About the Company

ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. Established in 1910 as the ‘Imperial Tobacco Company of India Limited’, the company was renamed as the ‘India Tobacco Company Limited’ in 1970 and later to ‘I.T.C. Limited’ in 1974. It has a diversified presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. It has many famous brands like Wills, Classic, Gold Flake, Aashirvaad, Sunfeast, Bingo, Fiama, Vivel, Classmate and many others.

Q3 FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 12996.63 12267.65 5.94% 12525.8 3.76% 37645.42 35322.72 6.58%
PBT 5035.53* 4821.19 4.45% 4807.7 4.74% 14654.97* 13490.25 8.63%
PAT 4141.93 3209.07 29.07% 4023.1 2.95% 11338.97 8982.42 26.24%

 

Consolidated Financials (In Crs)
  Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 13960.5 13168.8 6.01% 13497.27 3.43% 40762.96 38133.6 6.90%
PBT 5049.25* 4828.19 4.58% 5042.11 0.14% 15282.88* 13996.18 9.19%
PAT 4047.87 3136.96 29.04% 4173.72 -3.02% 11658.1 9231.4 26.29%

*Includes an exceptional item of Rs 132.11 Cr which represents the loss of tobacco leaf stocks destroyed in a fire at a third party owned warehouse. The insurance claim for this is under process.

Detailed Results

    1. The company had a modest quarter with 3.43% revenue growth YoY and a decline of 3% YoY in profits.
    2. 9M performance was good with 6.9% revenue growth and 26% profit growth. The growth in profits was mainly due to fall in corporate tax rate which was instituted earlier this year.
    3. The FMCG-Cigarettes segment saw revenues rise 5.3% YoY while profits from the segment rose 6.4% YoY.
    4. The FMCG-Others segment revenue was up 6.1% YoY. Segment EBITDA grew 48% YoY. The margins for the segment rose 230 bps YoY.
    5. Hotels segment also showed good performance with segment revenues up 22.2% YoY and EBITDA up 40.1% YoY.
    6. The company commissioned Welcomhotel Amritsar on 1st November 2019. ITC Royal Bengal has received a good response and is setting new benchmarks since its inception a short while ago.
    7. Paper division saw almost flat revenues and profits due to slowdown in the FMCG and liquor industry and depressed realizations on the softening of global pulp prices.
    8. Agribusiness revenue grew 10.4% and saw profits of 16.7% YoY. This was mainly driven by trading opportunities in oilseeds, pulses & coffee and scaling up of value-added segments (spices and frozen snacks).
    9. Aashirvaad continues to maintain a leadership position in its segment.
    10. Shortage of potato due to extensive crop damage in parts of Karnataka and Maharashtra caused by excessive rainfall adversely impacted Bingo! potato chips sales.
    11. The company added two new variants ‘Herby Spin’ and ‘Chatpata Swing to its Tedhe Medhe range.
    12. The company also launched `Sunfeast’ Bounce Loops in vanilla, chocolate and jam flavours in the quarter.
    13. The company also launched ‘Candyman’ Fantastik, a crispy wafer roll filled with chocolate cream in the quarter.
    14. In personal care, the company saw a consolidation of Savlon handwash and the introduction of two new deodorants for women under the Engage brand.
    15. In the stationary products business, the company continues to occupy a leadership position in this segment.
    16. The company also launched `Mangaldeep Lo Smoke Agarbatti’ with 80% less smoke.
    17. The company sustained its leadership position in the legal cigarette market.

Analyst’s View

ITC has been one of the biggest conglomerates in the history of modern India. The company has done well to diversify into other FMCG segments and build many leading brands like Aashirvaad, Bingo, etc The company has seen good performance in the current quarter with good revenue and EBITDA growth in its FMCG-Others and the Hotels business. The company is doing well in maintaining a leadership position in many of its brands. The company has shown resilient growth in its FMCG segment despite the current industry slowdown. It remains to be seen how long will it take for the company to bring up the earning power of its new segments and how will the future of the cigarette industry pan out in the country. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments and its mammoth cash-generating ability, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption.

 

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