ITC Ltd (Q4 FY13)

India Infoline News Service | Mumbai |

ITC reported 19% yoy increase in revenues at Rs81.8bn (above our expectations of Rs81.2bn) during Q4 FY13 driven by ~11% yoy growth in core cigarettes segment.

CMP Rs335, Target Rs372, Upside 11.1%
  • Results in line with expectations. Revenue grew by ~19% yoy to Rs81.8bn, driven by cigarettes, Other-FMCG and agri segments
  • Cigarette volumes grew by ~3% yoy; EBIT margins expand by 70bps to 31.6%. Other-FMCG segment achieves break-even at EBIT level; registers a profit of Rs119mn against a loss Rs167mn in Q4 FY12
  • OPM expands by 30bps to 32.1%. A drop of 210bps in overhead cost mitigates high raw material cost impact. Net profit matched our expectations by recording ~19% yoy growth at Rs19.3bn
  • We expect ITC to witness a revenue/PAT CAGR of 16.5%/18% respectively over FY12-14. Maintain BUY with a revised 9-mth price target of Rs372 (earlier Rs353)
Result table (Standalone)
(Rs m) Q4 FY13 Q4 FY12 % yoy Q3 FY13 % qoq
Net sales 81,803 68,614 19.2 76,271 7.3
Material costs (35,478) (28,045) 26.5 (30,770) 15.3
Personnel costs (3,434) (3,315) 3.6 (3,462) (0.8)
Other overheads (16,599) (15,382) 7.9 (14,311) 16.0
Operating profit 26,292 21,871 20.2 27,727 (5.2)
OPM (%) 32.1 31.9 26 bps 36.4 (421) bps
Depreciation (2,067) (1,880) 9.9 (2,052) 0.7
Interest (243) (148) 63.7 (252) (3.5)
Other income 3,311 2,841 16.5 4,148 (20.2)
PBT 27,293 22,684 20.3 29,572 (7.7)
Tax (8,014) (6,540) 22.5 (9,053) (11.5)
Effective tax rate (%) (29.4) (28.8) - (30.6) -
Reported PAT 19,280 16,144 19.4 20,519 (6.0)
PAT margin (%) 23.6 23.5 4 bps 26.9 (333) bps
Ann. EPS (Rs) 9.8 8.3 18.2 10.5 (7.0)
Source: Company, India Infoline Research

Segment-wise net sales and EBIT break-up
Segments Q4 FY13
(Rs mn) Revenues yoy (%) EBIT yoy (%)
Cigarettes 36,232 11.5 21,124 20.2
FMCG - Others 20,362 26.0 119 -
Hotels 3,155 10.4 406 (51.0)
Agri Business 18,545 31.1 1,275 20.8
Paper & Packaging 10,575 7.9 1,881 (3.9)
Total 88,868 17.8 24,806 16.7
Inter-segment revenue (7,065) 3.1 - -
Net sales 81,803 19.2 - -
Source: Company, India Infoline Research

Cigarette and FMCG - Others segment fuel revenue growth

ITC reported 19% yoy increase in revenues at Rs81.8bn (above our expectations of Rs81.2bn) during Q4 FY13 driven by ~11% yoy growth in core cigarettes segment. Cigarette volumes recorded ~3% yoy increase Vs 1.5% in Q3 and flattish in Q2 FY13. A 31% yoy jump in agri (driven by leaf tobacco exports) and 26% yoy increase in Other-FMCG revenues (led by 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 offsets high input cost impact, cigarette EBIT margins expand by 70bps

OPM expanded by 30bps to 32.1% aided by 210bps/60bps decline in overhead/staff cost respectively. A 250bps increase in raw material cost restricted further margin expansion. Cigarette EBIT margins witnessed 70bps expansion at 31.6%. Price hikes coupled with premiumisation of its portfolio have helped ITC improve cigarette EBIT margins. As expected, Other-FMCG segment registered a profit of Rs119mn (at EBIT level) against a loss of Rs167mn in Q4 FY12 as profits from the foods segment are increasing sequentially. Impacted by steep increase in wood, coal and chemical costs, paper and packaging segment recorded a 3.9% yoy decline in EBIT.


Cost analysis
As a % of net sales Q4 FY13 Q4 FY12 bps yoy Q3 FY13 bps qoq
Material costs 43.4 40.9 250 40.3 303
Personnel costs 4.2 4.8 (63) 4.5 (34)
Other overheads 20.3 22.4 (213)
BSE 265.60 3.90 (1.49%)
NSE 266.25 4.05 (1.54%)

***Note: This is a NSE Chart

 

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