DMART - Result Analysis Q1 FY20-21

DMART - Result Analysis Q1 FY20-21

CMP: 2,237 (14:51 13-07-2020)

  

Total revenue from operations 3,833 Cr  

5,815 Cr (-34.09%)  YoY | 6,256 Cr (-38.71%)  QoQ  

  

Year ending revenue: 24,870 Cr Vs. 20,005 Cr (24.34%) 

 

Net Profit of 40.08 Cr  

323.06 Cr (-87.62%) YoY 271.28 Cr (-85.29%) QoQ  

  

Year ending Net profit: 1,301 Cr Vs. 903 Cr (44.08%) 

 

EPS (in Rs.) 0.61 

5.11 YoY |4.21 QoQ  

  

Year ending EPS: 20.55 Vs. 14.46 

 

View: Result is below expectation. YoY revenue declined and profit significantly declined. Margin also corrected in this quarter.    

 

Business Updates & Highlights: 

 

Q4FY21 EBITDA was around INR 112 Cr Vs. 597 Cr in Q1FY21 therefore declined by 81.1% in YoY. EBITDA margin is around 2.9% Vs. 10.3% in YoY.  

 

2 Stores were added in the Q1FY21. 

 

Net Profit is at Rs. 40 crore for Q1 FY21, as compared to Rs. 323 crore in the corresponding quarter of last year. PAT margin stood at 1.0% in Q1 FY21 as compared to 5.5% in Q1 FY 20. 

 

Financial

ROE and ROCE is around INR 18% and 26% respectively and book value per share is around INR 170 and share is currently trading at 13.7x of its book value. Company is currently trading at annualized PE of 186 which is very expensive as per Industry benchmark. Promoter holding is around 75% in the company which is strong and stable.  FIIs and mutual fund hold around 9.6% and 5.7% in the company. The good thing is company is virtually debt free and realization is also very fair.  

 

Management Commentary: Mr. Neville Noronha, CEO & Managing Director

1. Covid-19 continued to spread across the country. The ensuing restrictions have had a significant impact on our operational and financial performance in the quarter. Our revenue, EBIDTA and PAT for the quarter were significantly lower as compared to the same quarter last year. At the end of Q1 of FY 2020-21, our review and analysis can be summed up into four key observations:
2. Essential Retailer – Being in the essential products business helped us in providing shoppers their basic needs, pay our employees their wages and our suppliers and other service providers their dues just like before. In the current circumstances, this is extremely satisfying to each and every DMartian.
3. Organized Retail (India versus Developed Countries) – Unlike developed countries where organized retailers had a surge of customers walking into their stores, it has not happened with the same intensity at our stores.
4. This was because of the strong enforcement of store shutdowns, restrictive movement of people in general and strict social distancing rules inside stores. While the overall lockdown rules have softened in general, they continue with the same or more severe intensity in certain cities and local municipalities from time to time. Its negative impact on footfalls and sales were significant. There is also a sales channel of traditional trade which is smart, agile and resourceful. India still has a strong and resilient network of small shops and neighbourhood stores. They came roaring back after the first 2 or 3 weeks of lockdown serving the needs of an anxious customer the way the customer wanted it - quickly over the counter or through home deliveries. Value wasn’t top of mind for shoppers during this time.
5. The DMart Business Model – After the passage of three months we can say with further certainty that our business model of store ownership, steady incremental store additions over time and strong focus on cost efficiency during usual times has allowed the business to face the pandemic shocks with relatively less harm. While we are in the midst of the second wave of the pandemic and business outlook may continue to seem uncertain, we are less anxious than we were in the beginning of April 2020.
6. Online Sales – DMart Ready sales in Mumbai have grown very well. We are making all attempts to scale it up in a meaningful manner. We started Home Deliveries (using DMart Ready App) through our stores across the rest of the cities, but discontinued it once the stringent lockdowns were withdrawn and our stores were allowed to open for business.
7. Conclusion – Wherever stores were allowed to operate unhindered, we recovered to 80% or more of pre-Covid sales in most stores. Discretionary consumption continues to be under pressure, especially in the Non-FMCG categories. This is impacting gross margins negatively. Store operations and duration of operation per day continues to remain inconsistent across cities due to strict lockdowns enforced by local authorities from time to time. In addition, in certain cities authorities are once again insisting on selling only essential products. Hence our future revenues continue to remain uncertain. We continue to cooperate with local authorities and are taking all necessary precautions and measures to keep our shoppers and employees safe and make shopping 100% safe

Position: Share support price is INR 2180. Long term investor should continue with the company. Short term share can correct due to result is declined.   

