Hold ITC - Result in‐line with expectations - Nirmal Bang

ITC's performance for Q3FY12 was broadly in line with estimates. ITC scores high on earning‐resilience in these uncertain times ‐: 1) We feel that ITC can underperform in the near term due to most likely increase in the excise duty in the next budget; 2) the Other FMCG business has started to narrow losses which in our view will attain break even in 2HFY13E.

- Net Sales for Q3FY12 went up by 14.2% to Rs. 6195.43 crores as compared to Rs. 5424.25 crores in Q3FY11 and was marginally up by 3.7% from Rs.5974.18 crores in Q2FY12. The company posted remarkable revenue primarily driven by a 24.4% growth in non‐cigarette FMCG businesses, a 16.6% growth in Cigarette business, 11.6% growth in Paperboard business.

- EBITDA increased by 18% to Rs. 2381.1 crores in Q3FY12 compared to Rs. 2017.87 crores in Q3FY11 and was up by 7.3% from Rs. 2218.99 crores in Q2FY12. This was led by cigarette gross revenue growth of 11% YoY driven by a combination of ~4.5% volume growth and 5‐6% price hike. The cigarette volume disappoints though it reported a strong EBIT growth of 20% YoY. Operating margins for the cigarette business increased by 240bps to 31.7%, driven largely by price increases. Non‐tobacco FMCG revenues grew by 25% YoY even as segment losses reduced by 37.5%. Hotels business margins improved 350 bps YoY.

- The Company reported an EBITDA margin of 38.4% in Q3FY12, as compared to 37.2% in Q3FY11 and 37.1% in Q2FY12.

- Net Profit for Q3FY12 went up by 22.5% to Rs. 1700.99 crores as compared to Rs. 1389.08 crores in Q3FY11 and increased by 12.3% from Rs. 1514.31 crores in Q2FY12. ITC reported a PAT margin of 27.9% in Q3FY12, as compared to 25.5% in Q3FY11 and 25.3% in Q2FY12. The jump in PAT was attributed to the significant jump in other income by 48% YoY and 57.7%.

Source : Equity Bulls

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