CMP: 197 (As on 27-07-2020 @ 12:01)
Total income from operations 10,478 Cr
12,560 Cr (-16.59%) YoY | 12,658 Cr (-17.22%) QoQ
Year ending revenue: 51,393 Cr Vs. 48,353 Cr (6.29%)
Net Profit of 2,567 Cr
3,926 Cr (-34.67%) YoY 3,437 Cr (-25.33%) QoQ
Year ending Net profit: 15,585 Cr Vs. 19,150 Cr (-18.61%)
EPS (in Rs.) 2.04
3.13 YoY | 2.72 QoQ
Year ending EPS: 12.45 Vs. 10.27
View:
Result is in line with the expectation and improved in this quarter.
YoY revenue declined and profit also declined in this quarter. As Hotel
business income almost wiped out in this quarter and revenue was around
INR 25 Cr Vs. 495 Cr in corresponding previous quarter.
Business Updates & Highlights:
Q1FY21
EBITDA is around INR 2,945 Cr Vs. 4,503 Cr in Q1FY20 therefore declined
by 34.6% in YoY. EBITDA margin in Q1FY21 was 28.1% Vs. 36.1% in Q1FY20.
Segment wise performance
Cigarette revenue fell 29.1%
YoY to Rs 3,853 crore. EBIT for Cigarette division was around INR 2,356
Cr and declined by 38.8% in YoY. Margin was around 61.1% Vs. 70.8% in
YoY.
FMCG business rose 10.3% to Rs 3,375 crore on YoY. EBIT
for FMCG business was around INR 125 Cr and up by 60.3% in YoY. Margin
was around 3.7% Vs. 2.5% in YoY. Despite Education and stationery
product business (ESPB) remained impacted due to deferment of academic
session across the country. FMCG-Others Segment delivered a strong
performance driven by Staples, Convenience Foods and Health &
Hygiene products, leveraging the strong equity of the Company’s brands
and a robust portfolio of relevant and innovative products.
For
the hotels segment, that fall was a huge 94.4% to Rs 25 crore. EBIT for
hotel segment was around INR (258 Cr) and declined by 2776%. Margin Nil
(losses) Vs. 2.6% in YoY. Hotels Segment severely impacted with
operations coming to a standstill due to restrictions on travel and
hotel operations
Agri-business revenue up by 3.9% in YOY and it
was 3,746 crore. EBIT for Agri-business was around INR 179 Cr and
declined by 11.4%. Margin was around 4.8% Vs. 5.6% in YoY. Up due to
back of trading opportunities in oil seeds and rice. - Leveraged
e-choupal network to cater to surge in wheat requirements for Aashirvaad
atta.
Paper-boards segment revenue declined 32.8% to Rs 1,026
crore. EBIT for Paper-boards segment was around INR 160 Cr and its
declined by 51.1% in YoY. Margin was around 15.6% Vs. 21.6% in YoY.
Paperboards, Paper & Packaging Segment performance impacted by lower
offtake from end-user industries; robust growth in exports partly
mitigated the weak domestic demand environment.
Others revenue up by 6.3% and it was around INR 557 Cr. EBIT for Others segment was around INR 115 and its up by 69.1% in YoY.
Financial
ROE
and ROCE is around 23% and 35% respectively and book value per share is
around INR 53 and share is currently trading at 3.7x of its book value.
Company is currently trading at annualized PE of around 19 which is
slightly high as per Industry benchmark. FIIs, mutual fund and insurance
cos hold around 14.6.8%, 9.5% and 21.7% in the company which was
slightly declined in this quarter. The good thing is company is
virtually debt free.
Position: Share strong support price is
INR 184/156. Long term investors should continue with the company with
possible target of INR 230/250. Dividend yield is also around 5% of
current market price.
Share View: Share price high 272 (52
week) and now 198. ITC is one of India's foremost private sector
companies and a diversified conglomerate with businesses spanning FMCG,
Hotels, Paperboards and Packaging, Agri Business and Information
Technology. ITC is the country's leading FMCG marketer, the clear market
leader in the Indian Paperboard and Packaging industry, a globally
acknowledged pioneer in farmer empowerment through its wide-reaching
Agri Business, a pre-eminent hotel chain in India that is a trailblazer
in 'Responsible Luxury'. ITC's wholly-owned subsidiary, ITC Infotech, is
a specialized global digital solutions provider.
