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ITC’s Q3FY12 numbers came in line with our sales and PAT estimates. Key
positives were YoY margin expansion in four out of five businesses (only
agri business margin remained flat, Cig margins were the highest in the
past 19 quarters), sales growth in FMCG (19% YoY in Q2FY12 vs. ~25% YoY
in Q3FY12) and sharp loss reduction in FMCG. Key negatives were a mere
~5% growth YoY in cigarette volumes (our estimate 6%) on a base of 2%
growth in Q3FY11 (8% volume growth in Q1FY12 and Q2FY12 on a lower
base of ‐3.5% and ‐0.8% respectively) and slower growth in agri business
(10% YoY in Q3FY12 versus 13% in Q2FY12). We will closely track the
cigarette volume growth and anticipate forthcoming Union Budget to be
harsh on cigarettes; we expect the stock to be range bound till then.
Maintain ‘BUY’ from long‐term perspective.
Stellar growth continues though cigarette volumes dip
ITC’s net revenue surged 14.2% YoY to ~INR62bn in Q3FY12. Its cig gross sales grew ~11%
as volumes disappointed with ~5% growth. Backed by improving profitability in the
packaged food business, FMCG losses dipped 36.4% YoY with 24.5% rise in sales and
326bps expansion in margin YoY. Hotels business sales remained flat (up 2.6%) while
profits increased 14.8% led by 348bps YoY margin improvement. Paper segment’s
performance was robust with profit and sales rising 12.4% and 17.2% YoY, respectively.
Agri business was the only laggard with sales and profit up 9.8% YoY.
Dip in COGS boosts EBIDTA margin; PAT in line with estimate
The company’s EBITDA margin expanded 128bps YoY on account of 205bps decline in
COGS, led by calibrated price hikes to counter rise in VAT rates in various states. PAT
grew 22.5% YoY to ~INR17bn (in line with our estimate).
Outlook and valuations: Positive; maintain ‘BUY’
We anticipate the forthcoming Union Budget to be harsh on cigarettes as a sharp excise
hike seems imminent. We are enthused by ITC’s plan to enter dairy and other consumer
segments. Also, it is gaining traction in non‐cigarettes businesses, making it a well
diversified growth company. Currently, it is trading at 25.6x and 22.3x FY12E and FY13E
EPS, respectively. We maintain ‘BUY/Sector Outperformer’
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ITC’s Q3FY12 numbers came in line with our sales and PAT estimates. Key
positives were YoY margin expansion in four out of five businesses (only
agri business margin remained flat, Cig margins were the highest in the
past 19 quarters), sales growth in FMCG (19% YoY in Q2FY12 vs. ~25% YoY
in Q3FY12) and sharp loss reduction in FMCG. Key negatives were a mere
~5% growth YoY in cigarette volumes (our estimate 6%) on a base of 2%
growth in Q3FY11 (8% volume growth in Q1FY12 and Q2FY12 on a lower
base of ‐3.5% and ‐0.8% respectively) and slower growth in agri business
(10% YoY in Q3FY12 versus 13% in Q2FY12). We will closely track the
cigarette volume growth and anticipate forthcoming Union Budget to be
harsh on cigarettes; we expect the stock to be range bound till then.
Maintain ‘BUY’ from long‐term perspective.
Stellar growth continues though cigarette volumes dip
ITC’s net revenue surged 14.2% YoY to ~INR62bn in Q3FY12. Its cig gross sales grew ~11%
as volumes disappointed with ~5% growth. Backed by improving profitability in the
packaged food business, FMCG losses dipped 36.4% YoY with 24.5% rise in sales and
326bps expansion in margin YoY. Hotels business sales remained flat (up 2.6%) while
profits increased 14.8% led by 348bps YoY margin improvement. Paper segment’s
performance was robust with profit and sales rising 12.4% and 17.2% YoY, respectively.
Agri business was the only laggard with sales and profit up 9.8% YoY.
Dip in COGS boosts EBIDTA margin; PAT in line with estimate
The company’s EBITDA margin expanded 128bps YoY on account of 205bps decline in
COGS, led by calibrated price hikes to counter rise in VAT rates in various states. PAT
grew 22.5% YoY to ~INR17bn (in line with our estimate).
Outlook and valuations: Positive; maintain ‘BUY’
We anticipate the forthcoming Union Budget to be harsh on cigarettes as a sharp excise
hike seems imminent. We are enthused by ITC’s plan to enter dairy and other consumer
segments. Also, it is gaining traction in non‐cigarettes businesses, making it a well
diversified growth company. Currently, it is trading at 25.6x and 22.3x FY12E and FY13E
EPS, respectively. We maintain ‘BUY/Sector Outperformer’
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