ITC stock faces cigarette tax pressure ahead of Q2 results

ITC is scheduled to announce its September-quarter results on Monday, November 2, after market hours. A preview by Business Standard, updated at 8:47 a.m. IST, says brokerages expect a weak second quarter as higher cigarette taxation weighs on the company's largest profit contributor.

Cigarette business remains the key risk

Kotak Institutional Equities expects cigarette volumes to decline 9 percent year over year, with cigarette net sales down 20 percent and EBIT down 27 percent. The brokerage attributes the pressure to the new tax structure and cumulative blended price increases of 32 to 34 percent over the past six months.

Motilal Oswal Financial Services has a similar view, forecasting an 8 percent decline in cigarette volumes, a 22 percent drop in cigarette revenue and a 28 percent fall in cigarette EBIT. These are analyst estimates rather than reported results.

FMCG offers a partial offset

Non-cigarette FMCG is expected to provide support. Kotak projects 10 percent year-over-year revenue growth for the segment, while Motilal Oswal sees revenue rising 14 percent and EBIT increasing 10 percent. Both brokerages expect the cigarette weakness to remain the dominant factor for the consolidated outcome.

Analyst expectations differ on the scale of the overall decline. Kotak forecasts consolidated net sales of 17,129.2 crore Indian rupees, down 5 percent year over year, EBITDA of 5,173 crore Indian rupees, down 17.3 percent, and adjusted profit after tax of 4,050.7 crore Indian rupees, down 20.4 percent. Motilal Oswal expects net sales to be broadly flat and profit after tax to decline 15.1 percent.

Indian equities will also be shaped by the broader trading environment around the ITC stock theme.

Indian equities remain linked to developments in the BSE Sensex and sector-wide sentiment.

More news and analyses on ITC stock.