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ITC
Strong underlying performance
ITC has reported 19% EBITDA growth in 3QFY11, despite its paper business (10%
of EBIT) recording a decline of 5% due to one-off factors. Improving revenue
growth in cigarette business to 18% yoy growth, suggests volume growth has
turned to positive 1-2%.
3QFY11 records 20% revenue growth
! ITC has recorded overall revenue growth of 20% with cigarette business growing at 18% yoy,
other FMCG at 24% y.o.y, hotels at 26% yoy, agri-business at 18% yoy and paper business
at 8% yoy. The cigarette business has seen a improvement in revenue growth from 14% in
1HFY11, to 18%, which clearly, suggests that volume growth has returned back to 1-2%
positive growth. The paper business under-performed, due to inventory depletion caused by
the uncertainity around the change in graphic statutory warnings on cigarette packaging. Key
segments in other FMCG segments like biscuits (28% growth), potato chips (48% growth)
performed strongly. ITC has entered the noodles segment in September 2010, under the
"Sunfeast Yippee" brand name.
EBITDA growth was strong at 19%
! Cigarette business recorded 17% EBIT growth. We estimate that ITC cigarette volumes,
which were running at 2-3% negative in the 1HFY11 due to knee-jerk impact of the price
hikes post budget, have returned back to positive growth in 3QFY11. The losses in the other
FMCG business declined to Rs736m from Rs860m in 3QFY10. While, the mix in key
segments have got richer, due to high commofity price inflation, the positive impact on
margins have got neutralised. Paper business recorded a dip in EBIT by 5%, due to 2-3 week
production shutdown in cigarette packaging business due to uncertainity in graphic warnings.
Hotel business grew EBIT at 16%, but was again adversely impacted due to Common Wealth
Games in its Delhi operations. Agri business recorded a strong 36% growth, with strong good
volumes in its leaf tobacco business.
Budget will be key for short-term sentiment.
! We do not expect a sharp excise hike in the 2011 budget, given the flat to negative volume
growth for industry in FY11, post the 10-11% hike in 2010 budget. ITC is set to achieve our
FY11 EPS estimates, and we maintain our Buy on the stock.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
ITC
Strong underlying performance
ITC has reported 19% EBITDA growth in 3QFY11, despite its paper business (10%
of EBIT) recording a decline of 5% due to one-off factors. Improving revenue
growth in cigarette business to 18% yoy growth, suggests volume growth has
turned to positive 1-2%.
3QFY11 records 20% revenue growth
! ITC has recorded overall revenue growth of 20% with cigarette business growing at 18% yoy,
other FMCG at 24% y.o.y, hotels at 26% yoy, agri-business at 18% yoy and paper business
at 8% yoy. The cigarette business has seen a improvement in revenue growth from 14% in
1HFY11, to 18%, which clearly, suggests that volume growth has returned back to 1-2%
positive growth. The paper business under-performed, due to inventory depletion caused by
the uncertainity around the change in graphic statutory warnings on cigarette packaging. Key
segments in other FMCG segments like biscuits (28% growth), potato chips (48% growth)
performed strongly. ITC has entered the noodles segment in September 2010, under the
"Sunfeast Yippee" brand name.
! Cigarette business recorded 17% EBIT growth. We estimate that ITC cigarette volumes,
which were running at 2-3% negative in the 1HFY11 due to knee-jerk impact of the price
hikes post budget, have returned back to positive growth in 3QFY11. The losses in the other
FMCG business declined to Rs736m from Rs860m in 3QFY10. While, the mix in key
segments have got richer, due to high commofity price inflation, the positive impact on
margins have got neutralised. Paper business recorded a dip in EBIT by 5%, due to 2-3 week
production shutdown in cigarette packaging business due to uncertainity in graphic warnings.
Hotel business grew EBIT at 16%, but was again adversely impacted due to Common Wealth
Games in its Delhi operations. Agri business recorded a strong 36% growth, with strong good
volumes in its leaf tobacco business.
Budget will be key for short-term sentiment.
! We do not expect a sharp excise hike in the 2011 budget, given the flat to negative volume
growth for industry in FY11, post the 10-11% hike in 2010 budget. ITC is set to achieve our
FY11 EPS estimates, and we maintain our Buy on the stock.
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