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India Equity Research Reports, IPO and Stock News
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For 2QFY2012, ITC declared steady growth in its top line and earnings (broadly
in-line with our estimates). We recommend Accumulate on the stock.
Key highlights: During the quarter, ITC declared top-line growth of 17.5% yoy to
`5,974cr (`5,0834cr), in-line with our estimates. The cigarette division registered
21.5% yoy growth in gross revenue (16.4% yoy growth in net revenue) on the
back of higher volume growth as well as price hikes taken in cigarettes. Amongst
other segments, at net level, agri-business, paperboards and packaging and
hotels posted growth of 14.8% yoy, 9.4% yoy and 1.1% yoy, respectively, while
the non-cigarette FMCG business grew by robust ~27% yoy. Earnings for the
quarter grew by robust 21.5% yoy to `1,514cr (`1,247cr), marginally above our
estimates. The company has been successful in reducing its losses in the
non-cigarette FMCG business – loss during 2QFY2012 stood at ~`56cr (`67cr).
Outlook and valuation: Post 2QFY2012, we maintain our revenue and earnings
estimates. We expect ITC to report a top line of `24,706cr in FY2012E and
`29,294cr in FY2013E, registering a CAGR of ~17% over FY2011-13E. Growth
would be driven by the company’s diversified business model and ability to invest
in growing businesses. In terms of earnings, we expect the company to report a
`17.4% CAGR over the same period, backed by good performance by all
businesses. At the CMP of `207, the stock is trading at 23.4x FY2013E EPS.
We recommend Accumulate on the stock with a target price of `219, based on
our SOTP valuation.
Investment rationale
Cigarettes to grow by double digits and post impressive EBIT margin: We
believe the cigarette business is well poised to post double-digit sales and EBIT
growth in FY2012E. The company has taken prices hikes in brands such as
Classic and Navy cut and is expected to hike prices of the Gold Flake brand.
This will aid in higher realization.
Non-cigarette FMCG to register a ~20% CAGR over FY2011-13E: While
cigarettes remain the main profit center for the company, investments in
non-cigarette businesses such as FMCG, hotels and paperboards have started
yielding positive contribution. During FY2011-13E, we expect non-cigarette
EBIT to register a ~20% CAGR, aided by 1) reduction in non-cigarette FMCG
losses (likely breakeven in FY2013); 2) improvement in hotel margins, aided
by higher ARRs and uptick in the economy; and 3) higher margins in the
paperboards and packaging business.
Outlook and valuation
Post 2QFY2012, we maintain our revenue and earnings estimates. We expect ITC
to report a top line of `24,706cr in FY2012E and `29,294cr in FY2013E,
registering a CAGR of ~17% over FY2011-13E. Growth would be driven by the
company’s diversified business model and ability to invest in growing businesses.
In terms of earnings, we expect the company to report a `17.4% CAGR over the
same period, backed by good performance by all businesses. At the CMP of `207,
the stock is trading at 23.4x FY2013E EPS. We recommend Accumulate on the
stock with a target price of `219, based on our SOTP valuation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, ITC declared steady growth in its top line and earnings (broadly
in-line with our estimates). We recommend Accumulate on the stock.
Key highlights: During the quarter, ITC declared top-line growth of 17.5% yoy to
`5,974cr (`5,0834cr), in-line with our estimates. The cigarette division registered
21.5% yoy growth in gross revenue (16.4% yoy growth in net revenue) on the
back of higher volume growth as well as price hikes taken in cigarettes. Amongst
other segments, at net level, agri-business, paperboards and packaging and
hotels posted growth of 14.8% yoy, 9.4% yoy and 1.1% yoy, respectively, while
the non-cigarette FMCG business grew by robust ~27% yoy. Earnings for the
quarter grew by robust 21.5% yoy to `1,514cr (`1,247cr), marginally above our
estimates. The company has been successful in reducing its losses in the
non-cigarette FMCG business – loss during 2QFY2012 stood at ~`56cr (`67cr).
Outlook and valuation: Post 2QFY2012, we maintain our revenue and earnings
estimates. We expect ITC to report a top line of `24,706cr in FY2012E and
`29,294cr in FY2013E, registering a CAGR of ~17% over FY2011-13E. Growth
would be driven by the company’s diversified business model and ability to invest
in growing businesses. In terms of earnings, we expect the company to report a
`17.4% CAGR over the same period, backed by good performance by all
businesses. At the CMP of `207, the stock is trading at 23.4x FY2013E EPS.
We recommend Accumulate on the stock with a target price of `219, based on
our SOTP valuation.
Investment rationale
Cigarettes to grow by double digits and post impressive EBIT margin: We
believe the cigarette business is well poised to post double-digit sales and EBIT
growth in FY2012E. The company has taken prices hikes in brands such as
Classic and Navy cut and is expected to hike prices of the Gold Flake brand.
This will aid in higher realization.
Non-cigarette FMCG to register a ~20% CAGR over FY2011-13E: While
cigarettes remain the main profit center for the company, investments in
non-cigarette businesses such as FMCG, hotels and paperboards have started
yielding positive contribution. During FY2011-13E, we expect non-cigarette
EBIT to register a ~20% CAGR, aided by 1) reduction in non-cigarette FMCG
losses (likely breakeven in FY2013); 2) improvement in hotel margins, aided
by higher ARRs and uptick in the economy; and 3) higher margins in the
paperboards and packaging business.
Outlook and valuation
Post 2QFY2012, we maintain our revenue and earnings estimates. We expect ITC
to report a top line of `24,706cr in FY2012E and `29,294cr in FY2013E,
registering a CAGR of ~17% over FY2011-13E. Growth would be driven by the
company’s diversified business model and ability to invest in growing businesses.
In terms of earnings, we expect the company to report a `17.4% CAGR over the
same period, backed by good performance by all businesses. At the CMP of `207,
the stock is trading at 23.4x FY2013E EPS. We recommend Accumulate on the
stock with a target price of `219, based on our SOTP valuation.
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