ITC Q4 preview: Single-digit revenue growth seen; PAT may dip up to 7% YoY

Demand for health and hygiene products, foods segment and other discretionary items along with healthy cigarette volumes growth is expected to drive ITC's March quarter (Q4FY21) revenue higher, said analysts. While the hotels segment is expected to remain a drag, they expect agri and paper board segments to support overall growth.

ITC, which is slated to post its quarterly numbers on June 1, is likely to post high single-digit revenue growth on a yearly basis during the quarter under review, although the profit after tax (PAT) is expected to fall.

Shares of the FMCG major gained 4.5 per cent during the January-March period as against a rise of 2.11 per cent in the BSE FMCG index and 3.7 per cent in the benchmark Sensex.

Here's what top brokerages expect from the March quarter show:

ICICI Securities

The brokerage expects ITC's PAT to decline 1.2 per cent year-on-year (YoY) to Rs 3,751.7 crore for the quarter ended March 2021, from Rs 3,797 crore posted in the same period last year. Meanwhile, on a quarter-on-quarter (QoQ) basis, PAT could jump 2.4 per cent. ITC's PAT during the December quarter stood at Rs 3,663 crore.

"Operating profit is likely to increase 4.9 per cent YoY on the back of lower gross margins. The company would continue the cost-cutting measures to protect the profitability of the business," said Sanjay Manyal, research analyst at ICICI Securities.

The brokerage pegs revenue for the quarter under review at Rs 12,547.5 crore as against Rs 11,420.04 posted in the March 2020 quarter, implying growth of 9.9 per cent YoY. Sequentially, the figure is expected to remain stable as against Rs 12,580.40 crore posted in the December quarter of FY21.

"We expect revenue growth of 9.9 per cent with cigarette business expected to grow 7.5 per cent. The company had taken a cigarette price hike in February 2020 while base quarter sales were impacted by the lockdown in the last 10 days of March 2020. The FMCG business is likely to continue the growth momentum in the packaged foods business given the consumption shift from loose to branded products. We expect 35 per cent and 5 per cent growth in Agri and paper business, respectively, on the back of sales decline in the base quarter," Manyal added.

He expects the hotels business to see a 38.6 per cent QoQ sales growth but it is still expected to be down 30 per cent YoY.

JM Financial

Brokerage JM Financial expects PAT to decline 6.4 per cent YoY to Rs 3,554.9 crore during the quarter ended March 2021. Sequentially, the figure could slip by 3 per cent.

"Cigarette volumes are estimated to grow 7 per cent on the back of a weak base. FMCG growth is likely to decelerate as tailwinds wane but we expect the FMCG profit progression to remain steady. The Hotels segment EBIT could break even after massive losses in the first nine months," the brokerage said.

It has pegged revenue from the sale of products and services for the said quarter at Rs 12,273.8 crore, up 8.61 per cent YoY, as against Rs 11,300 crore in the same quarter in the corresponding fiscal. Meanwhile, in QoQ terms, the figure is likely to decline 1.75 per cent from Rs 12,492 crore posted in the December quarter.

Axis Securities

This brokerage pegs March 2021 quarter PAT at Rs 3,650 crore, down 4 per cent YoY and 0.4 per cent QoQ.

"Gross margins are expected to decline given rise in prices of raw material. We expect EBITDA margins to expand YoY owing to a better mix (improved contribution from cigarettes, modest recovery in hotel division with ease in lockdown) with improvement in FMCG business margins YoY. QoQ PAT to sustain, aided by recovery in business," the brokerage said.

It pegs EBITDA margins for the said quarter at 38 per cent as against 37 per cent in the corresponding quarter last year and 34 per cent in the previous quarter of this fiscal.

The brokerage further expects Q4FY21 revenue from sale of products and services to grow 7 per cent YoY to Rs 12,067 crore but fall 3.4 per cent QoQ.

"Underlying cigarette volumes are expected to grow ~6 per cent YoY with ease in lockdown. FMCG segment expected to report ~12 per cent YoY growth driven by demand for health and hygiene, foods segment and other discretionary products. Hotels segment to be a drag as operations continued to remain impacted. Agri and Paper board segment to support overall growth," it added.