ITC - Result Analysis Q4 FY20
Total revenue from operations 12,561 Cr
13,308 Cr (-5.61%) YoY | 13,212 Cr (-4.95%) QoQ
Year ending revenue: 51,393 Cr Vs. 49,862 Cr (3.04%)
Net Profit of 3,926 Cr
4,050 Cr (-3.02%) YoY 3,597 Cr (9.19%) QoQ
Year ending Net profit: 15,593 Cr Vs. 12,836 Cr (24.28%)
EPS (in Rs.) 3.13
3.23 YoY |2.87 QoQ
Year ending EPS: 12.45 Vs. 10.24
View: Result is line with the expectation. Although YoY revenue decreased but profit slightly decreased due to the benefit of lower Tax for FY20. QoQ revenue decreased but profit increased due to impact of lower Taxation.
Business Updates & Highlights:
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 8.9 percent to Rs 4,163.5 crore Vs. 4,525 Cr in corresponding previous quarter.
Company is primarily into five operating segment viz. FMCG (Cigarette) – 43%, FMCG (others) – 24%, Hotels – 3.7%, Agri business – 14%, Paperboards – 10.9% and others – 4.3%.
Q4FY20 Cigarette business revenue was INR 5,130 Cr Vs. 5,485 Cr in YoY therefore declined by 6.5%. Q4FY20 Cigarette business EBIT was INR 3,403 Cr Vs. 3,855 Cr therefore declined by 11.7% in YoY.
Q4FY20 FMCG business revenue was INR 3,183 Cr Vs. 3274 Cr in YoY therefore declined by 2.8%. Q4FY20 FMCG business EBIT was INR 147 Cr Vs. 131 Cr therefore up by 12.6% in YoY.
Q4FY20 Hotels business revenue was INR 466 Cr Vs. 510 Cr in YoY therefore declined by 8.6%. Q4FY20 EBIT was INR 42.6 Cr Vs. 88.7 Cr in YoY therefore declined by 52% in YoY.
Q4FY20 Agri business revenue was INR 1,887 Cr Vs. 2101 Cr in YoY therefore declined by 10.2%. Q4FY20 Agri business EBIT was INR 123 Cr Vs. 147 Cr in YoY therefore declined by 16.4% in YoY.
Q4FY20 Paper business revenue was INR 1,458 Cr Vs. 1,537 Cr in YoY therefore declined by 5.1%. Q4FY20 Paper business EBIT was INR 286 Cr Vs. 301 Cr in YoY therefore declined by 4.9% in YoY.
Overall for FY 2019/20, Gross Revenue at Rs. 46,324 crores increased by 2.4%, while PBT (before exceptional items) at Rs.19,299 cr. grew by 4.6% over FY 2018/19
During the lockdown period, which started from March 22, ITC launched two products under the Savlon brand, advanced hand sanitiser Savlon Hexa and a surface disinfectant spray.
The Board of Directors of the Company has recommended a dividend of INR 10.15 per ordinary share of Re. 1/- each for the financial year ended 31st March, 2020 and the dividendapproved closure of the Register of Members of the Company from Wednesday, 8th July, 2020 to Thursday, 9th July, 2020 for the purpose of payment of dividend. Last year it was around INR 5.75 dividend.
Financial:
ROE and ROCE is around INR 23% and 35% respectively and book value per share is around INR 48 and share is currently trading at 4.1x of its book value. Company is currently trading at annualized PE of 16 which is average as per Industry benchmark. FIIs, mutual fund and insurance cos hold around 14.7%, 9.9% and 21.7% in the company. Cash and cash equivalent from operating activities as of March 2020 is around INR 14,690 Cr Vs. 12,583 Cr as of March 2019 (**Very positive**). The good thing is company is virtually debt free and realization is also very good.
Position: Share support price is INR 180. Long term investor and dividend seeking should continue with the company.
Share View: ITC is one of India's foremost private sector companies with a market capitalisation of nearly US $ 50 billion and Gross Sales Value of US $ 10.8 billion with presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers, Agri & IT Businesses.
Opportunities: Prior to the outbreak of the pandemic, the FMCG-Others segment was on track to register double-digit revenue growth for the fourth quarter, on a comparable basis. The Education and Stationery Products Business (ESPB), which reported strong growth till February 2020, severely impacted in the peak month of March 2020 due to closure of educational institutions and deferment of new academic sessions across states pursuant to nation -wide lockdown. Robust growth of 30% in Free Cash Flow generation. High dividend paying company and currently paid around INR 10.15 per share of dividend which approximately around 5% of CMP. Highly diversified group with sustainable business model.
Increasing consumer traction for 'Bingo!' Potato Chips and Tedhe Medhe continued to drive growth in the Snacks Busines
In the Instant Noodles category, YiPPee! noodles sustained its growth momentum and overall market standing as a strong, competitive #2 brand in the noodles space
Risk: Due to ongoing pandemic situation Hotel business will face more pain atleast for next two quarter and further Paper & Paper products business will also impacted due to closure of educational institutions. Agri business despite 9th months was good Subdued demand for leaf tobacco in international markets, relatively steeper depreciation in currencies of competing origins and adverse business. ITC topline is still more than 40% from Cigarette division and profit also more than 75% from this division. FMCG sector topline growth is still subdued and bottom line is negligible. In the Union Budget 2020, a steep increase in National Contingent Calamity Duty on cigarettes was announced w.e.f. 1st February 2020 and Cigarette business can also face challenge for higher duty in upcoming years also.
This is a very under valued stock, it can be purchased in range of Rs 185 to Rs 190 for long term view.
Sources:
Various publications
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Good Analysis, and very good stock to have in portfolio.
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