CMP: ₹438
ITC’s Dec-Q earnings had been beneath expectations general. Cigarettes efficiency seemed muted y-o-y (volumes down 2 per cent) however longer-range information suggests a more healthy state of affairs (4 yr CAGR of 4 per cent – tad beneath September quarter’s 5 per cent however higher than the previous two quarters).
Notably, the Sept-to-Dec sequential quantity uptick was steeper-than-trend final yr, and there have been additionally some weather-related disruptions in some key markets in the course of the quarter. FMCG continued to do effectively regardless of a difficult macro; progress has moderated however higher vs friends; margin enchancment trajectory remained sturdy. Lodges was a stand-out contributor this time spherical.
Paperboard (resulting from subdued home demand and extra low-priced Chinese language provides within the international market) and Agri (resulting from sure restrictions positioned in a couple of of the commodities to make sure meals safety and management inflation) remained underneath extreme stress inflicting important drag in general profitability.
We count on inventory to be muted within the near-term given a weaker general surroundings, although we reckon there may be potential for re-rating given a sharper capital allocation technique.
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