Equity Research Summary ITC Ltd.

Submitted By: Click to edit Master subtitle style Kapil Goyal IM-17, Roll No. 75

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Recommendations

For 4QFY2011, ITC declared steady growth in its top line and earnings. We have marginally revised our estimates downward. We recommend Neutral on the stock. 4/11/12

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All Segments except Agribusiness show double digit growth

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Earnings grow by strong 25% yoy aided by high other income

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Cigarette segment registered double-digit sales and EBIT growth

We believe the cigarette business is poised for double-digit growth in terms of revenue and EBIT in FY2012E, albeit on a highbase. We have modeled in growth of 45% in cigarette volumes for FY201213E.

Price hikes and no further increase in excise duty by Govt.

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Non-cigarette FMCG witnessing strong revenue traction

ITCs non-cigarette FMCG business registered steady revenue growth of 16.8% yoy However, losses reduced by ~`11cr During the quarter, the company launched Sunfeast Yipee noodles in two flavours.

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Going ahead, we expect revenue

Hotel business shows recovery as ARR improves

ITCs hotel business registered robust growth of 18.2% yoy to `324cr (`274cr) during the quarter, aided by the festive/holiday season. The business segment reported EBIT margin of 30.7% (expansion of 219bp yoy), driving strong 27.3% yoy growth in EBIT. We believe the hotel business is well 4/11/12 track to post a 21% CAGR in on

Paperboard and packaging segment shows resilience

The paperboard and packaging segment registered strong revenue growth of 15% yoy (14.2% on a net level) to `962cr (`836cr). However, EBIT margin of the segment registered a marginal contraction of 5bp yoy to 20.1%. Going forward, we expect the segment to post a modest 15% CAGR 4/11/12 in revenue during FY201113E,

ITCs agri business registered 9.5% yoy growth in revenue (on high base) to `1,082cr (`988cr). The business segment reported a 217bp yoy expansion in EBIT margin to 9.2%, aiding 43.1% yoy growth in EBIT. Going ahead, we expect this segment to register a 4% CAGR in revenue over FY201113E (on account of flat global cigarette 4/11/12

Agri business registers another quarter of muted revenue growth

Model double-digit sales and EBIT growth in cigarettes

We have modeled in volume growth of 45% in cigarette volumes for FY201213, despite high base of FY2011 on account of high price hikes (1520% weighted average price hikes taken) likely to fully offset 1) ~17% excise hike in Union Budget 201112 and 2) rise in VAT announced in several states.
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We believe the cigarette business is

Non-cigarette to register a 23% CAGR over FY201113E

While cigarettes remain the main profit centre for the company, investments in non-cigarette businesses such as FMCG, hotels and paperboards have started yielding positive results. During FY201113E, we expect noncigarette EBIT to grow at a 23% CAGR aided by 1) reduction in noncigarette FMCG losses (likely 4/11/12

Financial Statements

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Thank You

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