ITC: Smoking Growth In Challenging Times

Shailendra Lotlikar / 19 Jan 2013

India Inc continues to surprise by posting better than expected results across sectors. After IT and Banking, it was the turn of diversified conglomerate ITC to come up with results that far surpassed what was expected of it. It had done well by reporting a good growth at all levels. This is commendable given the challenging environment that businesses have faced in the December quarter.

Its raining good results for India Inc and ITC was another addition to it. For the December quarter of 2012, the company’s performance has been very good. The topline of the company stood at Rs 7627.07 crore as against Rs 6195.43 crore during the corresponding period last year, witnessing a growth of 23.11% on a YoY basis. The bottomline stood at Rs 2051.85 crore as against Rs 1700.98 crore during the same period last year growing by 20.63% on a YoY basis. This increase was primarily led by segments like Branded Packaged Foods, Personal Care, Agri Business and of course Cigarettes.

Particulars (Rs/Cr)Q3FY13Q2FY13% Chg
Net Sales    7,627.07    6,195.43        23.11
EBITDA    2,652.54    2,208.36        20.11
Net Profit    2,051.85    1,700.98        20.63
EPS            2.61            2.19
Margins (%)

Chg/ bps
EBITDA 34.78 35.64 87 bps
NPM 26.9 27.46 55 bps
According to the company, this performance is remarkable because the environment has been challenging, which included a slowdown in economic growth and sustained high inflation. There is also an impact of the steep hike in taxes on cigarettes during the year that comes into play while considering the results of ITC. On the margins front, the EBITDA and the net profit margins for Q3FY13 witnessed a growth of 87 basis points (bps) and 55 bps respectively on a YoY basis.

Of the various segments that the company operates in, the non cigarette business has registered a revenue growth of 30.1% on a YoY basis. This has played a positive part in improving the topline of the company as a whole.The Cigarettes business witnessed a growth of 13.1% on a YoY basis. Its net sales in this segment stood at Rs 3657 crore which were largely due to the price hikes passed on to consumers. The FMCG business witnessed a strong growth of 30.1% on a YoY basis in net sales which stood at Rs 1783 crore. Hotels and Papers & Packaging businesses posted a topline growth of 11% and 8.5% respectively on a YoY basis. The Agri business witnessed a growth of 43.1% on a YoY basis. Net sales from this segment stood at Rs 1631 crore for Q3FY13.

ParticularsQ3FY13 (Rs/Cr)% Growth
Cigarettes    3,657.00          13.10
FMCG    1,783.00          30.10
Agri Business    1,631.00          43.10

Looking at the results the company seems to have done remarkably good in a challenging business environment. It has surpassed street expectations which were around Rs 1900 crore for its bottomline. The markets have reacted positively with the results and the scrip touched an intraday high of Rs 289 before settling at Rs 286 by the end of the day on Friday. If you have the stock in your portfolio, do not be in a hurry to get over it by booking profits. This is just the beginning of the upward growth trajectory for its business and better days are yet ahead.

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