ITC Faces Share Price Decline Post Q3 Results and Dividend Announcement – Analysts Weigh In

ITC, the conglomerate spanning cigarettes to hotels, reported a consolidated net profit of ₹5,335 crore for the third quarter of FY24, reflecting a 6% growth compared to ₹5,006 crore in the same period last year.

Key Financials:

1. Revenue from Operations: ITC’s revenue for the December quarter increased by 2% year-on-year to ₹19,484 crore from ₹19,020 crore.
2. EBITDA: Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) in Q3FY24 declined by 3.2% to ₹6,024 crore, with EBITDA margin contracting by 180 basis points YoY to 36.6%.
3. Segment Performance:
   • FMCG segment showcased resilience with a 7.6% YoY revenue increase and a 100 bps expansion in EBITDA margin to 11.0%.
   • Cigarettes segment witnessed consolidation on a high base, with a 2.3% YoY rise in revenue and PBIT. Cigarette volumes dipped by 2% YoY but increased by 5% QoQ.
   • Hotels segment experienced its best-ever quarter, with an 18% growth in revenue and a remarkable 57% YoY increase in PBIT. EBITDA margin improved by 470 bps to 36.2%.
4. Dividend Declaration: The ITC board declared an interim dividend of ₹6.25 per share for FY24, with a record date set for February 8.

Market Response:

• ITC shares witnessed a 1.02% decline, trading at ₹445.40 apiece on the BSE at 9:20 am.

Analysts’ Views:

1. Emkay Global Financial Services:
   • Maintains a positive long-term view on ITC, citing better execution and macro support for its diversified businesses.
   • Acknowledges near-term challenges, including a 2% estimated volume decline in Q3FY24 for cigarettes.
   • Maintains a ‘Buy’ rating, with a target price reduced to ₹520 per share from ₹550.
2. Nuvama Institutional Equities:
   • Despite Q3FY24 revenue and PAT exceeding estimates, cuts FY24E and FY25E EPS estimates by 5.2% each.
   • Maintains a ‘Buy’ call with a revised target price of ₹535 per share, down from ₹560.
3. Antique Stock Broking:
   • Reduces estimates for ITC post-Q3FY24 by 3%/8%/6% for FY24/FY25/FY26.
   • Remains positive on ITC’s performance driven by cigarette market share gains and momentum in FMCG and Hotels business.
   • Maintains a ‘Buy’ recommendation with a target price of ₹499 per share, down from ₹532.

In conclusion, analysts express confidence in ITC’s long-term potential, with some foreseeing near-term challenges as entry opportunities. The stock’s current performance prompts adjustments in target prices while maintaining optimistic outlooks.