ITC’s Cigarette Business Snaps 12-Quarter Declining Trend

Kolkata: Indian conglomerate company ITC shares jumped seven percent near their 52-week high on Monday, tracking the tobacco major’s March quarter earnings. Strong gains in ITC - one of the most influential stocks in the Nifty50 - also supported broader markets on Monday.

ITC on Friday reported a net profit of nearly Rs 2,500 crore on sales of Rs 10,060 crore in Q4, meeting Street estimates. More importantly, ITC's cigarette volume rose after 12 straight quarters of decline, according to Religare. ITC’s cigarette business, the biggest and most profitable segment for the company, grew by nearly 10 percent year-on-year to Rs 4,640 crore as compared to 5.7 percent and 1.6 percent growth in the December and September quarters.

According to Sharekhan, ITC hiked cigarette prices by 10-13 percent to pass on the impact of ten percent increase in the excise duty. “With no incremental price hikes in the coming quarters, we expect cigarette sales volume to stabilise in the coming quarters. We have factored in a low single-digit decline in the sales volume for FY17 and volume growth of 6 percent in FY18 in the absence of any significant increase in the excise duty,” the brokerage added.

ITC’s non-cigarette FMCG business however grew by just 5.4 percent year-on-year to Rs 2,700 crore indicating persistent sluggish demand environment. Analysts say normal monsoons can lift ITC’s FMCG business.

ITC’s agri-business grew by 26.5 percent year-on-year to Rs 1,800 crore on a soft base. The company’s hotels/papers businesses grew 4.8 percent and three percent year-on-year respectively.