ITC - Q1FY21 Result Update - ICICI Securities

ITC reported 17.4% decline in sales with cigarettes revenues seeing de-growth of 29.1%. The volume dip of 40% was better than our expectation given 45 days business loss. We believe trade (distributor, retailers) inventory would have depleted during lockdown despite retail shops staying closed. Preferred pack buying over loose cigarettes also helped restore volumes. These factors would have helped company to re-fill trade pipeline given manufacturing & supply chain operations normalised in June. The trade normally holds 14 days inventory. Comparable FMCG sales grew 12.2% with strong demand in staples, packages foods & hygiene product and steep decline in discretionary & stationary businesses. Operating margins contracted 1184 bps mainly impacted by negative operating leverage & excise hike earlier in budget. Net profit de-grew 26.2%.

Valuation & Outlook

With the end of capex cycle in most businesses (except FMCG), we believe capital allocation has been rationalised. With more than Rs. 20,000 crore of cash & liquid investment and consistent free cash flow generation of Rs. 10,000-12000 crore, we expect Rs. 20/share including special dividend in FY21E. We value the stock on SOTP basis valuing cigarette business at 14x PE & FMCG business at 5x price to sales with a target price of Rs. 250/share.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ITC_Q1FY21.pdf

Shares of ITC LTD. was last trading in BSE at Rs.199.7 as compared to the previous close of Rs. 200.65. The total number of shares traded during the day was 936745 in over 7929 trades.

The stock hit an intraday high of Rs. 201.65 and intraday low of 197.35. The net turnover during the day was Rs. 186757863.

Source : Equity Bulls

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