Report
Krishnan Sambamoorthy
EUR 120.00 For Business Accounts Only

MOSL: ITC (Annual report): Steadily progressing on a sustainable path (ITC IN, Mkt Cap USD42.8b, CMP INR274, TP INR335, 22% Upside, Buy)

In this report, we present the key takeaways from ITC’s FY22 Annual Report:

  • Refreshed post-pandemic strategy: ITC’s refreshed strategy across business divisions places digital prowess and sustainability at its center, as it focuses on remaining nimble to address the fast-evolving trends and consumer preferences. Management will also explore growth opportunities through the M&A route and will undertake higher investments to drive exports.
  • Infrastructure and ICMLs: ITC has 10 operational integrated consumer goods manufacturing and logistical (ICML) facilities located close to high demand centers. These facilities have resulted in shorter distance to market, reduced emissions, improved quality and hygiene, as well as an improved supply chain.
  • Positive outlook for Cigarettes: After subdued demand over the last two years, cigarette volumes surpassed pre-pandemic levels in the latter half of FY22. Relative stability in cigarette taxation in recent years has helped the organized industry partially claw back the volumes lost to illicit trade with ITC being a prime beneficiary.
  • Enhancing FMCG-Others distribution: ITC’s FMCG-Others business now reaches 7m retail outlets. The company strengthened its direct reach during the year with market/outlet coverage growing ~40%/10% YoY, respectively. Direct reach enhancement in rural markets was supported by a hub-and-spoke distribution model with a 40% expansion in the rural stockist network over FY21 and collaborations with rural-focused eB2B players.
  • Improving operating metrics of Hotels: The Hotels business bounced back towards the end of FY22 after the third COVID wave disrupted demand in Jan’22. Occupancy rates at the end of Mar’22 surpassed pre-pandemic levels and while average room rates improved YoY, they remained below the pre-pandemic levels.
  • Paper and paperboards: Paperboard demand is likely to be driven by end-user segments such as household appliances, consumer goods, ready-made garments, e-Commerce, pharmaceuticals, etc. Writing and printing paper demand is also expected to bounce back in the short term following the re-opening of educational institutions.
  • Agri business: Strong FY22 performance was driven by growth in wheat, rice, spices and leaf tobacco exports despite logistical challenges. The Agri business continues to focus on: a) enhancing its Value-added Agri Products (VAAP) portfolio, b) creating an Agri-tech platform for Indian farmers, and c) promoting ‘Climate Smart Agriculture’.

 

Provider
Motilal Oswal
Motilal Oswal

​Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. 

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Analysts
Krishnan Sambamoorthy

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