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ITC Ltd.
F4Q11: Cigarette Volumes
Disappoint; Strong Quarter
for Other Businesses
Quick Comment – F4Q11 earnings ~5% below
estimates: ITC reported F4Q11 revenue, EBITDA, and
PAT of Rs58.4bn, Rs19.1bn and Rs12.8bn, respectively,
vs. our estimates of Rs61bn, Rs20.7bn, and Rs13.5bn.
Cigarette volume decline of ~2% YoY was the key
disappointment for the quarter. However, our
understanding is that retail demand remains strong and
the disappointment in primary sales is likely a phasing
issue. Putting numbers into perspective, lower cigarette
volumes during the quarter represents ~three days of
sales for ITC. Performance across other business
segments continues to improve with ~300bp
improvement in RoE for the non-cigarette businesses.
Market expectations for cigarette volumes for F4Q was
~4%, in our view. The disappointment notwithstanding,
results were inline with Bloomberg reported consensus
expectations. Said differently, non-cigarette business
beat consensus expectations during the quarter.
Key Positives: 1) Strong operating performance in the
hotels business with margins at 30.7%, the highest in
eight quarters. 2) Strong cigarette EBIT growth of 18%
drove over 100bp of segment margin expansion. 3) Agri
business continues to surprise with revenue and
operating profit growth of 9% (base impact) and 43%,
respectively. 4) Non-tobacco FMCG losses reduced by
14% in F4Q. We estimates that volume market share for
ITC in the soaps business is stable at ~6%. 5) Capital
employed in the cigarette business is down 10% QoQ.
5) ITC declared a special dividend of Rs1.65 per share,
implying a total payout of 82% for F2011, higher than our
expectation of ~60%.
Key Negatives: 1) Cigarette volume fell ~2% YoY. We
view this as a phasing issue and remain confident of 7%
growth for F2012. 2) Reported operating margin was
~100bp lower than expected driven by a combination of
lower cigarette business revenues and roll out costs for
personal care products, we believe
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ITC Ltd.
F4Q11: Cigarette Volumes
Disappoint; Strong Quarter
for Other Businesses
Quick Comment – F4Q11 earnings ~5% below
estimates: ITC reported F4Q11 revenue, EBITDA, and
PAT of Rs58.4bn, Rs19.1bn and Rs12.8bn, respectively,
vs. our estimates of Rs61bn, Rs20.7bn, and Rs13.5bn.
Cigarette volume decline of ~2% YoY was the key
disappointment for the quarter. However, our
understanding is that retail demand remains strong and
the disappointment in primary sales is likely a phasing
issue. Putting numbers into perspective, lower cigarette
volumes during the quarter represents ~three days of
sales for ITC. Performance across other business
segments continues to improve with ~300bp
improvement in RoE for the non-cigarette businesses.
Market expectations for cigarette volumes for F4Q was
~4%, in our view. The disappointment notwithstanding,
results were inline with Bloomberg reported consensus
expectations. Said differently, non-cigarette business
beat consensus expectations during the quarter.
Key Positives: 1) Strong operating performance in the
hotels business with margins at 30.7%, the highest in
eight quarters. 2) Strong cigarette EBIT growth of 18%
drove over 100bp of segment margin expansion. 3) Agri
business continues to surprise with revenue and
operating profit growth of 9% (base impact) and 43%,
respectively. 4) Non-tobacco FMCG losses reduced by
14% in F4Q. We estimates that volume market share for
ITC in the soaps business is stable at ~6%. 5) Capital
employed in the cigarette business is down 10% QoQ.
5) ITC declared a special dividend of Rs1.65 per share,
implying a total payout of 82% for F2011, higher than our
expectation of ~60%.
Key Negatives: 1) Cigarette volume fell ~2% YoY. We
view this as a phasing issue and remain confident of 7%
growth for F2012. 2) Reported operating margin was
~100bp lower than expected driven by a combination of
lower cigarette business revenues and roll out costs for
personal care products, we believe
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