ITC Q2 Results Forecasts Nearly 30% YoY Profit Decline Amidst Impact of Cigarette Tax Hikes.

ITC is bracing for a challenging September quarter, with significant pressures on its cigarette segment expected to impact overall performance. Analysts forecast that cigarette volumes will decline by approximately 8% year-on-year (YoY), largely attributed to a new tax regime that has adversely affected both pricing and consumer demand. The operating profit from this segment could consequently fall by as much as 29%. Despite the anticipated struggles in the cigarette business, growth in ITC’s fast-moving consumer goods (FMCG) and paper divisions is likely to provide some cushion, with expectations for the FMCG sector to achieve around 11% in revenue growth.

The company’s consolidated revenue is anticipated to drop by 3% YoY, primarily due to the downturn in the cigarette and agricultural segments, though this decline may be offset by the flourishing FMCG sector. Most brokerages project a notable impact on profit margins, with Nuvama estimating a 20% reduction in consolidated EBITDA, leading to a contraction of over 600 basis points in margins to about 28.5%. The subdued performance of the agri-business, despite a marginal growth forecast of 3%, reflects ongoing struggles within that segment, as external agricultural market conditions remain challenging.

The expansion of ITC’s paper and packaging business is a silver lining amid these challenges. The inclusion of recently acquired Century Pulp and Paper operations is expected to yield substantial revenue growth of around 32% in the paper sector, although higher-margin contributions may be limited. Analysts predict that improvements in demand and capacity enhancement from these acquisitions will significantly bolster revenue, highlighting the importance of non-cigarette sectors for ongoing performance. Stakeholders will be keen to hear management’s insights regarding pricing strategies, consumer demand stability, and potential impacts on market share in the upcoming earnings announcement as these factors will be critical in addressing the expected declines.

Source: The Economic Times

(Expert Note: This intelligence brief was structured and verified by the Wealthova editorial desk.)