If smokers have reduced the consumption of cigarettes owing to the pandemic restrictions, then ITC Ltd’s June quarter results (Q1FY22) don’t reflect that. In fact, the firm’s mainstay cigarettes business was a star performer last quarter on both revenues and profitability. ITC’s paperboards, paper and packaging business outshined, too.

The upshot: the company’s standalone Ebitda rose as much as 50% year-on-year to Rs3,990 crore. Ebitda is earnings before interest, tax, depreciation and amortisation; a key measure of profitability for companies. Of course, the lower base of last year helps, considering the covid-19 lockdown has weighed heavily on business operations. “On a 2-yr CAGR, Ebitda still declined 6%, which is understandable in the context of restrictions during the quarter," said analysts from Jefferies India Pvt. Ltd in a report on 25 July. CAGR is short for compound annual growth rate. Even so, ITC June quarter Ebitda is 12% ahead of Jefferies’ estimates.

The firm’s cigarettes revenues rose 33% year-on-year, aided by a favourable base. Volume growth is estimated to be in line with revenue growth. ITC saw severe disruptions in the month of May. There has been week-on-week improvement since mid?June with most markets returning to normalcy and witnessing faster recovery compared to the first wave.

“What is most important to us at this juncture, however, is that there doesn’t yet appear to be any structural damage to smoking habits as was the fear earlier, despite the prolonged problems relating to mobility, ease of product-access, etc due to the lockdowns," said analysts from JM Financial Institutional Securities Ltd in a report on 24 July. For the quarter, cigarettes earnings before interest and tax (Ebit) increased by 37%, contributing 84% of the company’s total Ebit.

The company’s fast-moving consumer goods (FMCG) division saw revenue growth of 10% year-on-year. The company said its hygiene portfolio bounced back after normalizing in H2FY21 at elevated levels. Further, discretionary/ ‘out?of?home’ consumption products witnessed strong growth on a favourable base. In this category, the adverse impact of the second wave was lower compared to the first wave. Even as FMCG Ebit rose 16% year-on-year, note that higher input costs pose a risk, going ahead.

ITC’s paperboards saw year-on-year revenue and Ebit growth of 54% and 145%, respectively. Jefferies said Ebit margins rose to an all-time high at around 25%. Profitability was helped by richer product mix and higher realisations due to surge in global pulp prices.

Meanwhile, ITC’s shares traded around 1% higher in early deals on Monday on the National Stock Exchange. JM’s analysts said, “Core business is looking up, and stock is cheap with a very attractive dividend yield." The stock is yet to recover to pre-pandemic levels and is trading almost 12% lower than its pre-covid highs seen in January 2020.