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ITC: Topline pressure

Jul 25, 2003

Tobacco major, ITC Limited, has recorded a marginal 1.5% topline growth during the June quarter. However, the company has managed to report a healthy 15.5% bottomline growth during the quarter. The company has attributed the topline sluggishness to a 10-day transporters’ strike in April ’03 which disrupted shipments considerably, particularly in the paperboards and agri business segments.

(Rs m) 1QFY03 1QFY04 Change
Net Sales 14,080 14,289 1.5%
Other Income 260 571 119.7%
Expenditure 8,396 8,169 -2.7%
Operating Profit (EBDIT) 5,685 6,120 7.7%
Operating Profit Margin (%) 40.4% 42.8%  
Interest (net) 86 55 -36.1%
Depreciation 533 594 11.4%
Profit before Tax 5,325 6,041 13.4%
Tax 1,886 2,069 9.7%
Profit after Tax/(Loss) 3,439 3,972 15.5%
Net profit margin (%) 24.4% 27.8%  
No. of Shares (eoy) (m) 247.5 247.5  
Diluted Earnings per share* 55.6 64.2  
*(annualised)      
Current P/e ratio   11.6  

An encouraging factor in the performance was the expansion in the operating margins by over 2%. This seems largely to have come about owing to the introduction of super premium cigarette brands like 'Insignia' during the quarter. The company also launched another variant of the 'Wills' brand during the quarter.

On the retailing front, ITC continues to add more brands to its portfolio. The company's mid-priced segment offering 'John Players' distribution network now extends to 1,600 outlets. The company has launched premium eye wear 'Valentino', as well as ladies handbags from 'Furla' in a bid to expand its offerings in the Wills Lifestyle stores. on the hotels front, ITC registered revenues to the tune of Rs 500 m in the quarter (up 22% YoY). The growth in revenues was led by the commisioning of the Sonar Bangla in Kolkata.

The e-choupal model was further ramped up to 2,150 installations covering 12,000 villages. As per company, its greeting cards business attained a 20% market share during the quarter. We have yet to get the overall results of each segment, and hence are not able to comment on the profitability of each segment.

The ITC stock trades at 11.6x annualised 1QFY04 earnings. The company has taken many initiatives in a bid to de-risk its revenue profile towards non-tobacco related businesses. Most of its new businesses are in a nascent stage. Consequently, the markets have been conservative on ITC's prospects.


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