Fast moving consumer goods (FMCG) major ITC will report its third-quarter earnings on Wednesday and the focus will be on volume growth and margins.
- The stock trades at 25 times FY20, earnings trades at 51 percent discount to Hindustan Unilever Ltd (HUL) and this discount has been the widest that the street has seen in a very long time. So there is case for that valuations and the other thing that will help them is the fact that there is a favourable base of a 4 percent decline in the volumes.
- 10 percent growth on the topline, Rs 10,740 crore, EBITDA growth of about 10.5 percent Rs 4,300 crore is what the street is estimating. It is a high margin business, margins are likely to be stable at around that 40 percent mark and the net profit flat at around Rs 3,077 crore. So with 10 percent EBITDA growth and 10 percent revenue growth, why would the net profit be flat because the base quarter had an exceptional gain of Rs 413 crore so if you adjust for that, the net profit is likely to be higher by 15 percent.
- The number that one should keep on one’s radar is the Rs 3,100 crore mark on the bottomline and not just the percentage growth.
- The street expects 6-7 percent growth in cigarette volumes.
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