ITC’s cigarettes burn in Q1FY22, but stock doesn’t light up much

The result: The company’s standalone Ebitda rose a whopping 50% year-over-year to Rs3,990 crore. Ebitda is earnings before interest, tax, depreciation and amortization; an important measure of profitability for companies. Of course, last year’s lower base helps, as the Covid-19 lockdown has weighed heavily on business operations. At a 2-year CAGR, EBITDA was still down 6%, which is understandable in the context of restraints during the quarter,” analysts at Jefferies India Pvt. Ltd said in a report on July 25. CAGR is short for compound annual However, the June ITC quarter Ebitda is 12% higher than Jefferies estimates.

The company’s cigarette revenues were up 33% year-over-year, helped by a favorable base. Volume growth is expected to be in line with revenue growth. ITC saw serious disruptions in the month of May. There has been week-on-week improvement since mid-June, with most markets returning to normal and recovering faster compared to the first wave.

What is most important to us at the moment, however, is that there does not yet appear to be any structural damage to smoking habits as previously feared, despite the long-standing problems with mobility, easy access to products, etc. lockdowns,” said JM analysts. Financial Institutional Securities Ltd in a report on July 24. For the quarter, cigarette revenue before interest and tax (Ebit) increased 37%, accounting for 84% of the company’s total Ebit.

The Fast Moving Consumer Goods (FMCG) division saw a 10% year-over-year revenue growth. The company said its hygiene portfolio recovered after normalization in H2FY21 at elevated levels. In addition, discretionary/out-of-home consumer products grew strongly on a favorable basis. In this category, the adverse impact of the second wave was lower compared to the first wave. Even if the FMCG Ebit was up 16% year-over-year, keep in mind that higher input costs are a risk.

ITCs cardboard saw year-over-year revenue and Ebit growth of 54% and 145%, respectively. Jefferies said EBIT margins rose to an all-time high of about 25%. Profitability was aided by a richer product mix and higher realizations as a result of the increase in global pulp prices.

Meanwhile, ITCs stock traded about 1% higher in early deals on Monday on the National Stock Exchange. JMs analysts said core business looks good and stocks are cheap with very attractive dividend yields.” The stock has yet to recover to pre-pandemic levels, trading nearly 12% below pre-covid highs in January 2020.