ITC witnessed a sequential enchancment on cigarette quantity in Q4FY21 with c.7% y-o-y progress (in keeping with consensus; under JEFe). FMCG continued to witness robust progress charges together with margin enchancment; inns was expectedly weak whereas agri & paperboards’ Ebit was forward. Ongoing Covid-19 induced restrictions proceed to cloud near-term outlook notably on cigarette volumes though we anticipate a restoration throughout H2FY22. We lower FY22 EPS by c.4%; BUY.
This autumn present: Op. Ebitda grew 7% y-o-y to Rs 44.7 bn, 4% under our estimate though largely in keeping with consensus. On a 2-yr CAGR, Ebitda fell 1%. Pre-ex earnings grew 8% y-o-y to Rs 37.5 bn, which was 4% under.
Infosys, ITC, RIL, PVR, Route Cell, Motherson Sumi, Manappuram Finance shares in focus
ITC, Infosys, Radico Khaitan, Magma Fincorp, PNB Housing, Aurobindo Pharma shares in focus
ITC rating- Add: Margins in FMCG phase trigger for cheer; TP revised to Rs 250
Cigarette quantity miss: Web revenues grew 7% y-o-y, after declining for 4 consecutive quarters, aided by robust restoration in metros and huge cities. Cigarette volumes have been up 7-8% with Ebit rising 8% y-o-y, 5% under estimates. On a 2-year CAGR, each volumes and Ebit declined 2%. Volumes recovered again to close pre-Covid ranges in the direction of end-FY21; nevertheless, second Covid wave has introduced up challenges on account of constraints in no. of working shops and restricted hours of operations.
FMCG progress robust: FMCG income grew at 16% y-o-y, albeit contains consolidation of Dawn Meals. Adjusted for Dawn, stationery & way of life enterprise, income progress stood at 16% (vs. 11% in Q3). FMCG Ebitda margin expanded 30bps y-o-y to eight.3% (down 90bps q-o-q). Adjusted for Dawn consolidation, stationery & way of life enterprise, Ebitda margin expanded 115bps y-o-y with phase Ebitda up 19%.
Lodges: Lodges income continued to get well, up 22% q-o-q. On a y-o-y foundation, income declined 38%.
Agri: Agri revenues grew strongly, up 79% y-o-y. Ebit margin declined 90bps y-o-y, with Ebit up 54% y-o-y.
Paperboards: Income grew 14% y-o-y (vs. 5% decline in Q3). Section Ebit grew 13% y-o-y with margin flattish at 19.5%.
FY21 efficiency: ITC noticed a 9% EPS decline in FY21, with cigarette Ebit declining 14% and an over Rs 5 bn+ Ebit loss in inns. FMCG enterprise nevertheless did properly, with income progress of 15% and Ebitda up 44% (34%, ex-Dawn).
Dividend: ITC declared a Rs 5.75 last dividend, after an interim dividend of Rs 5 declared in Q3. At Rs 10.75, payout stood at a wholesome 102%.
Minimize EPS: Whilst This autumn noticed a sustained restoration, second Covid wave creates near-term uncertainty on cigarette quantity restoration. We accordingly lower our FY22 EPS estimate by 4% (minor change in FY23). Preserve Purchase with unchanged PT of Rs 270.