ITC's Q4FY18 numbers came broadly in-line with the consensus estimates. Net revenue (net of excise duty) declined by 4.8% yoy to Rs10,586.7cr. Raw material and other expenses were down by 14.6% yoy and 8.3% yoy respectively. Thus, EBITDA grew by 6.9% yoy to Rs4,144cr with 431bps yoy expansion in EBITDA margin to 39.1% (estimate 36.3%). Company reported PAT growth of 9.9% yoy to Rs2,932.7cr.
Cigarette segment (assuming all excise duty is for cigarette segment) reported 7.1% yoy decline in the revenue. This is attributable to expected cigarette volume decline during the quarter.
FMCG segment reported moderate growth of 5.8% yoy. Comparable growth for the segment was 11.3% yoy led by branded packaged foods, personal care and stationery products businesses. Encouragingly, the EBIT of the segment jumped by 64.2% yoy and 94.1% qoq to Rs91.2cr and EBIT margin of 3%. This was driven by enhanced scale, favorable product mix and cost management initiatives.
Hotel segment’s revenue grew by 5.6% yoy with 118bps yoy expansion in EBIT margin. The growth was driven by improvement in ARRs and robust growth in F&B sales. Construction of ITC Hotels at Hyderabad (to be operational in Q1FY19), Kolkata, Ahmedabad and WelcomHotels in Guntur and Bhubaneswar is in progress.
However, the agri business continued to witness decline in revenue, down 8.1% yoy. EBIT margin remained flat on yoy basis. This was primarily on account of shortage and adverse quality of Andhra leaf tobacco crop, limited trading opportunities in agri commodities (such as wheat, soya, coffee) and high base effect.
Further, paperboard segment reported flat revenue due to slowdown in the FMCG & legal cigarette industry, cheap imports and unabsorbed capacity in domestic paperboard industry. On the positive side, EBIT margin for the segment improved by 114bps yoy to 18.6%, aided by favorable product mix, higher in-house pulp utilisation and benign input prices.
We believe the expansion in company’s EBITDA margin by 431bps is attributed to (a) cigarette price hikes and (b) improvement in operating performance of the FMCG segment.
Depreciation for the quarter was up by 25.7% yoy.
Other income grew by 28.5% yoy to Rs516.5cr.
Tax rate for the quarter stood at 32.3% against 34% in Q4FY18.
Company has recommended a dividend of Rs5.15 per share for FY18.
ITC Ltd is currently trading at Rs. 284, up by 2.2 points or 0.78% from its previous closing of Rs. 281.80 on the BSE.
The scrip opened at Rs. 281.80 and has touched a high and low of Rs. 285.70 and Rs. 279.65 respectively. So far 88,66,571 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 200 DMA.
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