ITC outperforms benchmark on strong earnings hope; stock up 2%

ITC will announce its Q4 results and declare final dividend on May 18, 2022.

Shares of ITC traded 2 per cent higher at Rs 267.25 on the BSE in Friday’s intra-day trade in an otherwise weak market. The surge comes on the back of healthy earnings expectation due to improved cigarette volumes and announcement of dividend. In comparison, at 10:22 am, the S&P BSE Sensex was down 1.8 per cent at 54,695 points.

"A meeting of the board of directors of the company has been convened for May 18, 2022, to consider audited financial results for the quarter ended March 31, 2022. The board will also consider the recommendation of final dividend for the aforesaid financial year," the company said in an exchange filing.

Earlier, ITC had paid interim dividend of Rs 5.25 per equity share of Re 1 each for the financial year 2021-22.

The share price of the cigarettes to fast moving consumer goods (FMCG) major traded close to its 52-week high level of Rs 273.10 that it had touched on April 11, 2022. In the past one month, the stock has gained 2 per cent, as compared to 8 per cent decline in the S&P BSE Sensex. Meanwhile, in the past three months, the stock has rallied 13 per cent, against 7 per cent decline in the benchmark index. The stock has also surged 17 per cent in six months, as compared to 9 per cent fall in the Sensex.

While announcing Q3 results on February 3, 2022, ITC remained optimistic of robust recovery across markets aided by increase in mobility, agile supply chain and market servicing.

Analysts at Elara Capital believe that the cigarettes category continues to see volume uptick due to increased mobility and better farm income during the Rabi season. "A likely better realization in the Kharif season as well could result in higher farm income, leading to improvement in rural growth," the brokerage firm added.

Meanwhile, Emkay Global Financial Services believe that ITC is better-placed than peers with improving cigarette performance and strong earnings visibility. “We expect ITC to report a relatively stronger quarter, with improvement in cigarettes and other divisions and lesser margin pressure compared to FMCG peers,” the brokerage firm added.

Analysts also estimate steady cigarette performance with sales/EBIT growth of 9 per cent/10 per cent and FMCG sales growth of 9 per cent with flat margins YoY. “We estimate strong performance in paper and agri with EBIT growth of 11 per cent/38 per cent and EBIT breakeven for hotels business. The profit after tax growth is lower at 8 per cent due to lower other income and higher ETR,” said analysts at Emkay Global Financial Services