ITC - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, ITC declared strong 26.0% yoy growth in its net profit to Rs.1,614cr, which was ahead of our estimates. During the quarter, the company's non-cigarette FMCG business reported top-line growth of 23.2% yoy, while the segment's loss fell substantially to Rs.16.7cr (vs. Rs.67.8cr and Rs.46.6cr in 4QFY2011 and 3QFY2012, respectively). We maintain our Accumulate view on the stock.

Key highlights: For 4QFY2012, ITC posted impressive 17.6% yoy growth in its net sales to Rs.6,861cr. While growth in the cigarette business (net sales of Rs.3,250cr) stood at 17.4% yoy, other FMCG business posted strong 23.6% growth. The agri business also posted strong 30.8% yoy growth. Cigarette volume growth stood at 4.5% for the quarter. However, the hotels business reported a decline due to the economic slowdown in the domestic and global economy. On the operating front, margin stood at 31.6%, up 97bp yoy due to higher realization on cigarettes and reduction in losses on the non-cigarette FMCG business.

Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of ~17% over FY2012-14E, driven by the company's diversified business model and ability to invest in growing businesses. Although we expect the recent price hikes to put pressure on cigarette volume growth, we do not see a major impact of the same on the company's earnings profile. At the CMP, the stock is trading at 21.5x FY2014E EPS. We maintain an Accumulate on the stock with a target price of Rs.252.

Source : Equity Bulls

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