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ITC reported yet another good quarter with revenue/EBITDA/net earnings
growth of 18%/18%/21% during Q2FY12. Cigarette and other FMCG
divisions in particular registered healthy sales and margin performance.
We maintain our positive stance on the stock and it remains our preferred
pick. We expect ITC to deliver an EPS CAGR of 17% over FY11-
14E. ITC has outperformed the broad market by 38% YTD and in the
current volatile market, we think it should do relatively better than its
peers.
Cigarettes - robust volume and EBIT growth trend maintained. ITC
registered 14% and 19% sales and EBIT growth for cigarettes,
respectively, supported by an estimated 7-8% volume growth, price/mix
growth of ~6% and lower excise payout during Q2FY12. Product mix
improvement continued with premium cigarettes growing at a faster rate
than mass brands. We expect healthy volume growth (~7%) and EBIT
growth in FY12E supported by reasonable price increases (~6%) for
cigarettes.
Other FMCG surprises positively with strong top-line growth of 27%
y/y and EBIT losses declining by 16% y/y. Better revenue and
profitability for foods (supported by price increases) and education
businesses was a key driver for the same. ITC’s recent forays into instant
noodles and skin care category have been met with an encouraging
consumer response. Performance of personal care continues to be steady,
aided by new variant launches and increased distribution.
Non-FMCG businesses - a mixed bag. While revenue growth for paper
business was a tad lower at 10%, better product mix led to 18% EBIT
growth and 190bp y/y margin expansion. Agri business had a steady
quarter with 13% revenue and 15% EBIT growth. The hotel division,
however, had a weak quarter with just 4% sales and 9% EBIT growth
driven by flat occupancy level growth and low single digit growth in
ARRs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ITC reported yet another good quarter with revenue/EBITDA/net earnings
growth of 18%/18%/21% during Q2FY12. Cigarette and other FMCG
divisions in particular registered healthy sales and margin performance.
We maintain our positive stance on the stock and it remains our preferred
pick. We expect ITC to deliver an EPS CAGR of 17% over FY11-
14E. ITC has outperformed the broad market by 38% YTD and in the
current volatile market, we think it should do relatively better than its
peers.
Cigarettes - robust volume and EBIT growth trend maintained. ITC
registered 14% and 19% sales and EBIT growth for cigarettes,
respectively, supported by an estimated 7-8% volume growth, price/mix
growth of ~6% and lower excise payout during Q2FY12. Product mix
improvement continued with premium cigarettes growing at a faster rate
than mass brands. We expect healthy volume growth (~7%) and EBIT
growth in FY12E supported by reasonable price increases (~6%) for
cigarettes.
Other FMCG surprises positively with strong top-line growth of 27%
y/y and EBIT losses declining by 16% y/y. Better revenue and
profitability for foods (supported by price increases) and education
businesses was a key driver for the same. ITC’s recent forays into instant
noodles and skin care category have been met with an encouraging
consumer response. Performance of personal care continues to be steady,
aided by new variant launches and increased distribution.
Non-FMCG businesses - a mixed bag. While revenue growth for paper
business was a tad lower at 10%, better product mix led to 18% EBIT
growth and 190bp y/y margin expansion. Agri business had a steady
quarter with 13% revenue and 15% EBIT growth. The hotel division,
however, had a weak quarter with just 4% sales and 9% EBIT growth
driven by flat occupancy level growth and low single digit growth in
ARRs.
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