ITC Q2 revenue jumps 27%, beats estimates

ITC reported its quarterly results on Thursday evening after market hours and reported a net profit increase, higher than estimates. On Friday morning, the share was trading flat at Rs 350.20 per share. The ITC share has given impressive returns in 2022. It has gained nearly 60% so far.

Key highlights of ITC's quarterly results:

Let us look at the Q2FY23 numbers of ITC in detail:

Revenue rises: ITC’s standalone revenue increased 26.6% on-year to Rs 16,130 crore in July-Sep 22 period. The company posted a revenue of Rs 12,731 crore in the corresponding period last year. Sequentially, the revenue is lower by 6.7% from Rs 17,289 crore. The revenue is higher than Street estimates of Rs 15,614 crore.

Profit beats estimates: ITC’s net profit jumped 20% year on year to Rs 4,466 crore for the September quarter. Analysts had earlier anticipated a net profit of about Rs 4223 crore. In the year-ago period, ITC reported a net profit of Rs 3,697 crore. Sequentially, the revenue was up 7.1% from Rs 4,196 crore.

Margins stable: Segment PBIT margin (ex-Agri Business) was up by ~150 bps YoY and ~40 bps sequential. EBITDA margin for the September quarter improved marginally to 36.4%, as against 36.3% YoY. This was much higher than analysts' expectations of 34.3%.

ITC results: Segment-wise performance 

FMCG - Others

The FMCG-others segment saw a 21% year-on-year rise in revenues and stood at Rs 4,885 crore. The company reported strong growth led by Staples & Convenience Foods and Discretionary/Out of Home categories. The Education & Stationery Products Business continues to witness strong traction. Q2FY23 Segment EBITDA margins improved 170 basis points sequentially to 9.5%.

Cigarette: Mainstay business

ITC said that stability in taxes backed by deterrent actions by enforcement agencies enables continued volume recovery from illicit trade. The segment revenue increased by 23.3% on-year to Rs 6954 crore. The segment's recent launches continue to gain traction, with robust growth across regions and markets. Segment PBIT was up by 23.6% year on year.

Hotel

Hotels reported excellent performance across the location. ARR and Occupancy are ahead of pre-pandemic levels driven by Retail (packages), Weddings, Leisure, and MICE segments. During the quarter, two new properties were added to the portfolio under the ‘Storii by ITC Hotels’ brand – Storii Shanti Morada in Goa and Storii Amoha Retreat in Dharamshala. 

The hotel segment of ITC reported a revenue of Rs 554 crore, up from Rs 128 crore in the year-ago period. Segment EBITDA stood at Rs 156 crore, up from Rs 138 crore from the year-ago period. Segment EBITDA margin was at 29%.

Agri-business

Agribusiness registered revenue of Rs 3,997 crore, up 44% year on year, led by wheat, rice, and leaf tobacco exports. ITCMAARS (Metamarket for Advanced Agriculture and Rural Services) – a crop-agnostic ‘phygital’ full stack AgriTech platform is being scaled up with 460+ FPOs in 9 states encompassing about 180,000 farmers. This platform provides farmers with AI/ML-driven personalized and hyperlocal crop advisories, access to good quality inputs and market linkages, and allied services like pre-approved loans.

Paper & Paperboards

Paperboards, paper, and packaging revenue stood at Rs 2,288 crore in the second quarter, a growth of 25% compared to the year-ago period. This was on the back of strong demand across end-user segments and exports. Margin expansion to 27.5% was led by strategic investments, an integrated business model, and proactive capacity augmentation.

ITC Share: Analysts' View - Target Price

ICICI Securities: The firm has maintained a BUY call for ITC shares and has increased the target price to Rs 405 per share against Rs 360 earlier. The firm believes that ITC would continue to grow in its core business of Cigarettes and FMCG with stable taxation & softening of raw material prices. They remain positive on ITC from a long-term growth perspective.

Motilal Oswal: The Indian brokerage firm has given a BUY rating on the stock with a target price of Rs 400 per share. The firm is positive on ITC fueled by a better-than-expected demand recovery and a healthy margin outlook in Cigarettes, smart recovery from the Hotels business, healthy sales momentum in the FMCG business, and better capital allocation in recent years.