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ITC Ltd Research Report - 22nd Jul 2016

FMCG | Published on Jul 22nd 2016

IT

ITC posted a healthy set of numbers for 1QFY2017, both on the top-line and the bottom-line front. The top-line was strong due to healthy growth in Cigarettes, other FMCG & Agri businesses which resulted in a higher overall profitability of the company. Key highlights: ITC’s net sales for the quarter grew by 9.8% yoy to Rs10,054cr. In terms of segment wise performance (gross level), the Cigarettes business posted a 6.4% yoy growth in sales to Rs8,231cr, aided by price hikes and increase in volume. The FMCG (Others) business posted a 9.5% yoy growth in sales to Rs2,385cr. Further, the Agri business posted a strong sales growth of 20.2% yoy to Rs2,794cr. However, the Paperboards & Packaging and Hotel divisions posted a revenue de-growth of 1.6% yoy and 0.2% yoy for the quarter. Overall, the company’s OPM contracted by 43bp yoy to 35.1%, owing to increase in raw material and staff costs. Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 9.8% and 11.3% respectively over FY2016-18E. At the current market price, the stock is trading at 24.6x its FY2018E EPS. We recommend an Accumulate on the stock with a target price of Rs283.

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Accumulate

CMP 250
Target Price 283
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)282,381.66
MCAP NSE (Rs in Cr)282,745.25
P/E (x)28.48
EPS (Rs.)8.18
BV (Rs.)32.33
Div Yield (%)2.42
FV (Rs.)1.00
P/BV (x)7.21
EV/Sales (x)7.00
EV/EBITDA (x)18.24

Shareholding Pattern (%)

Foreign52.0
Institution35.0
Public & Others9.0
Corporate4.0
Promoter0.0
Grand Total100.0

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