Expectataion:ITC Q2 profit may grow 10%, cigarette volume growth seen at 3-4%:
-Cigarette-hotel-to-FMCG major ITC is expected to show good performance in quarterly earnings on Tuesday as profit is likely to increase 10 percent year-on-year to Rs 2,673 crore with likely cigarette volume growth of 3-4 percent in Q2.
-Volume growth may be boosted by modest price hike of 5-6 percent and higher proportion of sales from sub 65mm cigarettes (that attract lower excise duty). In Q2FY16, the company had a 15 percent decline in cigarette volume.
-According to average of estimates of analysts polled by CNBC-TV18, revenue during the quarter is seen rising 9 percent to Rs 9,725 crore on yearly basis. Operating profit may grow 8 percent YoY to Rs 3,850 crore but margin may shrink 40 basis points to 39.6 percent in the quarter ended September 2016.
-Analysts expect cigarette revenue growth at 7-8 percent for the quarter. It contributes 60 percent to total revenue and 90 percent to EBIT (earnings before interest and tax).
-FMCG business growth is expected to be 9-10 percent but there may be a loss at EBIT level. Hotels sales growth is likely to be 2-3 percent and agri trading growth at around 10 percent (against 10 percent decline in Q2FY16).
-The stock gained 35 percent since Budget day's low of Rs 179 as excise duty hike of 10 percent in Budget was below expectations.
-Analysts bet on this stock due to attractive valuations. Cigarette volume growth has regained positive momentum for two quarters after 12-13 quarters of decline
