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Recommendations India

ITC 1QFY2015 performance highlights and results update

August 1, 2014, Friday, 11:00 GMT | 07:00 EST | 15:30 IST | 18:00 SGT
Contributed by Angel Broking


For 1QFY2015, ITC posted a good set of numbers, both on the top-line and bottom-line front. The top-line was driven by Cigarettes, Agri and other FMCG businesses. The company reported strong EBIT level profit in the Cigarettes business for the quarter.

Key highlights: ITC’s net sales rose by 24.8% yoy to Rs.9,248cr. The Cigarettes business posted an 18.8% yoy growth in net sales to Rs.4,201cr, aided by price hikes. Healthy realizations resulted in the Cigarettes business posting a 21.4% yoy growth in its EBIT. The other FMCG business, which posted a 10.9% yoy growth in net sales to Rs.1,935cr, posted an EBIT level loss of Rs.16cr. The Paperboards and Packaging division posted a 10.8% yoy and 9.3% yoy growth in revenue and segmental EBIT respectively. Although the Agri business posted a 50.6% yoy growth in revenue, the segment’s EBIT remained flat on a yoy basis. The Hotels business posted a flat top-line performance while it reported an EBIT level loss of Rs.12cr. Overall, the company’s OPM contracted by 223bp yoy to 35.4%, owing to higher raw material costs (up 429bp yoy as a % of sales).

Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 15.1% and 15.0% respectively over FY2014-16E. At the current market price, the stock is trading at 24.4x FY2016E EPS. We recommend a Buy on the stock with a target price of Rs.441.

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