Dear All,
Forwarding you the Result Update on ITC for 4QFY2011 with a Neutral recommendation.
For 4QFY2011, ITC declared steady growth in its top line and earnings (broadly in line with our estimates). We have marginally revised our estimates downward. We recommend Neutral on the stock.
All segments deliver, earnings growth boosted by other income: For 4QFY2011, ITC reported top-line growth of 15.5% yoy to `5,836cr (`5,054cr), below our estimates of 18.9% yoy growth to `6,011cr. The cigarette division registered 13.2% growth in gross revenue (12.8% yoy growth in net revenue) on the back of better realisation (price hikes and no further increase in excise duty) and improved product mix (up-trading to filter cigarettes). Among other segments, agri-business and non-cigarette FMCG businesses posted growth of 9.5% yoy and 16.8% yoy, respectively. The hotels and paperboards businesses registered growth of 18.2% and 15% yoy, respectively. Earnings for the quarter grew by robust 25% yoy to `1,282cr (`1,028cr), though below our expectation of 28.8% yoy growth to `1,325cr, aided by high other income (up 52.2% yoy to `226cr) and flat margins (up 18bp yoy to 30.7%).
Outlook and valuation: We continue to like ITC’s diversified business model and its ability to generate and invest strong cash flows in high potential businesses. However, we believe the current stock price (run-up post the announcement of no further excise duty hike in Union Budget 2011–12) factors the positives in the stock. Hence, we recommend Neutral on the stock with a revised fair value of `195 (`205), based on 23x FY2013E EPS – 10% premium to its historical valuations on account of better visibility in core cigarette division (no excise hike) and improved profitability.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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