Analyst Research Report Snapshot

Title:

ITC Ltd.- Q4FY14 Result Update - "ACCUMULATE"

Price:

$58.00

Provider:

Kisan Ratilal Choksey Shares and Securities Private Limited

Date:

30 May 2014

Pages:

6

Type:

AcrobatPDF

Companies referenced:

ITC.NS

Available for Immediate Download
Summary:

ITC Ltd.- Q4FY14 Result Update CMP: Rs 343 Target Price: Rs 386 Recommendation: ACCUMULATE “Surprise in FMCG portfolio!!!!!” FMCG major ITC reported better numbers with Net sales up by 12% y-o-y to Rs.9145 crores, on the back of better performance of Agri and FMCG other business, which reported a growth of 13.5% and 11% respectively. Cigarette portfolio the major business reported flat growth. EBITDA was up by 18% y-o-y to Rs.3203 crores. Operating margins improved by 195bps on y-o-y to 35%, on account of decreased raw material cost than last year and FNCG segment posting positive results. Net profit increased by 18% y-o-y to Rs.2278 crores on the back of better operating efficiency. Cigarette business supports growth: ITC’s Cigarette-business the major business segment saw a subdued quarter with its revenue flat on y-o-y basis to Rs.4079crs on the back of lower volume sales however; it grew by 12% q-o-q on the back of price hike taken for some of its brand in this quarter. The contribution of 64mm cigarette increased giving revenue stability in its core business. In Non-cigarette businesses FMCG segment reported good set of numbers both y-o-y and q-o-q basis giving boost to revenue growth. Hotel and Paperboard segment were subdued; Agri business fared well than last quarter. Margins declined on Q-o-Q basis: EBITDA grew by 18.5% y-o-y to Rs.3203crs on the back of better performance of FMCG segment and price hike done for some of the Cigarette brands. Margin improved by 195bps on y-o-y basis to 35% on the back of decreased raw material cost than last year. Sequentially EBITDA decreased marginally by 2.5% and is under pressure due to declining volumes in its core cigarette business and increasing ad spends. However, FMCG segment surprised with profit of Rs.43crs increased by 3 times from the previous quarter. The Hotel business reported growth in profit up by 23% on q-o-q and by 11.5% on y-o-y basis because of its Chennai property doing well. Net Profit increased on Y-o-Y basis: Net profit was up by 18% y-o-y to Rs.2278crs on the back of better operating profit and reduced interest burden. PAT margin was improved by 134bps y-o-y to 24.9%. On sequential basis it was down by 275bps due to increased cost resulting into poor operating results. Valuations & Views: We expect ITC to post its normal revenue growth rate of 28% to 30% in FY15 & FY16 driven by superior product mix & leadership position in the core business and continued investments behind brands & distribution network. At the CMP of Rs.343 per share ITC is available at a PE of 29.9xFY15E & 24.9xFY16E. We recommend Accumulate rating on the stock, with a target price of Rs.386, a potential upside of 13%.

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