Recommendations » India

ITC 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, ITC posted a robust 21.3% yoy growth in its net profit to Rs.1,836cr, ahead of our estimates. The cigarette division posted a strong 20.3% improvement in its EBIT. The companyRs.s non-cigarette FMCG business reported a substantial decline in its losses to Rs.30cr from Rs.56cr in 2QFY2012.

Key highlights: ITC's top-line rose by 19.6% on a yoy basis. The cigarettes business posted a 14.0% yoy growth in net sales to Rs.3,385cr, with the volumes remaining flat. The other (non-cigarette) FMCG business posted a healthy 26.1% yoy growth in net sales to Rs.1,691cr. The agri business surprised with a remarkably good 41.1% yoy growth in net sales to Rs.2,024cr, aided by wheat exports. The OPM came in at 36.5% up 121 bp on yoy basis, with the cigarette business posting a healthy margin expansion. However, margins of the agri business fell on a high base. The bottom-line rose by 21.5% yoy to Rs.1,836cr.

Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 17.2% and 17.7% respectively over FY2012-14E, driven by the companyRs.s diversified business model and ability to invest in growing businesses. At the current market price, the stock is trading at 26.9x FY2014E EPS. We maintain a Neutral rating on the stock.