ITC’S NET REVENUES GREW BY 9.6%YOY TO RS17248.2CRORE

News - ITC’s net revenues (including other operating income) grew by 9.6%yoy to Rs17248.2crore driven by 6%yoy growth in the cigarette business revenues and 18% growth in the agribusiness revenues.  Cigarette business volume growth stood at ~5% in-line with the street expectation of 4-5% for the quarter. Non-cigarette FMCG business revenues grew by 3.7%yoy to Rs5494.6crore (lower than street expectation of 6-7%). Gross margins decreased by 347BPS yoy to 54.7% (stood flat QoQ) while EBIDTA margins decreased by 242BPS yoy to 34.7% (largely in-line with our expectation of 34.4%).  FMCG business EBIDTA margins was down to 8.9% (stood in-line with 8.5% in Q3FY25) led by sharp input cost inflation during the quarter. Cigarette business and PPP business EBIT margins were down by 121bps and 491bps in Q4. Agri business maintained its strong performance with 17% revenue growth and EBIT margins improving by 46bps to 7.0% on back of better leaf tobacco exports. Overall EBIDTA grew by 2.5%yoy to Rs5,986.4crore and adjusted PAT stood flat at Rs4,874.7crore (in-line with our expectation of Rs4,813.9crore). Reported PAT stood at Rs19,561.6crore. Exceptional item in Q3FY25 includes Rs14,686.9crore gains related to discontinued operations.  The company has declared the final dividend of Rs7.85 per share (including interim dividend final dividend stands at Rs14.35 per share).

View - Overall ITC’s Q4 performance was replica of Q3 results with cigarette business volumes growing in mid-single digit while agri business performing with double digit revenue growth and margins remaining high on y-o-y basis. In-line with its Next-growth strategy, the company had made three acquisitions in fast growing consumption space. We should expect the company to invest strong cash generation in organic and inorganic initiatives to improve the growth prospects of FMCG business and paperboard, paper and packaging business in the coming years. Its discounted valuations (22x FY27E earnings) and long-term growth prospects make it a better pick in large FMCG space.

Impact - Neutral