The Economic Times daily newspaper is available online now.

    ITC's first quarter has no spark to ignite another rally

    Synopsis

    Subdued demand both in domestic and export markets, competition from low priced Chinese supplies in global markets, sharp reduction in global pulp prices and high-base effect impacted its performance. Lower realisations and increase in input costs impacted the segment's profitability.

    ITC's first quarter has no spark to ignite another rallyReuters
    ET Intelligence Group: ITC's June quarter performance is unlikely to cheer its investors. The company's stock has already corrected 9% since it announced the proposed scheme of demerging its hotels business into a separate listed company on July 24.

    The board finally cleared the demerger with shareholders getting 1 share of ITC Hotels for every 10 shares held in the parent company - a ratio that is unlikely to enthuse most investors.

    Underperformance of the agri division - adversely impacted by the ban on wheat exports - pulled down the overall revenue growth of the company. The gross revenues dropped 7% impacted by the 24% decline in the agri segment revenues. Despite the hit on the topline, the agri business managed to improve its profitability on account of better realisations of value added agri products and lead tobacco.

    ITC’s First Quarter Has No Spark to Ignite Another RallyET Bureau

    The cigarette business continued to post double-digit growth in sales and profit. Product innovation as well as premiumisation helped spur the growth. The company has managed to claw back volumes from illicit trade in cigarettes. Consequently, ITC's overall profitability improved year-over-year.

    Performance of the FMCG business continued to be encouraging with the segment crossing quarterly sales of ₹5,000 crore and its profit doubling to ₹431 crore for the June quarter. The strong performance was driven by growth in staples, biscuits, noodles, dairy as well as stationery products among other products.

    The hotels business logged its best quarterly performance - making the demerger well-timed. There has been improvement in the operational parameters of average room rates and revenue per available room. It is likely to take around 15 months for the ITC hotels as an entity to be demerged and listed.

    Besides agri division, the paper business too posted subdued performance with revenues dropping 6% and segmental income declining 23%.

    Subdued demand both in domestic and export markets, competition from low priced Chinese supplies in global markets, sharp reduction in global pulp prices and high-base effect impacted its performance. Lower realisations and increase in input costs impacted the segment's profitability.

    With the hotels division demerger details having been spelt out and a lacklustre quarterly performance, the Street is unlikely to have a fresh trigger for spurring another rally in the ITC stock. The rally in ITC stock is likely to pause - at least for now.



    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in