- Results above expectations. Revenues grew by ~20% yoy to Rs71.5bn, driven by healthy growth in cigarettes, Other-FMCG and agri segment.
- Cigarette margins expanded by 90bps to 32.4%. Losses in the Other-FMCG segment reduced to Rs303mn
- OPM witnessed 130bps expansion at 36.5% aided by sharp 710bps drop in raw material cost. Net profit for the quarter surpassed our expectations by recording ~21% yoy growth at Rs18.4bn
- We expect ITC to witness a revenue/PAT CAGR of 16.2%/18.4% respectively over FY12-14. Maintain BUY with a revised 9-mth price target of Rs327
|(Rs m)||Q2 FY13||Q2 FY12||% yoy||Q1 FY13||% qoq|
|OPM (%)||36.5||35.2||125 bps||34.7||180 bps|
|Effective tax rate (%)||(31.0)||(31.6)||-||(31.4)||-|
|PAT margin (%)||25.7||25.3||35 bps||24.1||161 bps|
|Ann. EPS (Rs)||9.4||7.8||20.0||8.2||14.6|
Segment-wise net sales and EBIT break-up
|(Rs mn)||Revenues||yoy (%)||EBIT||yoy (%)|
|FMCG - Others||16,908||26.1||(303)||(45.8)|
|Paper & Packaging||10,590||5.3||2,825||(2.5)|
Cigarette and agri segment fuel revenue growth
ITC reported 19.6% yoy increase in revenues at Rs71.5bn (above our expectations of Rs68.7bn) during Q2 FY13 driven by 14% yoy growth in core cigarettes segment. Cigarette volumes remained flat despite steep price hikes over the past two quarters. A 41% yoy jump in agri (driven by wheat exports) and 26% yoy increase in Other-FMCG revenues (led by strong growth in foods and personal care business) further fuelled revenue growth. The growth could have been even better but for slower growth in hotels (due to weak economic environment) and paper segment revenues.
Drop in overhead cost fuels OPM, cigarette EBIT margins expand by 90bps
OPM expanded by 130bps to 36.5% fuelled by a 210bps decline in overhead cost. A sharp rise in outsourcing cost (15.4% of net sales Vs 7.3% in Q2 FY12) restricted further margin expansion. Cigarette EBIT margins witnessed 90bps expansion at 32.4%. Price hikes (~20% in Q1 FY13) coupled with premiumisation of its portfolio have helped ITC improving cigarette EBIT margins. ITC has managed to reduce losses in the Other-FMCG segment to Rs303mn (Rs559mn in Q2 FY12) as profits from the foods segment are increasing sequentially. The management expects this segment to break even by FY13.
|As a % of net sales||Q2 FY13||Q2 FY12||bps yoy||Q1 FY13||bps qoq|