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Recommendations India

ITC 3QFY2014 performance highlights and results update

January 20, 2014, Monday, 06:33 GMT | 02:33 EST | 12:03 IST | 14:33 SGT
Contributed by Angel Broking

For 3QFY2014 ITC’s performance was in-line with our estimates. Its bottomline rose by 16.3% yoy to Rs.2,385cr. Although, cigarette volumes declined by ~2-3% yoy, the EBIT of the division rose by 18.8% yoy.
Key highlights: ITC’s net sales rose by 13.1% yoy to Rs.8,623cr. The Cigarettes business posted a 12.5% yoy growth in net sales to Rs.4,116cr, aided by the price hikes taken by the company, even though volumes are expected to have de-grown by 2-3%. Healthy realizations resulted in the Cigarettes business posting an 18.8% yoy growth in its EBIT. The non-cigarette FMCG business posted a 16.6% yoy growth in net sales to Rs.2,078cr aided by a robust performance from the branded packaged foods business. Enhanced scale and improvement in leverage resulted in segmental EBIT of Rs.10cr vs a loss of Rs.24cr for 3QFY2013. The Agri business posted a 9.5% yoy and 19% yoy growth in revenue and segmental EBIT respectively. The Paperboards and Packaging division’s revenue grew by 18.5% yoy. However, segmental EBIT remained flat on account of increase in input costs. The Hotels business posted a flat performance on the top-line front, reporting a net revenue of Rs.315cr. Overall, the company’s OPM rose by 54bp yoy to 36.9%.
Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 14.0% and 17.2% respectively over FY2013-15E. At the current market price, the stock is trading at 25.2x FY2015E EPS. We recommend a Buy on the stock with a Target Price of Rs.382.