 

Share View: Share price high 2,559 (52 week) and now 2,322. Avenue Supermarts Limited which owns and operates D-Mart stores. D-Mart is a national supermarket chain that offers customers a range of home and personal products under one roof. The Company offers a wide range of products with a focus on Foods, Non-Foods (FMCG) and General Merchandise & Apparel product categories. The Company offers its products under various categories, such as grocery and staples, dairy and frozen, fruits and vegetables, home and personal care, bed and bath, crockery, toys and games, kids apparel, apparel for men & women and daily essentials. As of June 30, 2020 the Company had 216 stores with Retail Business Area of 8.0 million sq. ft. across various states. 

 

Opportunities: D-Mart follows Everyday low cost - Everyday low price (EDLC-EDLP) strategy which aims at procuring goods at competitive price, using operational and distribution efficiency and thereby delivering value for money to customers by selling at competitive prices. During this quarter company has still opened two stores despite the strict lockdown on April and part of May. Company recovered to 80% or more of pre-Covid sales in most stores. Strong operating cash flow and realization with strong visionary promoters and continuously adding by FPIs and mutual fund Dmart is still in favorite 

 

Risk: Discretionary consumption continues to be under pressure, especially in the Non-FMCG categories. This is impacting gross margins negatively. Store operations and duration of operation per day continues to remain inconsistent across cities due to strict lockdowns enforced by local authorities from time to time. Like in Pune, Bangalore, Thane further shut down in the month of July, 2020 itself. In addition, in certain cities authorities are once again insisting on selling only essential products. Q2FY21 can also look like slight recovery as compare to Q1FY21. Unlike developed countries where organized retailers had a surge of customers walking into their stores, it has not happened with the same intensity at Dmart stores. India still has a strong and resilient network of small shops and neighbourhood stores and during the lockdown small shops did very well in terms of their customer needs.  

Sources: Various publications

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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Analysis of India's Current Account Surplus

Analysis of India's Current Account Surplus

India’s current account balance turned to a surplus (after more than a decade) of 0.1% of GDP (or USD 0.6 billion) for the January-March 2020 period, compared to a current account deficit of 0.7% of GDP (or USD 4.6 billion) in the year ago period. India saw a current account deficit of 0.4% in the October-December 2019 period. For the full fiscal year 2019-20, the current account deficit narrowed to 0.9% of the GDP compared to 2.1% in financial year 2018-19.

There are two factors that have primarily resulted in this current account surplus – a narrowing trade deficit and a significant increase in net invisible receipts.

India’s trade deficit narrowed to USD 35 billion (4.8% of GDP) in quarter ended March 2020 from USD 36 billion (5% of GDP) in the quarter ended December 2019. The general slowdown in imports due to the Covid-19 crisis along with a significant reduction in oil prices played a major role in reducing the trade deficit. Additionally, India’s export dependence is lower compared to other emerging market economies. The composition of discretionary goods (the demand for which reduces the most in such crises) such as luxury goods, auto, etc., is also low in India’s exports.

India’s net invisible receipts increased to USD 35.6 billion (4.8% of GDP) from USD 33.4 billion (4.6% of GDP). “Invisibles” include the import & export of services, private remittances from abroad and payments to foreign countries, and incomes earned by MNCs from their investments in India. The increase in net invisible receipts was driven mainly by an increase in private remittances. Remittances by Indians employed overseas and other private transfers rose by 14.8% from a year ago to USD 20.6 billion. Net outflows from overseas investment income payments also decreased to USD 4.8 billion from USD 6.9 billion a year ago. Net services receipts increased on the back of a rise in net earnings from computer and travel services on a year-on-year basis.

