Why ITC will continue to outperform the FMCG Index?

A strong March quarter performance is likely to make ITC an outperformer in the FMCG sector. The cigarettes-to-packaged products company is expected to post a revenue growth of 14% - the highest in the last four quarters. The growth however is likely to be value-driven as the company’s cigarettes volume is likely to decline by 1-2% over the previous year.

The operating margins are estimated to be 38.8% - 570 bps higher than a year ago. Margin expansion is likely to occur in case of all segments – cigarettes, FMCG, hotels, agri and paper. FMCG business is likely to post profit – thanks to its sustained investment in the segment, product relaunches and foray into fast growing categories.

While the ET FMCG Index has gained 1.12% in the last one year, ITC’s stock is up 3.2%. Year to date also, ITC has gained 7.2% even as the broader sectoral index is up 3.9%. The stock is likely to continue its out performance of the index – aided by a strong March quarter performance.