*ITC Q2: Analysts expect strong numbers, net to grow 16%**C*igarettes to FMCG and hotels major ITC<http://www.moneycontrol.com/india/stockpricequote/cigarettes/itc/ITC> is set to announce its results for the quarter ended September 2012 today. Analysts have been expecting strong results from the company despite negative news flow (like packaging norms, changes in tax structures and competition from illicit segments) during the quarter.
The profit after tax is expected to grow by 16.1 percent year-on-year to Rs 1,758 crore and net sales are likely to rise by 15.4 percent YoY to Rs 6,893 crore during the quarter. Analysts on an average expect 15-18% YoY revenue growth in the cigarette segment, which contributes 50 percent to its total revenues, with flat EBIT margin. The volume growth of cigarettes segment is expected to be flat to one percent for the quarter. Cigarette volumes did not fall despite price increase of around 18% in the three months ended September, which is a testimony of ITC's pricing power. Other FMCG business (other than cigarette), which includes confectionary, personal care, foods etc, is expected to report 20% growth in revenues. Reduction in losses in this segment will continue in the second quarter as well. In case of hotels business, weak macro environment and high supply continue to plague the segment. Occupancy rates have remained flat for around 2 years now. Earnings before interest, tax, depreciation and amortisation (EBITDA) is seen going up by 14.3% to Rs 2,410 crore in the second quarter of financial year 2012-13 from Rs 2,108 crore. Operating profit margin is likely to increase 30 basis points YoY to 35 percent in the quarter. Overall the street is expecting the company to remain an outperformer in the FMCG space. Fundamentally the stock has been riding on predictability in cash flows, despite negative noise on packaging norms, changes in tax structures and competition from illicit segments. ITC has maintained superior market leadership position in cigarette business. Despite acute price hikes (following excise duty hikes in cigarettes), the company has been able to successfully pass them on to customers, without any loss in market share. Increase in cigarette consumption from new consumers (especially growing number of female consumers) also helped the cigarette business keep the market share higher. Over Rs 5,500 crore from FMCG (other than cigarette) business has made ITC the second largest FMCG company by sales. Analysts feel the break even in this segment in the next 4-5 quarters will be a significant positive for the company. ITC faced a slew of negative news in the second quarter of FY13. Uttar Pradesh government increased value added tax (VAT) on cigarettes from 17.5% to 50% and Australian government introduced plain packaging norms for all cigarette companies during the quarter. Institutional investors continue to remain overweight on ITC, despite high valuations and an underweight stance on the consumer staples sector as a whole. IDFC was the only brokerage with a clear and strong negative view on the stock. In fact for Q2, the firm have estimated a 1% decline in cigarette volumes. -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
