ITC Q3 review: Muted cigarette volume growth weighs on sentiment; what lies ahead?

ITC share price, ITC share price NSE, ITC share price target, ITC Q3 results: ITC shares were on investors' radar on Tuesday, January 30, after the diversified conglomerate reported a weak set of financial results for the quarter that ended December 31, 2023. The stock in the early morning deals traded 0.6 per cent lower at Rs 447.1 apiece on the NSE.

ITC Q3 results

The earnings were announced after market hours on Monday. ITC reported a jump of 10.75 per cent in its standalone profit after tax (PAT) and a rise of 8.52 per cent in revenue from operations year-on-year (YoY) as the company reported its December quarter results. Meanwhile, the cigarettes segment witnessed consolidation on a high base after a period of sustained growth momentum. The net segment revenue and segment PBIT were up 2.3 per cent YoY.

Analysts at JM Financial, in their earnings review note, said that cigarette volumes declined around 2 per cent during the quarter, as per their workings.

"There was, however, an element of the base effect here, as the sequential volume uptick in 3Q last year was a tad higher than trend levels. When seen on a normalised basis (4-year CAGR), cigarette volumes grew c.4 per cent during the December quarter, which is in the ballpark of that seen in recent quarters," the report added.

The company's standalone profit stood at Rs 5,572.07 crore against Rs 5031.01 crore registered in the year-ago period. Zee Business Research had estimated the figure to come in at Rs 5,252 crore. Read more

ITC share price target: What should investors do? Here is what the brokerages suggest.

Jefferies has maintained a 'buy' call on ITC. The brokerage has reduced the target by Rs 20 to Rs 520.

At a recent analyst meeting, the ITC chairman highlighted the possibility of consolidation of cigarette volumes in the near term, and that exactly played out, Jefferies added in its note. In 3QFY24, cigarette EBIT growth (+2%) was the slowest YoY in several quarters, which the brokerage highlighted with a trimmed EPS of 2–3 per cent.

CLSA has maintained an 'overweight' rating on ITC but has slashed the target price by Rs 18 to Rs 486. The global brokerage notes that the company's cigarette volume growth was weaker than expected, while the FMCG segment had a steady quarter. The paper business, however, was a significant drag, with no green shoots visible yet. CLSA added that growth challenges remain, but the core remains solid.

Morgan Stanley has continued an overweight rating on ITC. The brokerage has cut the target to Rs 491 from Rs 501. "Top-line miss led by cigarettes and agribusiness. Hotels reported better revenue vs. estimates. EBIT for the cigarette business was below MSe while FMCG was ahead," the brokerage in its report said.

ITC dividend

ITC announced an interim dividend of 625 per cent, or Rs 6.25, of the face value of Rs 1 per equity share. "...declared an interim dividend of Rs 6.25 per ordinary share of Rs 1 each for the financial year ending on 31st March 2024," ITC said in an exchange filing.

ITC dividend 2024 record date

The company has set February 8 as the record date for the interim dividend.

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