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ITC: A Decent Quarter Amidst Challenging Environment - Views on News from Equitymaster
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  • Dec 7, 2016 - ITC: A Decent Quarter Amidst Challenging Environment

ITC: A Decent Quarter Amidst Challenging Environment
Dec 7, 2016

ITC has announced second quarter results of the financial year 2016-2017 (2QFY17). The company has reported 8% YoY and 10.5% YoY growth in revenues and net profits respectively. Here is our analysis of the results.

Performance Summary
  • ITC began FY17 on a positive note. The momentum of decent sales and profitability was also seen during this quarter. Net sales for the quarter ended September 2016 were up by 8% YoY.
  • The growth was led by the company's non-cigarette FMCG business segment. Revenues for the non-cigarette FMCG business witnessed an increase of 13.3% YoY during the quarter. The company's cigarette business contributed to about 58% to net revenues, while the non-cigarette FMCG business contributed 18.2% to net revenues.
  • ITC managed to keep operating profit margins intact during the quarter. At the EBIT level, margins for the cigarette, and non-tobacco FMCG business segments expanded by about 0.4% YoY and 0.3% YoY, respectively. On the other hand, EBIT margins of the agri business contracted by 0.1% on a YoY basis.

    Financial performance snapshot
    (Rs m) 2QFY16 2QFY17 Change
    Revenues 126,113 136,166 8.0%
    Expenditure 92,286 99,866 8.2%
    Operating profit (EBITDA) 33,827 36,300 7.3%
    EBITDA margin (%) 26.8% 26.7%
    Depreciation 2,582 2,684 4.0%
    EBIT 31,245 33,616 7.6%
    EBIT margin (%) 24.8% 24.7%
    Interest 103 107 4.0%
    Other income 3,926 4,754 21.1%
    Profit before tax 35,068 38,262 9.1%
    Tax 12,443 13,262 6.6%
    Profit after tax/(loss) 22,625 25,000 10.5%
    Net profit margin (%) 17.9% 18.4%
    No. of shares (m) 8,027 12,112
    Diluted earnings per share (Rs)* 8.5
    Price to earnings ratio (x) 27.0

    * trailing 12 month earnings

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DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report.
  2. Except for ITC Ltd. Equitymaster has no financial interest in any other Subject Company forming a part of this report.
  3. Equitymaster's investment in the subject company is as per the guidelines prescribed by the Board of Directors of the Company. The investment is however made solely for building track record of its services.
  4. Equitymaster's Associates and Research Analyst or his/her relative do not have any financial interest in the subject company.
  5. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
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