ITC - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, ITC posted robust 20.2% yoy growth in its net profit to Rs.1,602cr. The company's non-cigarette FMCG business reported substantial decline in its losses. The segment's operating losses stood at Rs.39cr in 1QFY2013 (vs. Rs.76cr in 1QFY2012).

Key highlights: For 1QFY2013, ITC posted 15.3% yoy growth in its net sales to Rs.6,652cr. While growth in the cigarette business (net sales of Rs.3,425cr) stood at 19.2% yoy, other FMCG business witnessed 23.0% yoy growth to Rs.1473cr. The agri business and hotel business remained flat yoy at Rs.1,691cr and Rs.232cr respectively. Cigarette volume growth remained flat for the quarter due to price hikes on account of increase in excise duty. On the operating front, operating margin stood at 34.7%, up 221bp yoy due to higher realization on cigarettes, reduction in losses on the non-cigarette FMCG business. However, Gross margin remained flat yoy at 61.3%.

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 23.6x FY2014E EPS. We maintain a Neutral rating on the stock.

Source : Equity Bulls

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