Shares of ITC, a Kolkata-based conglomerate with operations in cigarettes, FMCG products and hotels, hit a new high of Rs 398.10, gaining 2% on the BSE in Tuesday’s intra-day trade, on expectations of strong earnings growth. 

FMCG companies have taken price cuts and grammage increases in the last six months which is expected to result in a volume uptick in the January-March quarter. However, rural demand conditions remain soft compared to urban demand. 

Despite challenges such as uncertain demand and inflationary pressures, ITC has performed well in recent quarters, thanks to strong growth in its core cigarette business following the pandemic, steady double-digit growth in non-cigarette FMCG, and accelerated growth in the hotel and paperboard, paper and packaging (PPP) business. 

ITC (FMCG) business is expected to see strong growth of 19.1% led by higher growth in foods, discretionary & stationary segments. Cigarette volumes would continue to grow at a faster pace (10-13%) led by stable taxation in the last five years and curb on illicit cigarettes, according to analysts at ICICI Securities.

The brokerage firm estimates 6.3% revenue growth for ITC led by around 13% volume growth in cigarettes. “We expect 340 bps gross margin improvement & similar expansion in operating margins to 35.3%. Net profit is expected to grow 17.2% to Rs 4911.8 crore,” analysts said in the Q4 result preview.

According to Motilal Oswal Financial Services (MOFSL) in their results preview, despite the recent amendment in the Finance Bill 2023 regarding tobacco/tobacco products, there will be no significant effect on the tax rates for cigarettes. Therefore, due to a rise in cigarette demand, a boost in the hotel industry reduced input cost pressures compared to competitors, and appealing valuations, ITC is the preferred choice for the next year.

Shares of ITC closed at Rs 396 apiece, up 1.92% or Rs 7.45 from the previous close on Tuesday.