ITC Q1: ITC Q1 preview: Net profit may rise 32%, but sequential performance likely to see Covid 2.0 hit

MUMBAI: is expected to report strong year-on-year performance in the quarter ended June aided by a low base of the year-ago quarter, but will reflect the damage caused by the second wave of Covid-19 infections in sequential performance.

The cigarette-to-biscuits company is expected to report a 32 per cent year-on-year rise in net profit to Rs 3,085 crore, according to an average of 10 brokerages polled by ETMarkets.com. The company is also expected to report a 27 per cent on-year rise in revenue from operations to Rs 11,359 crore in the reported quarter.

The country’s second largest FMCG company will report its June quarter earnings on Saturday.

On a sequential basis, the company’s net profit is likely to sink 18 per cent and sales may fall 15 per cent, reflecting the damage afflicted by the second wave on the demand environment.

The growth in the quarter will be led by the company’s mainstay cigarette business where analysts are factoring a 22-30 per cent year-on-year growth in volumes given the steep decline in the year-ago quarter.

While the year-on-year growth will be handsome for the company, its volumes are expected to have taken a hit as compared to the previous quarter on account of localized lockdowns triggered by the second wave.

The FMCG business is expected to report sales growth in the range of 5-10 per cent in the quarter because of the high base of the year-ago quarter and minimal benefits from the second wave in the health and hygiene segment.

Consumer staple companies did not see the benefit of panic buying in the June quarter as they saw in the year-ago quarter due to national lockdown, said analysts.

On the operating front, the cigarette manufacturer’s performance is expected to be healthy as analysts expect earnings before interest, tax, depreciation and amortization to come around Rs 3,762 crore. ITC’s operating margin is likely to expand 397-580 basis points on-year to 31.3-34.9 per cent in the reporting quarter.

Besides the June quarter, investors will keenly await the company’s commentary on demand recovery post the second wave, the pricing environment for its FMCG products and possible restructuring of its businesses.