In the recently reported Q1FY25 results, ITC faced a marginal decrease in net profit, mainly due to challenges in the paper, paperboard, packaging, hospitality, and agri-business segments. Despite this, the conglomerate's consolidated gross revenue showcased a 7.5% increase year-on-year, with a positive trajectory exhibited in the gross cigarette revenue which grew by 6% driven by volume growth, mix improvement, and price hikes.
The FMCG segment of ITC reported a 6% growth year-on-year, although it faced adverse effects from severe heat waves and slow packaged food growth. Additionally, the paper business encountered difficulties such as demand issues, competitive pressure from China, lower pulp prices, and higher input costs, leading to weakened revenue and margins. The agri-business made improvements during the quarter, but faced setbacks from stock limits on wheat and export restrictions.
Following the Q1FY25 results, updates were provided on ITC's target prices, showcasing a positive outlook on the company's growth prospects. Earnings estimates were increased by 1-2% for FY25E-FY26E, indicating a revenue, Ebitda, and net profit compound annual growth rate over the upcoming years. With the anticipation of improved performance in the FMCG and paperboard segments, as well as a strategic capital allocation post the hotel demerger, positive sentiments were maintained on ITC's return profiles and valuation multiples. Additionally, market dynamics, such as government taxation policies, rural consumption trends, and innovations in product portfolios, were highlighted as factors impacting ITC's business performance and market positioning.