FMCG major, ITC reported a marginal growth of 3.64% in net profit for the quarter ended Mar. 31, 2015. Net profit for the quarter was Rs 23.61 billion as compared to Rs 22.78 billion in the same period last year. During the quarter, net revenues from operations was almost flat at Rs 92.93 billion, up 0.59% from Rs 92.39 billion in the same period last year.
We have collated views of analysts on how they view numbers and outlook on ITC:
Chitrangda Kapur, Reliance Secirities:
"ITC is one of the most well-diversified company in the FMCG space. However, the mainstay of the business i.e. cigarettes is under the headwind of stringent government regulations and this will continue to stay. ITC's focus on FMCG business (ex-cigarette) is promising and so far all brands of that business (Fiama Di Wills, Sunfeast and Yipee) have been staunch challenger to the established brands; it is nonetheless, a nascent business and will take time to be a significant contributor to ITC's consolidated revenue.
Post the result, we have not materially changed our estimates as we factor discretionary spending revival from 2HFY16E to aid financials across business segments for the company. Over FY15-17E, we factor revenue CAGR of 11.7% and earnings CAGR of 14%, which is slower to the CAGR of ~15% and ~19% for revenue and earnings, respectively over FY12-14. Hence, given the government's strong anti-tobacco stance and slower growth outlook, we revise our valuation multiple from 28x to 25x for ITC. We reiterate our BUY recommendation with revised target price lower to Rs 390 from Rs 438 earlier."
Abneesh Roy, Pooja Lath and Tanmay Sharma, Edelweiss Research:
"ITC's Q4FY15 revenue came marginally below our estimates due to the higher-than-expected ~13% YoY drop in cigarette volumes. Cigarette opportunity in India remains attractive over longer term-per capital consumption is 1/15th of China. However, we expect cigarette volumes to remain under pressure in near term. Although FMCG is gaining traction and valuation is attractive, the stock is unlikely to re-rate unless cigarette volumes improve. Hence, we downgrade to 'HOLD/SU' from 'BUY/SU' with a SOTP-based target price of Rs 360."
Gaurang Kakkad and Premal Kamdar, Religare:
ITC reported a dismal Q4 with net sales, EBITDA, adj. PAT growth of 0.5%/ 2.8%/5.4% as cigarette volumes plunged 13% and cigarette EBIT growth slowed to 6% YoY. Growth in the FMCG business too slid to 6.3% YoY. With pressure on cigarettes volumes growth and muted FMCG and other businesses, we foresee limited near-term drivers for the company. Maintain HOLD with a revised Mar'16 target price lower to Rs 350 from Rs 360."
Harsh Mehta, HDFC securities:
"ITC's overall revenues increased a mere 0.6% YoY to Rs 92.9 billion (below est). Cigarettes reported net sales growth of 3.2% YoY. Meanwhile, despite steep volume decline in cigarettes, ITC's EBIT growth for FY15 is resilient at 11.8%. Management is confident of low teen EBIT growth in FY16E, which we think is achievable. ITC expects rationality to emerge in excise hike from the next budget. We believe volume growth may well return in cigarettes from FY17E which may drive EBIT growth higher than aspired by us. FMCG business continues to gain market share on the back of resilient volume growth. Reiterate BUY. Our SOTP is Rs 394."
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