itc ltd q4 fy12 detailed reportbreport.myiris.com/firstcall/itc_20120705.pdf · stationery:...
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SYNOPSIS
ITC is one of the India's foremost
FMCG private sector companies with
a market capitalization of over US $
33 billion and a turnover of US $ 7
billion.
During the quarter, the robust
growth of Net Profit is increased by
25.98% to Rs. 16143.60 million.
ITC's is the first independent R&D
centre in India to get ISO 9001
accreditation and certified with ISO
14001 for EMS by DNV. It is also
certified for the Standard
ISO/IEC17025:2005.
ITC Ltd has recommended a dividend
of Rs. 4.50 per Ordinary Share of Rs.
1/- each.
Net Sales and PAT of the company
are expected to grow at a CAGR of
14% and 17% over 2011 to 2014E
respectively.
Years Net sales EBITDA Net Profit EPS P/E
FY 12 251738.20 96739.60 61623.70 7.88 31.46
FY 13E 286981.55 111369.86 71877.90 9.19 26.98
FY 14E 315679.70 123390.96 80156.05 10.25 24.19
Stock Data:
Sector: FMCG
Face Value Rs. 1.00
52 wk. High/Low (Rs.) 260.20/185.20
Volume (2 wk. Avg.) 333000.00
BSE Code 500875
Market Cap (Rs in mn) 1938963.20
Share Holding Pattern
1 Year Comparative Graph
ITC Ltd. BSE SENSEX
C.M.P: Rs. 248.00 Target Price: Rs. 280.00 Date: July 05th 2012 BUY
ITC Ltd. Result Update: Q4 FY12
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Peer Group Comparison
Name of the Company CMP(Rs.) Market Cap. (Rs. mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
ITC Ltd. 248.00 1938963.20 7.88 31.46 10.35 450.00
Hindustan Unilever Ltd 441.20 951621.80 12.75 34.53 27.09 750.00
Dabur India Ltd 114.70 199896.70 2.66 43.12 15.35 130.00
Godrej Consumer 578.30 194664.50 17.76 32.21 9.10 450.00
Investment Highlights
� Q4 FY12 Results Update
ITC Ltd has reported net profit of Rs 16143.60 million for the quarter ended on
March 31, 2012 as against Rs 12814.80 million in the same quarter last year, an
increase of 25.98%. It has reported net sales of Rs 69546.40 million for the quarter
ended on March 31, 2012 as against Rs 59599.90 million in the same quarter last
year, a rise of 16.69%. Total income grew by 18.15% to Rs 71625.10 million from
Rs 60621.50 million in the same quarter last year. During the quarter, it reported
earnings of Rs 2.06 a share.
Quarterly Results - Standalone (Rs in mn)
As At Mar-12 Mar-11 %change
Net sales 69546.40 59599.90 16.69
PAT 16143.60 12814.80 25.98
Basic EPS 2.06 1.66 24.68
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� Break up of Expenditure
� Segment Revenue (Net)
Segment Revenue Q4 FY12 Q4 FY11
FMCG 48,663.80 46,035.50
Agri Business 14,142.20 11,394.10
Paperboards, Paper & Packaging
9,799.40 9,784.20
Hotels 2,858.40 2,787.20
Total 75,463.80 70,001.00
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� Recommended Dividend
ITC Ltd has recommended a dividend of Rs. 4.50 per Ordinary Share of Rs. 1/-
each for the financial year ended March 31, 2012 and the dividend will be paid on
July 30, 2012.
� Awards
ITC Ltd has been awarded the 2012 World Business and Development Award at the
Rio+20 United Nations Summit at Rio de Janeiro, Brazil.
Company Profile
ITC is one of India's foremost private sector companies with a market capitalization of
over US $ 33 billion and a turnover of US $ 7 billion. ITC is rated among the World's
Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by
Forbes magazine, among India's Most Respected Companies by Business World and
among India's Most Valuable Companies by Business. ITC ranks among India's `10
Most Valuable (Company) Brands'. ITC also ranks among Asia's 50 best performing
companies.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG
products. While ITC is an outstanding market leader in its traditional businesses of
Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining
market share even in its nascent businesses of Packaged Foods & Confectionery,
Branded Apparel, Personal Care and Stationery.
ITC is widely perceived to be dedicatedly nation-oriented. ITC believes that its
aspiration to create enduring value for the nation provides the motive force to sustain
growing shareholder value. ITC practices this philosophy by not only driving each of
its businesses towards international competitiveness but by also consciously
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contributing to enhancing the competitiveness of the larger value chain of which it is a
part."
ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is
one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last
decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture
significantly enhance its competitiveness by empowering Indian farmers through the
power of the Internet. ITC's production facilities and hotels have won numerous
national and international awards for quality, productivity, safety and environment
management systems. ITC was the first company in India to voluntarily seek a
corporate governance rating.
ITC's R&D Centre the first independent R&D centre in India to get ISO 9001
accreditation and certified with ISO 14001 for Environment Management Systems by
DNV. The R&D Centre is also certified for the standard ISO/IEC17025:2005, by
National Accreditation Board for Testing and Calibration Laboratories (NABL). This
certification is awarded for "General requirement for the competence of Testing &
Calibration Laboratories".
List of products and brands
In FMCG, ITC has a strong presence in:
� Cigarettes: W.D. & H.O. Wills, Gold Flake Kings, Gold Flake Premium, Navy
Cut, Classic, Benson & Hedges, Silk Cut, Capstan,
� Foods: Kitchens of India; Ashirvaad; Minto, Sunfeast; Candyman; Bingo;
Sunfeast Pasta
� Apparel: Wills Lifestyle and John Players brands
� Personal care: Fiama di Wills; Vivel; Essenza di Wills; Superia; Vivel di
Wills brands of products in perfumes, haircare and skincare
� Stationery: Classmate and Paperkraft brands
� Safety Matches and Agarbattis
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Other Businesses include:
• Hotels
ITC's hotels have evolved into being India's second largest hotel chain with over
80 hotels throughout the country. ITC is also the exclusive franchisee
in India of two brands owned by Sheraton International Inc. - The Luxury
Collection & Sheraton which ITC uses in association with its own brands in the
luxury 5 Star segment. Brands in the hospitality sector owned and operated by
its subsidiaries include Fortune and WelcomeHeritage brands.
• Infotech India Ltd.
ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd,
provides IT services and solutions to leading global customers. ITC Infotech has
carved a niche for itself by addressing customer challenges through innovative
IT solutions.
• ITC's Agri-Business
ITC's Agri-Business is one of India's largest exporters of agricultural products.
The Company's 'E-Choupal' initiative is enabling Indian agriculture significantly
enhance its competitiveness by empowering Indian farmers through the power
of the Internet.
Group Companies
Subsidiaries
� ITC Infotech
� Surya Nepal Pvt. Ltd.
� Landbase
� King Maker Marketing Inc., USA
� Technico Pty Ltd. Australia
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� Russell Credit Ltd.
� Wimco Ltd.
� Srinivasa Resorts Ltd.
� Fortune Park Hotels Ltd.
� Bay Islands Hotels Ltd.
� Gold Flake Corporation Ltd.
Joint Ventures
� Maharaja Heritage Resorts Ltd.
� ITC Filtrona
Associate Companies
� Gujarat hotels Ltd
� International Travel House
Facilities
It employs over 26,000 people at more than 60 locations across India and is listed
on Forbes 2000. ITC Limited completed 100 years on 24 August 2010. In addition,
ITC's businesses have created sustainable livelihoods for more than 5 million people, a
majority of whom represent the poorest in rural India.