Foreign Direct Investments (FDI) have also been rising. Net FDI at USD 12.0 billion in Q4 of 2019-20 was higher than USD 6.4 billion in Q4 of 2018-19. This, along, with the surplus in current account balance, may also help boost the performance of the Indian rupee. The Indian rupee has appreciated by more than 1% last week.

Overall, India’s external position might be well placed in comparison to most other emerging markets. It will, therefore, be interesting to observe the current account surplus and the performance of the Indian rupee in the coming months and quarters.

Sources: Various publications

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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TCS Result Analysis FY20-21 Q1

TCS Result Analysis FY20-21 Q1

CMP: 2,222 (As on 10-07-2020 Closing Price) 

Results are weaker than expected revenue and margin performance; deal wins, commentary positive

  

Total income from operations 38,322 Cr  

38,172 Cr (0.39%)  YoY | 39,946 Cr (-4.02%) QoQ  

  

Year ending revenue: 156,949 Cr Vs. 146,463 Cr (7.11%) 

 

Net Profit of 7,049 Cr  

8,153 Cr (-13.57%) YoY 8,093 Cr (-12.93%) QoQ  

  

Year ending Net profit: 32,447 Cr Vs. 31,472 Cr (3.01%) 

 

EPS (in Rs.) 18.68 

21.67 YoY | 21.45 QoQ  

  

Year ending EPS: 86.19 Vs. 83.93 

 

View: Result is below expectation. YoY and QoQ revenue declined and profit also declined. Operating profit also corrected in this quarter as compare to YoY and QoQ.  

 

Business Updates & Highlights: 

 

Operating profit fell 9.7% to Rs 9,432 crore. Margin narrowed to 23.6% from 25.1%. Net margin at 18.3%.  

 

Dollar revenue fell 7% to $5,060 million. 

 

Company is primarily operating into four segment viz. BFSI – 39.8%, Mfg –10.1%, Retail & consumer – 15.4%, Communication – 16.9% and Other – 17.6% 

 

YoY topline growth for BFSI – 2%, Mfg – (3.8%), Retail & consumer – (22.6%), Communication – 0.21% and Other – 3.9%. 

YoY bottom line growth for BFSI – (0.4%), Mfg – (7.8%), Retail – (22.6%), Communication – 3.1% and others – 27.6%. 

 

Markets: Demand contraction was broad-based by geography. Other than Europe (+2.7%) and Latin America (+0.2%), growth declined in all other markets: North America (-6.1%), UK (-8.5%), India (- 27.6%), Asia Pacific (-3.2%), and MEA (-11.7%). 

 

Life Sciences & Healthcare continued to grow strongly at 13.8% YoY. 

 

Q1FY21 Total Contract Value: $6.9 Bn 

 

Consolidated headcount: 443,676 as of June 30, 2020.  

 

Board of Directors of the Company at its meeting held on July 09, 2020, inter alia, have declared an Interim Dividend of Rs. 5 per Equity Share of Rs. 1 each of the Company Record date is 17th July 2020 and Payment date is 31st July 2020.  

 

Financial 

ROE and ROCE is around 37% and 48% respectively and book value per share is around INR 225 and share is currently trading at 9.8x of its book value. Company is currently trading at annualized PE of around 30 which is high as per Industry benchmark. Promoter holding is around 72% in the company which is very strong and stable. FIIs mutual fund and Insurance cos hold around 15.7%, 2.7% and 5.4% in the company. Cash and cash equivalent from operating activities as of June 2020 is around INR 9,290 Cr.   

 

Share View: Share price high 2,304 (52 week) and now 2,200. Share strong support price is INR 2,090/2002. Long term investor should continue with the company. Short term outlook is bearish. Tata Consultancy Services is an IT services, consulting and business solutions organization that has been partnering with many of the world's largest businesses In their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions. This is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. 

