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ITC reported good all-round performance for 1Q FY12, registering Net Sales,
EBITDA, and PAT growth of 20%, 17% and 25% y/y respectively. The
cigarette business in particular registered healthy volume growth of ~8% and
EBIT margin expansion of 200bp y/y. Except for a slightly subdued top-line
growth for the hotel division, all other non-tobacco businesses either met or
exceeded our revenue and margin growth expectations. We like ITC for its
tobacco business, which is probably the only Indian consumer business whose
pricing power is intact, given low competition, high entry barriers and strong
brand affinity. Maintain Overweight.
Cigarettes: Encouraging volume growth and robust EBIT growth of
21%: 1Q sales rose 13% y/y, led by an estimated 8% volume growth,
implying price/mix growth of 5%. However, price rises and lower excise
payouts led to a sharp 200bp y/y expansion in EBIT margins for this
division and healthy 21% EBIT growth. Product mix improvement
continued with premium cigarettes growing at a faster rate than mass
brands. We expect healthy volume growth (~6-7%) and EBIT growth (17%)
in FY12 supported by reasonable price increases (5-6%) for cigarettes.
Non-tobacco business: Good performance: Top-line growth trends
remained healthy across divisions (ex-hotel), and nearly all segments posted
impressive EBIT growth in 1Q. Notable was the 20%+ EBIT growth for
paper (aided by better mix) and agri-business. EBIT losses for other FMCG
business declined 15% y/y despite investments being made for national
launch of skin care portfolio. Hotel business continues to achieve gradual
improvement in occupancy levels and ARRs and is expected to register
better growth in 2H. We expect non-tobacco businesses to attain EBIT
growth of 29% over FY11-13 and their EBIT contribution to increase from
19% in FY11 to 22% in FY13.
Maintain OW: We expect ITC to deliver an EPS CAGR of 18% over
FY11-13. The stock is our preferred pick in the consumer staples sector and,
in the current volatile markets, we think it should outperform. We see the
stock as attractive relative to other staple names, with its lower susceptibilty
to input cost pressures and higher pricing power.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ITC reported good all-round performance for 1Q FY12, registering Net Sales,
EBITDA, and PAT growth of 20%, 17% and 25% y/y respectively. The
cigarette business in particular registered healthy volume growth of ~8% and
EBIT margin expansion of 200bp y/y. Except for a slightly subdued top-line
growth for the hotel division, all other non-tobacco businesses either met or
exceeded our revenue and margin growth expectations. We like ITC for its
tobacco business, which is probably the only Indian consumer business whose
pricing power is intact, given low competition, high entry barriers and strong
brand affinity. Maintain Overweight.
Cigarettes: Encouraging volume growth and robust EBIT growth of
21%: 1Q sales rose 13% y/y, led by an estimated 8% volume growth,
implying price/mix growth of 5%. However, price rises and lower excise
payouts led to a sharp 200bp y/y expansion in EBIT margins for this
division and healthy 21% EBIT growth. Product mix improvement
continued with premium cigarettes growing at a faster rate than mass
brands. We expect healthy volume growth (~6-7%) and EBIT growth (17%)
in FY12 supported by reasonable price increases (5-6%) for cigarettes.
Non-tobacco business: Good performance: Top-line growth trends
remained healthy across divisions (ex-hotel), and nearly all segments posted
impressive EBIT growth in 1Q. Notable was the 20%+ EBIT growth for
paper (aided by better mix) and agri-business. EBIT losses for other FMCG
business declined 15% y/y despite investments being made for national
launch of skin care portfolio. Hotel business continues to achieve gradual
improvement in occupancy levels and ARRs and is expected to register
better growth in 2H. We expect non-tobacco businesses to attain EBIT
growth of 29% over FY11-13 and their EBIT contribution to increase from
19% in FY11 to 22% in FY13.
Maintain OW: We expect ITC to deliver an EPS CAGR of 18% over
FY11-13. The stock is our preferred pick in the consumer staples sector and,
in the current volatile markets, we think it should outperform. We see the
stock as attractive relative to other staple names, with its lower susceptibilty
to input cost pressures and higher pricing power.
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