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Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY11 FY12 FY13E FY14E
Description 12m 12m 12m 12m
Net Sales 214682.50 251738.20 286981.55 315679.70
Other Income 5181.70 8253.40 9491.41 10535.47
Total Income 219864.20 259991.60 296472.96 326215.17
Expenditure -140141.40 -163252.00 -185103.10 -202824.21
Operating Profit 79722.80 96739.60 111369.86 123390.96
Interest -481.30 -779.20 -701.28 -715.31
Gross profit 79241.50 95960.40 110668.58 122675.65
Depreciation -6559.90 -6985.10 -7543.91 -7921.10
Profit Before Tax 72681.60 88975.30 103124.67 114754.55
Tax -22805.50 -27351.60 -31246.78 -34598.50
Profit After Tax 49876.10 61623.70 71877.90 80156.05
Equity capital 7738.10 7818.40 7818.40 7818.40
Reserves 151261.20 179570.00 251447.90 331603.95
Face value 1.00 1.00 1.00 1.00
EPS 6.45 7.88 9.19 10.25
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E
Description 3m 3m 3m 3m
Net sales 60852.20 62478.40 69546.40 68850.94
Other income 1808.00 2851.20 2078.70 2369.72
Total Income 62660.20 65329.60 71625.10 71220.65
Expenditure -38662.30 -38667.40 -46912.90 -44753.11
Operating profit 23997.90 26662.20 24712.20 26467.55
Interest -141.80 -156.70 -148.20 -163.02
Gross profit 23856.10 26505.50 24564.00 26304.53
Depreciation -1701.30 -1738.90 -1880.40 -1974.42
Profit Before Tax 22154.80 24766.60 22683.60 24330.11
Tax -7011.70 -7756.80 -6540.00 -7493.67
Profit After Tax 15143.10 17009.80 16143.60 16836.43
Equity capital 7773.00 7796.20 7818.40 7818.40
Face value 1.00 1.00 1.00 1.00
EPS 1.95 2.18 2.06 2.15
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Key Ratios
Particulars FY11 FY12 FY13E FY14E
No. of Shares(in mn) 7738.10 7818.40 7818.40 7818.40
EBITDA Margin (%) 37.14% 38.43% 38.81% 39.09%
PBT Margin (%) 33.86% 35.34% 35.93% 36.35%
PAT Margin (%) 23.23% 24.48% 25.05% 25.39%
P/E Ratio (x) 38.48 31.46 26.98 24.19
ROE (%) 31.37% 32.89% 27.72% 23.62%
ROCE (%) 53.93% 55.12% 45.72% 38.59%
Debt Equity Ratio 0.006 0.004 0.003 0.003
EV/EBITDA (x) 24.07 20.04 17.41 15.71
Book Value (Rs.) 20.55 23.97 33.16 43.41
P/BV 12.07 10.35 7.48 5.71
Charts:
Net sales & PAT
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P/BV
Outlook and Conclusion
� At the current market price of Rs.248.00, the stock is trading at 26.98 x FY13E
and 24.19 x FY14E respectively.
� Earning per share (EPS) of the company for the earnings for FY13E and FY14E
is seen at Rs.9.19 and Rs. 10.25 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 14% and
17% over 2011 to 2014E respectively.
� On the basis of EV/EBITDA, the stock trades at 17.41 x for FY13E and 15.71 x
for FY14E.
� Price to Book Value of the stock is expected to be at 7.48 x and 5.71 x
respectively for FY13E and FY14E.
� We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.280.00 for Medium to Long term investment.
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Industry Overview
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer
packaged goods. Items in this category include all consumables (other than
groceries/pulses) people buy at regular intervals. The most common in the list are
toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, and household accessories and extends to certain electronic
goods. These items are meant for daily of frequent consumption and have a high
return.
A major portion of the monthly budget of each household is reserved for FMCG
products. The volume of money circulated in the economy against FMCG products is
very high, as the number of products the consumer use is very high. Competition in
the FMCG sector is very high resulting in high pressure on margins
FMCG companies maintain intense distribution network. Companies spend a large
portion of their budget on maintaining distribution networks. New entrants who wish
to bring their products in the national level need to invest huge sums of money on
promoting brands. Manufacturing can be outsourced. A recent phenomenon in the
sector was entry of multinationals and cheaper imports. Also the market is more
pressurized with presence of local players in rural areas and state brands
Fast moving consumer goods (FMCG) sector is scaling new heights due to the entry of
foreign brands and development of organized retailing in a big way. Indian packaged
food industry, which is currently estimated at around US$ 10 billion, is driving retail
sales to a major extent in India. FMCG firms have also started tapping net savvy
consumers to give a boost to their revenue. Companies, including Dabur, Himalaya
Herbal Healthcare, Neutrogena, Oriflame, Amul, Future Group, Aditya Birla Retail,
REI Agro and Carrefour are making efforts to expand their reach through internet.
A recent study has revealed that lesser developed eastern states such as Bihar, Orissa,
Chhattisgarh and Assam are leading rural sales in India. The analysis has
strengthened the fact that rural markets are driving consumption of FMCG products.
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• US FMCG giant McCormick, that has recently formed a joint venture (JV) with
Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food
industry and achieve sales of US$ 85 million in the first year of operations in
the country.
• FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian
breakfast cereal market by launching oats cereal under its flagship brand
‘Horlicks’. The breakfast cereal market in India is currently dominated by
PepsiCo and Kellogg’s.
• Oral and dental hygiene products manufacturer Colgate Palmolive has decided
to invest Rs 200 crore (US$ 40 million) to establish a greenfield facility at an
upcoming industrial estate in Sanand which is being developed by state-run
Gujarat Industrial Development Corporation (GIDC).
________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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Firstcall India Equity Research: Email – info@firstcallindia.com
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