ITC Q4 net likely to rise 20%

Better realisations in cigarette business, strong performance in hotels segment coupled with lower luxury taxes, is likely to lift ITC's fourth quarter net profit 20 per cent year-on-year to Rs 465crore.

Net sales for the quarter are seen rising 5 per cent y-o-y to Rs 2,029 crore. The company will report its earnings Friday.

The forecast is based on the average of the estimates of seven brokerages polled by CRISIL MarketWire.

On a sequential basis, net profit is seen rising 4 per cent , while sales are seen higher by 10 per cent.

Estimates for net profit vary between a low of Rs 440 crore and a high of Rs 480 crore, while sales forecast ranges from Rs 1,870-2,150 crore.

"ITC will benefit from lower luxury taxes in the month of February," said a earnings review note by investment bank CLSA Securities.

In the last week of January, the Supreme Court had ruled that the state governments cannot impose luxury tax on tobacco and tobacco products.

"Hotel business sales will be boosted due to commissioning of the second property in Mumbai but profits impacted due to higher depreciation," the CLSA note said. The company's fast moving consumer goods business should witness further improvement during January-March, analysts said.

During the October-December quarter, the company's absolute losses in the FMCG business had risen. However, as a percentage of sales, they showed a decline. The trend is expected to continue.

According to Kotak Securities, the full impact of the price hikes in select cigarette brands and the non-provisioning of luxury tax (following the Supreme Court ruling) will boost fourth quarter numbers.

"The cigarettes and hotels divisions would be the key sales growth drivers," said the earnings preview note by Motilal Oswal Securities.

"Net cigarette sales would benefit from lower luxury tax, but would be adversely impacted by the excise hike in March 2005."

"Businesses like hotels and paper are expected to improve profitability in line with industry trends," the note said.

ITC shares today ended at 1,531.65 rupees, up 1% over Wednesday.