setback to ITC’s overall performance was the sharp drop in the margins of the paperboard business.
- This segment suffered a 9.5% decline in sales due to muted domestic demand and increased supplies of lower-priced Chinese products in the global market.
- A significant rise in wood and coal prices, coupled with lower volumes, led to a 50% drop in profit before interest and taxes for this segment.
Cigarette Business
- Despite a challenging demand environment, the cigarette business saw a 4.5% rise in volumes, resulting in an 8.5% growth in sales.
- Analysts noted that this volume growth is impressive, considering the weak demand environment in most consumption categories.
- Stable tax policies and government efforts against illicit trade were identified as factors supporting this growth.
Hotel Business
- The hotel business witnessed a 21% Y-o-Y increase in revenues, driven by growth in room rates.
- Occupancies moderated due to fewer wedding dates in the September quarter and planned renovations.
- Progress in the demerger of hotels was highlighted as per scheduled timelines.
FMCG Business
- Revenue growth in other FMCG businesses was limited to 8.3% due to subdued demand.
- Increased competition from local and regional players and commodity price deflation were noted as challenges
Analyst Opinions on ITC quarterly results Q2 FY 2024
- Most brokerages slightly lowered their earnings estimates due to the weak performance of the paperboards division.
- JM Financial Research expects ITC’s stock to remain muted in the short term, considering the weaker Q2 performance, but they believe it could re-rate with a more robust capital-allocation strategy.
- Kotak Research maintains an “add” rating on ITC, forecasting a 9% earnings growth in FY2023-26, led by stable profit growth in the cigarette segment under a stable tax regime.
- BNP Paribas adjusted its earnings estimates downward for FY24-26 due to the paperboard division’s weaker outlook
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