On February 7, shares of ITC, a company that makes cigarettes and runs hotels, are in the spotlight. They just shared their financial results for the third quarter of FY25, and it was a mixed bag. The company’s profit after tax fell by 7% compared to last year, coming in at Rs 4,935 crore, down from Rs 5,335 crore.
However, ITC’s total earnings grew by 8%, reaching Rs 20,350 crore. The board also announced a dividend of Rs 6.5 per share for the financial year ending in March 2025. The company’s profits before tax (EBITDA) rose by 3% year-on-year. When looking just at the paper business, that number goes up to a 5% increase.
Breaking it down by business segments:
– Cigarettes: Revenue grew by 8% and profits before tax increased by 4%.
– Hotels: This part of the business did really well, with revenues hitting Rs 922 crore, which is a 15% increase from last year.
– FMCG (Fast-Moving Consumer Goods): Sales increased by 4% to Rs 5,418 crore despite some slow demand.
– Paperboard: This business faced tough competition from cheaper imports from China and Indonesia.
– Agri-business: This area grew by 10% thanks to stronger sales in leaf tobacco and value-added exports. Profits in this segment were up by 22%.
A brokerage firm called Nuvama maintained a “buy” recommendation for ITC and set a target price of Rs 571 per share, praising the performance in the cigarette segment but noting that overall profit margins have dipped.
Raw material costs have impacted profits, leading to a drop of 239 basis points in profit margins to 34.2%. Furthermore, Nuvama mentioned that ITC has acquired Prasuma, a company that specializes in frozen and ready-to-cook foods, at a reasonable cost, helping ITC grow in this booming market.
Despite these positive steps, Nuvama advised being careful in the short term due to a slowdown in the urban market, rising costs for raw materials, and weaker profits in the FMCG and paper divisions.
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