ITC Q2 results on October 24: Marginal growth in revenue, PAT expected; here’s what to watch out for

Hotels-to-cigarette conglomerate ITC is expected to report mid- to high single-digit revenue growth for the September quarter of the current financial year, driven by its non-cigarette FMCG, agri, and hotel businesses.

ITC will report its financial results for the September quarter on Thursday, October 24. Investors will closely watch management commentary on inflation, the impact of rising raw material costs on margins, and the performance of its paper board business, in addition to segment revenues. Investors will also focus on the company’s demand outlook in rural and urban areas, hotels, and agribusiness outlook and competitive intensity.

ITC may post 6.9-7.9% revenue growth for Q2

According to experts, the Kolkata-based conglomerate will likely report revenue growth of 6.9-7.9% year-on-year in the July-September quarter. The non-cigarette FMCG and hotel segments will likely drive revenue growth in the second quarter.

According to consensus estimates, ITC is likely to post revenue of ₹18,112 crore in Q2FY25, compared to standalone revenue of ₹17,548.75 crore in the September quarter of FY24.

On a quarterly basis, the revenue growth is expected to be around 5% but volume growth is likely to be slower than Q1 levels.

Experts project a marginal 1.5% YoY rise in profit after tax to ₹5,023 crore for the September quarter compared to ₹4,927 crore in the Q2 of FY24. The PAT is expected to rise by 2.15% on a quarterly basis compared to ₹4917.45 crore in Q1FY25.

EBITDA margin may see a YoY decline due to higher input costs

According to experts, the EBITDA margins are expected to be lower than the year-ago period due to rising raw material costs and weak performance by the paper board business. Negative pricing in notebooks and stationery is likely to hit the paper business.

Gross margin and EBITDA margin may decline by 254 basis points and 199 basis points, respectively, in the September quarter.

Ebitda or operating profit is projected at ₹6,262 crore for Q2FY25, a growth of 3.6% YoY compared to ₹6,042 crore the same quarter a year ago.EBITDA margins are expected at 34-35%.

Non-cigarette FMCG, Hotel segments to perform better

According to experts, hotel segment sales are likely to rise around 12-15%. Cigarette business revenue is expected to increase by 7%, with volume growth at 3% YoY. The non-cigarette FMCG business is expected to rise by 8% YoY, and the agribusiness is expected to rise by 6% on a yearly basis. The paper business is likely to remain flat.

Experts had earlier highlighted a marginal improvement in consumer demand due to improved rural demand amid low inflation and good monsoon and higher sowing. However, urban demand growth was soft QoQ due to weakened jobs data.

ITC Q1FY25 performance

ITC reported a 7.2% YoY rise in revenue from operations to ₹18,219.74 crore in the June quarter of FY25 in a challenging operating environment driven by hotels, value-added agri products, and leaf tobacco. The company’s standalone net profit stood at ₹4,917.45 crore in Q1FY25.

The company highlighted that green shoots of demand recovery emerged during the quarter in the Paperboards and paper and packaging segments. However, performance remained impacted largely due to cheap Chinese supplies in international markets, including India, and a surge in domestic wood prices.

In the Cigarettes division, net segment revenue was up 7% and segment profit before interest and tax (PBIT) was up 6.5% YoY in Q1 Fy25. The FMCG businesses revenue grew by 6.3% YoY, Hotels Segment Revenue was up 10.9% YoY and Agri Business Segment Revenues by 22.2%.

ITC share price

ITC shares opened negative on the NSE on Thursday and gained marginally to touch an intraday high of ₹482.4 apiece.

Shares of ITC Limited shares have declined 2.7% in the last five sessions while sliding 6.6% in the past one month. However, the stock has gained nearly 4% so far this year and up to 10% in the last one year.