ITC’s Q3 Results: Cigarette Volumes Weigh on Performance, Analysts Cut Target Price

ITC shares witnessed a decline in early trade on Tuesday following the announcement of its Q3 results. The conglomerate reported lower-than-expected cigarette volumes, leading to a decrease in investor sentiment. The share price fell by 1.84% to ₹441.70 on the news.

In the third quarter of FY24, ITC posted a consolidated net profit of ₹5,335 crore, denoting a 6% growth compared to the same period the previous year. The company’s revenue from operations also saw a modest increase of 2% YoY, reaching ₹19,484 crore.

Analysts have expressed their opinions on ITC’s performance and outlook following the Q3 results. Antique Stock Broking, while positive about ITC’s performance, adjusted their estimates by 3-8% for FY24-FY26. Similarly, Emkay Global remains positive on the company in the long term but emphasizes the importance of navigating near-term challenges.

Motilal Oswal Securities considers ITC a good defensive option in the uncertain market, attributing its resilience and a 3-4% dividend yield as key factors. They predict a 7% earnings CAGR over FY24-26 and recommend a BUY rating for the company. Nuvama Institutional Equities highlights the performance of ITC’s hotel business as the best-ever quarter, with revenue growth of 18% YoY and an EBITDA margin of 36.2%.

Despite positive aspects, ITC’s cigarette segment faced consolidation on a high base, resulting in only a 2.3% increase in net revenue. Additionally, the agri and paper segments continue to encounter pressures. Competitive intensity remains high in categories such as biscuits, snacks, noodles, and popular soaps.

Analysts have revised their target prices for ITC following the Q3 results. While Antique Stock Broking reduced their target price to ₹499, Emkay Global adjusted theirs to ₹520. Nuvama Institutional Equities suggested a target of ₹535. Nirmal Bang, while finding ITC’s valuations inexpensive, retains a BUY rating on the stock.