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ITC Ltd Research Report - 23rd May 2016

FMCG | Published on May 23rd 2016


ITC posted a healthy set of numbers for 4QFY2016, both on the top-line and the bottom-line front. The top-line was strong due to higher growth in Cigarettes & Agri businesses; however, higher taxes slightly dragged down the overall profitability of the company. Key highlights: ITC’s net sales for the quarter grew by 9.4% yoy to Rs10,169cr. The Cigarettes business posted a 10.2% yoy growth in net sales to Rs4,639cr, aided by price hikes, which enabled an 11.5% yoy growth in the segment’s EBIT. The FMCG (Others) business posted a 5.4% yoy growth in net sales to Rs2,704cr, and an EBIT level profit of Rs71cr. Further, the Paperboards and Packaging division posted a growth of 3.0% yoy and 6.5% yoy in revenue and EBIT, respectively. The Hotels business posted a 4.8% yoy growth in its top-line, while it reported a flat growth at the EBIT level. The Agri business posted a strong growth of 26.5% yoy in revenue, while its EBIT grew by 6.1% on a yoy basis. Overall, the company’s OPM expanded by 136bp yoy to 36.3%, owing to reduction in overall operating expenses. Outlook and valuation: We expect ITC to report a top-line and bottom-line CAGR of 8.3% and 9.3% respectively over FY2016-18E. At the current market price, the stock is trading at 22.6x FY2018E EPS. We recommend a Buy on the stock with a target price of Rs380.

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CMP 330
Target Price 380
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)292,215.10
MCAP NSE (Rs in Cr)292,396.83
P/E (x)29.67
EPS (Rs.)8.13
BV (Rs.)27.14
Div Yield (%)2.34
FV (Rs.)1.00
P/BV (x)8.89
EV/Sales (x)7.25
EV/EBITDA (x)18.88

Shareholding Pattern (%)

Public & Others9.0
Grand Total100.0

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