 

Opportunities: As per the company recent report “company believe that by 2025, only 25% of their associates will need to work out of our facilities at any point of time; and every associate will be able to realize their potential without spending more than 25% of their time in a TCS office. This can lead to potential big saving like infrastructure cost eg. Rent, overheads, electricity, cabs and admin cost etc. In this quarter this is already visible other cost INR 2,722 Vs. 3,393 Cr in YoY Vs. 3,451 Cr in QoQ therefore saving by 19.7% in YoY and 21.1% in QoQ. After an initial period of disruption, customers have now stabilized their operations and are now embarking on new beginnings to adapt and thrive in a post-pandemic world. Aegon UK has selected TCS as the strategic partner to provide end-to-end digital solutions by leveraging new-age technologies and newer ways of working for an extended duration of 3 years. TCS continues to be the global industry benchmark in talent retention, with the IT Services attrition rate (LTM) at 11.1%. 

 

Risk: As the pandemic gripped the rest of the world, software outsourcers also lost billings as they generate most of their business overseas and the bulk of it comes from clients in financial services, manufacturing and communications sectors. Due to global pandemic Clients are also likely to cut back spending as the pandemic will force companies to prioritise critical technologies over initiatives aimed at tech transformation—something that had been driving growth recently for Indian IT firms, according to Gartner. Worldwide IT spending is expected to decline 8% over last year to $3.4 trillion in 2020, it had predicted in May. Company has contingent liabilities in the tune of INR 3.2K Cr (approx.) towards legal claim against the company and matter is pending in the court.  

 

Summary:

* EBIT margin down 150 bps QoQ at 23.6%, its lowest level in 12 quarters since 1QFY18, as weak revenue and investments.

* New deal wins of US$ 6.9 billion were fairly healthy, up 21.1% YoY, an encouraging sign

* Vertical-wise performance was varied, with BFSI (-4.9% YoY CC), retail (-12.9%), COMM (-3.6%), MFG (-7.1%) and TECH (-4%) all facing pressure; only Life Sciences & Healthcare (+13.8%YoY CC) saw robust growth, aided by increasing demand from clients due to the COVID-19 pandemic

* Management commentary in the press release alludes to a bottom having been hit, with clients stabilizing their operations and embarking on new beginnings to survive in post COVID-19 world. Front-end transformation is a key area of investment, with applications, cloud and cyber security major themes for growth

* The deal wins are an early encouraging sign for growth in future quarters, even as we await management commentary regarding pace of execution

Sources: Various publications

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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India Cements - Q4 FY20 Results

India Cements - Q4 FY20 Results

Total revenue from operations 1,176 Cr 

1,603 Cr (-26.61%)  YoY | 1,244 Cr (-5.45%)  QoQ 

Year ending revenue: 5,186 Cr Vs. 5,770 Cr (-10.14%)

Net Profit of (11.7) Cr 

32.57 Cr (135.92%) YoY (9.43) Cr (-24.39%) QoQ 

Year ending Net profit: 53.46 Cr Vs. 25.26 Cr (111.61%)

EPS (in Rs.) 7.16

0.53 YoY |( 0.24) QoQ 

Year ending EPS: 9.18 Vs. 0.28

View: Result is below expectation. YoY revenue declined and company also posted losses in this quarter and FY20 also posted losses in this quarter. Due to comprehensive Income the EPS is positive for Q4 and FY20.  

Business Updates & Highlights:

Q4FY20 EBITDA is around INR 72.1 Cr Vs. 187.4 Cr in Q4FY19 Vs. 129.9 Cr in Q3FY20 therefore declined by 61.5% in YoY and declined by 44.5% in QoQ.  EBITDA margin is around 6.1% Vs. 11.6% Vs. 10.4%.

FY20 EBITDA is around INR 594.6 Cr Vs. 640.1 Cr in FY19 therefore up by 7.1% in YoY. EBITDA margin is around 11.4% Vs. 11.1% in FY19. 

Board of Directors of the Company at its meeting held on June 24, 2020, inter alia, has recommended a dividend of Re. 0.60 per share for the year ended March 31, 2020

Financial

ROE and ROCE is around INR 0.3% and 5% respectively and book value per share is around INR 170 and share is currently trading at 0.8x of its book value. Company is currently trading at annualized PE of 15 which is fair as per Industry benchmark.  Promoter holding is around 28.2% in the company which is very low and also promoter has pledged around 27% of their shareholding (Very negative). FIIs, mutual fund and insurance cos hold around 12.2%, 2.7% and 5.3% in the company which is decreased by FIIs and mutual fund.  Cash and cash equivalent from operating activities as of March 2020 is around INR 386 Cr Vs.  377 Cr as of March 2019.

