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ITC 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, ITC declared steady growth in its top line and earnings (broadly in-line with our estimates). We recommend Accumulate on the stock.

Key highlights: During the quarter, ITC declared top-line growth of 14.2% yoy to Rs.6,195cr (Rs.5,424cr), marginally below our estimates. The cigarette division registered 11.0% yoy growth in gross revenue (16.6% yoy growth in net revenue) on the back of higher value growth in cigarettes. Amongst other segments, at net level, agri-business, paperboards and packaging posted growth of 6.8% yoy, 11.5% yoy respectively, while hotels posted a decline of 1.0% yoy. Non-cigarette FMCG business grew by robust ~25% yoy. Earnings for the quarter grew by robust 22.5% yoy to Rs.1,701cr (Rs.1,389cr), in line with our estimates. The company has been successful in reducing its losses in the non-cigarette FMCG business – loss during 3QFY2012 stood at ~Rs.47cr (Rs.74cr).

Outlook and valuation: Post 3QFY2012, we maintain our revenue and earnings estimates. We expect ITC to report a top line of Rs.24,706cr in FY2012E and Rs.29,294cr in FY2013E, registering a CAGR of ~17% over FY2011-13E. Growth would be driven by the company’s diversified business model and ability to invest in growing businesses. In terms of earnings, we expect the company to report a 17.4% CAGR over the same period, backed by good performance by all businesses. At the CMP of Rs.199, the stock is trading at 22.5x FY2013E EPS. We recommend Accumulate on the stock with a target price of Rs.219, based on our SOTP valuation.