ITC's Q1FY19 results (Outperformer) - All round operational improvement!
Q1FY19 result highlights
- ITC’s reported revenues stood at Rs107.2bn (est: Rs107.7bn). EBITDA grew 12% yoy at Rs42bn(est: Rs41bn). PAT increased by 10% yoy to Rs28bn (Rs28bn).
- Comparable cigarette revenues grew by ~10% yoy. Cigarette volumes increased by ~1.5% yoy while EBIT grew by 8.7% yoy (est: 8.1% yoy).
- Comparable revenues for FMCG increased by 14.3% yoy. Segment EBITDA increased by 86% yoy to Rs1.27bn with a margin expansion of 190bps to 4.5%.
- Hotels & Agri revenues increased by 12% and 14% yoy respectively while Paper business revenues were flat for the quarter. Agri business EBIT declined by 17% with a margin contraction of 230bps yoy. Paper EBIT was up 15% yoy with margin expansion of 290bps.
Key positives: Strong operational improvement in cigarette and FMCG businesses
Key negatives: Weakness in Paper revenues and Agri EBIT.
Impact on financials: Earnings estimates remain largely unchanged. We introduce FY21E earnings estimates.
Valuations & view
ITC has started FY19 on strong note with Cigarette business reporting positive volume growth after 6 quarters. A stable regulatory regime currently with no hike in cess in recent GST council meeting despite anniversarisation and a favorable base in terms of volume growth & EBIT margin, provides comfort on the near term visibility of cigarette division performance. We are factoring a 4% volume growth and 12% yoy EBIT growth in FY19. Moreover, healthy growth in revenues as well as strong traction in profitability for FMCG business as well as gradual improvement in other divisions would drive overall earnings growth (13% CAGR over FY18-21E). With the stock trading at 25x/22x FY20/21E earnings, it is at a 35-40% discount to the average of the FMCG coverage universe. We believe risk reward is favourable; Maintain Outperformer.
ITC is a diversified manufacturing and marketing company which is based in India. Co. maintains an operating presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While Co. is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.