“We anticipate revenues, earnings before interest, taxes, depreciation, and amortisation (EBITDA), and profit after tax (PAT) to dip 18 per cent, 40.1 per cent and 26.4 per cent YoY, respectively. The Covid-19 induced lockdown impacted cigarette volumes for the full month of April with May seeing some recovery and June reaching pre-Covid level. Hence on the base of 3 per cent cigarette volume growth, we expect cigarette volumes to decline around 50 per cent YoY (Q4FY20 saw 10 per cent YoY volume growth on a base of 7.5 per cent),” Edelweiss Securities said in a quarterly preview.
ICICI Securities expects ITC
to post 25.6 per cent YoY decline in sales given the company lost 40-45 days of cigarette sales, which is a permanent loss (it cannot be recovered with future sales). The brokerage firm expects 50 per cent dip in cigarette volumes during the quarter. The company had taken a 10 per cent price hike after excise duty increase in Budget 2020.
“FMCG business would have been silver lining given most categories like atta, biscuits, packaged foods, soaps & sanitisers are part of the essentials & started manufacturing within 10-15 days of lockdown. Further, demand for packaged foods increased significantly given increased in-home consumption. Operating margins are likely to witness significant contraction due to negative operating leverage,” it said.
However, analysts at Emkay Global Financial Services believe ITC’s cigarette business is witnessing a stronger recovery than peers but the loss of sales in April/May is expected to result in a 25 per cent sales decline and a 38 per cent earnings decline.