Position: Share support price is INR 100. Trading based share and risky trader can continue.  

Share View: Share price high 140 (52 week) and around 126. India Cements is one of the leading cement manufacturing companies in India and also a market leader in South India. Total capacity of 15.5 million tonnes per annum

Opportunities: Leading cement player in South India. Recently HNIs Damani has invested in the share at lower rate around INR 85-100 and currently continue to hold and as per market rumours it can be taken over by Damani also since promoter shareholding is too low although company has denied this rumours. Company is also holding premier IPL Team Chennai Super King. 

Risk: Q1FY21 will be more down due to their subsidiary business Chennai Super King no IPL revenue since postponement of IPL on account of Covid – 19 mostly IPL revenue recorded in Q1. Further due to shut down also topline can further impact.  

Sources: Various publications

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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Avanti Feeds - Q4 FY20 Results

Avanti Feeds - Q4 FY20 Results

Total revenue from operations 1,035 Cr 

858 Cr (20.61%)  YoY | 923 Cr (12.15%)  QoQ 

Year ending revenue: 4,115 Cr Vs. 3,488 Cr (17.94%)

Net Profit of 98.7 Cr 

75.9 Cr (30.02%) YoY 58.4 Cr (69.09%) QoQ 

Year ending Net profit: 385.2 Cr Vs. 305.9 Cr (26.28%)

EPS (in Rs.) 6.38

4.99 YoY |3.51 QoQ 

Year ending EPS: 25.43 Vs. 20.08

View: Result is overall good and fair. YoY and QoQ revenue and profit both have increased. EBITDA also improved in this quarter. 

Business Updates & Highlights:

Q4FY20 EBITDA was around INR 124.5 Cr Vs. 93.3 Cr in Q4FY19 therefore up by 33.4% in YoY. EBITDA margin is around 12% Vs. 10.8% in YoY. 

FY20 EBITDA was around INR 453.8 Cr Vs. 407.2 Cr in FY19 therefore up by 11.4% in YoY. EBITDA margin in FY20 was around 11% Vs. 11.6% in FY19.

Company is primarily operating into two main segment viz. Shrimp Feed – 72% and Processed Shrimp – 27.5%. YoY topline growth for Shrimp Feed was around 15.1% and processed Shrimp was around 38.4%.

YoY bottom line growth for Shrimp feed was around 24.9% and processed shrimp was around 82.8%. 

Board of Directors of the Company at its meeting held on June 27, 2020, inter alia, has recommended a Final Dividend of Rs.0.10 Ps., per Equity Share of Re. 1/- each fully paid, (in addition to Interim Dividend of Rs. 5/- already paid during March, 2020) for the financial year 2019- 20

Financial

ROE and ROCE is around INR 23% and 37% respectively and book value per share is around INR 100 and share is currently trading at 4.7x of its book value. Company is currently trading at annualized PE of 19 which is good as per Industry benchmark. Promoter holding is around 43.7% in the company which is good and stable.  FIIs and mutual fund hold around 17.8% and 1.8% in the company which is more than 2% increased by FIIs. Cash and cash equivalent from operating activities as of March 2020 is around INR 125 Cr Vs.  184 Cr as of March 2019. The good thing is company is virtually debt free and realization is also very fair. 

Position: Share support price is INR 450. Short term share will bounce back. Long term investor can see the target price of INR 640.

Share View: Share price high 770 (52 week) and now 471. Avanti Feeds Limited stands as a leading provider of high quality feed, best technical support to the farmer and caters to the quality standards of global shrimp customers. Avanti is proud of a long list of loyal customers from USA, Europe, Japan, and Australia & Middle East.

