The brokerage expects ITC's revenue to decline 13 per cent year-on-year (YoY) to Rs 10,334.1 crore led by a significant disruption in revenue from the hotel business (down 95 per cent YoY). "We expect revenue from the cigarette business to reach a 90 per cent pre-covid level (vs 71 per cent in 1QFY21). FMCG
segment is likely to witness 10 per cent YoY while agri-business likely to grow at 5 per cent YoY during 2QFY21," the brokerage said in a result review note.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) is expected to come in at Rs 3,792.6 crore, down 17 per cent YoY while net profit or profit after tax (PAT) is seen at Rs 3,119.5 crore, down 22.5 per cent YoY. It expects gross and EBITDA margins to contract by 155bp YoY and 173bp YoY, respectively led by inferior product mix (reduction in contribution from cigarette business) and negative operating leverage (especially from the hotel segment).
Key monitorables include cigarette volume growth, outlook on hotel and paper businesses.
The brokerage notes that ITC's cigarette segment experienced headwinds during the quarter led by intermittent lockdown curbing OOH cigarette consumption, come back of smuggled cigarettes affecting KSFT segment, and weak consumer demand. It believes these factors will cause cigarette revenue to decline by 8 per cent.
Net sales (revenue) is expected to come in at Rs 10,862.9 crore, down 7.6 per cent YoY and up 22.8 per cent QoQ. EBITDA is expected to fall 17 per cent YoY to Rs 3,620.8 crore and adjusted PAT is seen at Rs 3,274.3 crore, down 17 per cent YoY and up 39.8 per cent QoQ.
The brokerage expects revenues, EBITDA and PAT to dip 6.1 per cent, 8.6 per cent and 12.5 per cent YoY respectively. "On the base of 3 per cent cigarette volume growth, we expect cigarette volumes to dip nearly 10 per cent YoY (Q1FY21 saw 40 per cent YoY volume dip on a base of 3 per cent). MRP hikes of 10 per cent on part of the portfolio are not in the base," it said. It expects cigarette volumes to be impacted by supply issues related to localised lockdowns while FMCG
business is expected to do well on the back of both foods and personal care (due to health and hygiene performing well) doing well.
"Hotels business to be the most adversely impacted leading to revenue dip of nearly 90 per cent on a base of 17.7 per cent (Q1FY21 saw 94.2 per cent YoY revenue dip on a base of 15 per cent)," the brokerage added.
Agri business should clock a growth of 5 per cent YoY on a base of 19.3 per cent growth (Q1FY21 saw 3.7 per cent YoY revenue dip on a base of 14.6 per cent). Paper business should see 5 per cent revenue dip on a base of 9.9 per cent (Q1FY21 saw 32.8 per cent YoY revenue dip on a base of 12.7 per cent). Lack of operating leverage will lead to 100bps EBITDA margin compression. The reversal of tax in the base quarter will lead to PAT dip being higher than EBITDA dip.
The brokerage believes that the company's FMCG business will continue to see double‐digit growth, with cigarette volumes recovering to the neutral territory after a 25 per cent fall in Q1. The company's revenue is seen at Rs 11,277.9 crore, down 5 per cent YoY and up 27 per cent QoQ. PAT is seen at Rs 3,399.7 crore, down 15 per cent YoY and up 45 per cent QoQ.
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