equity research summary-itc

8/2/2019 Equity Research Summary-ITC

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Equity Research Summary

ITC Ltd.Submitted By:Kapil GoyalIM-17, Roll No. 75


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Recommendations

For 4QFY2011, ITC declared steady

growth in its top line and earnings.We havemarginally revised our estimatesdownward. We recommend Neutralon thestock.


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egmen s excep gr -business show double digit

growth


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arn ngs grow y s rong25% yoy aided by high

other income


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gare e segmenregistered double-digit sales

and EBIT growth We believe the cigarette business ispoised for double-digit growth interms of revenue and EBIT in

FY2012E, albeit on a highbase. Wehave modeled in growth of 45% incigarette volumes for FY201213E.

Price hikes and no further increase inexcise duty by Govt.


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on-c gare ewitnessing strong revenue

traction ITCs non-cigarette FMCG businessregistered steady revenue growth of16.8% yoy

However, losses reduced by ~`11cr

During the quarter, the company

launched Sunfeast Yipee noodles in two

flavours.

Going ahead, we expect revenue


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Hotel business showsrecovery as ARR improves

ITCs hotel business registered robustgrowth of 18.2% yoy to `324cr(`274cr) during the quarter, aided by

the festive/holiday season. The business segment reported EBIT

margin of 30.7% (expansion of 219bp

yoy), driving strong 27.3% yoygrowth in EBIT.

We believe the hotel business is well

on track to post a 21% CAGR in


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Paperboard and packagingsegment shows resilience

The paperboard and packagingsegment registered strong revenuegrowth of 15% yoy (14.2% on a net

level) to `962cr (`836cr). However, EBIT margin of the

segment registered a marginal

contraction of 5bp yoy to 20.1%. Going forward, we expect the

segment to post a modest 15% CAGR

in revenue during FY201113E,


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gr us ness reg s ersanother quarter of muted

revenue growth ITCs agri business registered 9.5%yoy growth in revenue (on high base)to `1,082cr (`988cr). The business

segment reported a 217bp yoyexpansion in EBIT margin to 9.2%,aiding 43.1% yoy growth in EBIT.

Going ahead, we expect thissegment to register a 4% CAGR inrevenue over FY201113E (on

account of flat global cigarette


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Model double-digit sales andEBIT growth in cigarettes

We have modeled in volume growthof 45% in cigarette volumes forFY201213, despite high base of

FY2011 on account of high pricehikes (1520% weighted averageprice hikes taken) likely to fully offset

1) ~17% excise hike in UnionBudget 201112 and 2) rise in VATannounced in several states.

We believe the cigarette business is-


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Non-cigarette to register a23% CAGR over FY201113E While cigarettes remain the main

profit centre for the company,investments in non-cigarette

businesses such as FMCG, hotels andpaperboards have started yieldingpositive results.

During FY201113E, we expect non-cigarette EBIT to grow at a 23%CAGR aided by 1) reduction in non-

cigarette FMCG losses (likely


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Financial Statements


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Thank You

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