Opportunities: Manufacturing
of cigarettes only resumed in mid-May and currently all cigarette
making units have scaled up and are operating at pre-Covid levels this
segment EBIT margin is around 60% and cover more than 75% of their
bottom line. The Business also introduced Gold Flake Super Star
(Supermint), Gold Flake Star and Royal in the DSFT segment in
competitive markets straddling key price points.
Agri business
fairely well in this quarter despite Subdued demand for leaf tobacco in
international markets and adverse business mix weighed on Segment
Results. The ‘ITC Master Chef’ range of Frozen Snacks posted robust
growth in the retail channel. The range of Frozen Snacks was augmented
with the launch of eight new exciting variants and the range was
extended to 70+ cities during the quarter.
Paper & Paper
boards business Swift resumption of business ahead of competition,
strong dealer network and agility in servicing customer needs aided in
further strengthening market share in the Value Added Paperboards
segment.
FMCG: The Branded Packaged Foods Businesses
delivered a robust performance during the quarter driven by Atta,
Noodles, Biscuits and Fresh Dairy. Most major categories gained market
share during the quarter. In the Staples, Snacks and Meals category,
‘Aashirvaad’ atta posted strong growth across markets. Sunfeast’
Biscuits and Cakes recorded robust growth driven mainly by surge in ‘at
home’ consumption and the consumers’ preference for trusted brands. In
the Dairy & Beverages category, ‘Aashirvaad Svasti’ range of fresh
dairy products and ghee recorded strong growth. The range of milk
products was augmented with the launch of Aashirvaad Svasti Lassi, which
has received encouraging consumer response
ITC's new Consumer
Goods Businesses have established a vibrant portfolio of 25 world- class
Indian brands that create and retain value in India. FMCG brands
including Aashirvaad, Sunfeast, Yippee!, Bingo!, B Natural, ITC Master
Chef, Fabelle, Sunbean, Fiama, Engage, Vivel, Savlon, Classmate,
Paperkraft, Mangaldeep etc.
The Personal Care Products Business
recorded substantial growth in revenue driven by heightened awareness
and demand for hygiene products such as hand sanitizers, handwash,
antiseptic liquids and floor cleaners in the wake of COVID-19 pandemic.
The portfolio was augmented with the launch of several innovative
products in record time viz., ‘Savlon Surface Disinfectant Spray’,
‘Savlon Hexa’ hand sanitizing liquid, ‘Savlon Germ Protection Wipes’,
Savlon Hand Sanitizer Sachet, ‘Savlon Hexa advanced’ Soap.
Risk
Increasing
taxation on cigarettes, has caused progressive migration from
consumption of duty-paid cigarettes to other lightly taxed/tax-evaded
forms of tobacco products. The share of legal cigarettes in total
tobacco consumption in the country has declined considerably from 21% in
1981-82 to a mere 9% (against global average of 90%). Also further
levied National Calamity Contingency Duty in the month of Feb 2020.
Company EBIT cover for this segment was almost 80% in this quarter and
mostly company EBIT significant comes from this division and this is
continuously declined in YoY and QoQ.
FMCG business however
revenue was increased in this quarter and peoples habit got changed
during this quarter for essential products rather then luxurious spent
but still FMCG EBIT was not significant and it’s over only 5% of bottom
line and margin was also around 3.7%.
Agri business although
well in this quarter but again Leaf Tobacco subdued demand in this
quarter and it can be continue with at least two quarter as well.
Paper
& Packing board business subdued off take in certain segments (e.g.
liquor, cupstock, tobacco, hosiery) and significant adverse impact in
others (such as publications, décor, wedding cards etc.) impacted
operational performance. The demand for writing and printing paper has
also been impacted due to closure of educational institutions and
offices in the wake of the pandemic. This can also be continued across
this FY 2021 due to ongoing pandemic
Hotels segment there are significant near-term challenges on account of the outbreak of the COVID-19 pandemic.
Analysis: Good portfolio stock giving handsome dividends, it can be purchased at current market price for long term.
Disclaimer: The
information provided herein is based on publicly available information and
other sources believed to be reliable, but involve uncertainties that could
cause actual events to differ materially from those expressed or implied in
such statements. The document is given for general and information purpose and
is neither an investment advice nor an offer to sell nor a solicitation. While
due care has been exercised while preparing this document, we do not warrant
the completeness or accuracy of the information. We will not accept any
liability arising from the use of this material. The recipient of this material
should rely on their investigations and take their own professional advice.
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