Opportunities: Company is currently at beaten down valuation. Strong management and also quarterly performance is sound. Both the business fairly well in this quarter and year ended performance also improved. Debt free company. Largest supplier of Shrimp feed in the entire coast of India and other countries. Avanti has Four Prawn and a Fish Feed Manufacturing Units, certified ISO 9001:2008, in Kovvur, Vemuluru and Bandapuram in West Godavari District, Andhra Pradesh and Pardi in Valsad District, Gujarat, in India with a capacity of 4,00,000 MT per annum

Risk: Q1FY21 may also impact due to Covid-19 for Shrimp food business overall globally including USA, Europe, Japan and others on account of increasing virus pandemic. 

Sources: Various publications

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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Rites - Q4 FY20 Results

Rites - Q4 FY20 Results

CMP:  266 (As on 02-07-2020) 

  

Total revenue from operations 570 Cr  

737 Cr (-22.69%)  YoY | 619 Cr (-7.91%)  QoQ  

  

Year ending revenue: 2,474 Cr Vs. 2,047 Cr (20.84%) 

Net Profit of 143.9 Cr  

150.3 Cr (-4.62%) YoY 150.04 Cr (-4.29%) QoQ  

  

Year ending Net profit: 633 Cr Vs. 490 Cr (29.18%) 

EPS (in Rs.) 5.56 

5.81 YoY |5.86 QoQ  

  

Year ending EPS: 24.64 Vs. 18.78 

View: Average result and slightly below expectation. YoY and QoQ revenue and profit both have declined.  

Business Updates & Highlights: 

Q4FY20 EBITDA was around INR 163.5 Cr Vs. 181.7 Cr in Q4FY19 therefore declined by 10.1% in YoY. EBITDA margin is around 28.7% Vs. 24.6% in YoY.  

FY20 EBITDA was around INR 661 Cr Vs. 576.2 Cr in FY19 therefore up by 14.7% in YoY. EBITDA margin in FY20 was around 26.7% Vs. 28.1% in FY19. 

Company is primarily operating into three main segment viz. Consultancy (domestic) – 50%, Export sales – 10% and Turnkey construction – 29.8%. YoY topline growth for Consultancy (dom.) – 13%, Export sales – (42.8%) and Turnkey construction – (35%). 

YoY bottom line growth for consultancy (dom.) – (8.3%), Export sales – (74%) and Turnkey construction – (47.5%) 

The Company has signed shareholder agreement on 21st May, 2020 for acquiring 24% stake in Indian Railway Stations Development Corporation (IRSDC) for INR 48 crore (4.80 crore equity share of 10/- each), with Rail Land Development Authority (RLDA) and IRCON International being the other equity 

Partners. 

The Board of Directors have proposed final dividend of INR 6 per share (face value of 10 per share) and further company has paid two interim dividends of 10.00 per share (face value of 10 per share) for financial year 2019-20 

Financial 

ROE and ROCE is around INR 31.8% and 20% respectively and book value per share is around INR 166 and share is currently trading at 1.8x of its book value. Company is currently trading at annualized PE of 11 which is good as per Industry benchmark. Promoter holding (Govt. of India) is around 72% in the company which is strong but stable.  FIIs and mutual fund hold around 2.9% and 4.9% in the company. Cash and cash equivalent from operating activities as of March 2020 is around INR 268 Cr Vs.  134 Cr as of March 2019 (Very Positive). The good thing is company is virtually debt free and realization is also fair.  

Position: Share support price is INR 230. Long term investor should continue with the company.   

Share View: Share price high 331 (52 week) and now 266. RITES Limited is an engineering consultancy company, specializing in the field of transport infrastructure. Established in 1974 by the Government of India, the company's initial charter was to provide consultancy services in rail transport management to operators in India and abroad.  

Opportunities: RITES Limited is a Miniratna (Category-I) Schedule `A' Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India having diversified services and geographical reach. Margin improved and strong cash flow in YoY. Debt free company with monopolistic business. The Company has significant presence as a transport infrastructure consultancy organization in the railway sector. 

Risk: Q1 and Q2 FY21 topline may also impacted due to ongoing pandemic.  

Sources: Various publications

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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ITC - Result Analysis Q4 FY20

ITC -  Result Analysis Q4 FY20

CMP:  205 (As on 02-07-2020)

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

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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