• OUTLOOK ARENA
  • VIEWS ON NEWS
  • OCTOBER 27, 2000

ITC 2QFY01: Maintaining momentum

Tobacco major ITC Limited has logged in a 22% growth in its 2QFY01 net profits to Rs 2,517 m. This jump is on the back of a 6% net turnover growth during the same period. The company margins also went up from 21.9% in 2QFY00 to 25.1% in the current quarter. ITC's pays more than 50% of its revenues as excise duty. The company's gross income during the first quarter is actually Rs 22 bn, but the excise duties have more than halfed its net sales turnover to Rs 10 bn.

(Rs m)2QFY002QFY01Change1HFY001HFY01Change
Gross Income19,91821,6178.5%39,27243,0549.6%
Net Sales Turnover9,44510,0296.2%18,32820,0899.6%
Other Income3583867.7%5345635.5%
Expenditure5,8805,752-2.2%11,32311,4230.9%
Operating Profit (EBDIT)3,5654,27720.0%7,0048,66623.7%
Operating Profit Margin (%)37.7%42.6% 38.2%43.1% 
Interest (Net)327241-26.5%642472-26.6%
Depreciation26229111.2%56166919.1%
Profit before Tax3,3354,13123.9%6,3348,08927.7%
Tax1,2671,61527.4%2,3313,15035.1%
Profit after Tax/(Loss)2,0672,51721.7%4,0034,93823.4%
Net profit margin (%)21.9%25.1% 21.8%24.6% 
No. of Shares (eoy) (m)245.4245.4 245.4245.4 
Earnings per share*33.741.0 32.640.2 
*(annualised)      
Current P/e ratio  18.7     

ITC Limited is India’s No. 1 cigarette and tobacco company. It commands 65-70% share of the Rs 80 bn Indian cigarette market. It also has presence in the hospitality sector and packaging through its subsidiaries. The company has identified infotech (IT) and sports wear retailing as its future growth areas.

On a half yearly basis, the company has shown a 23% net profit growth over 1HFY00. Its turnover has grown by 10% during this period. The company has focused on improving its cost efficiencies. Its expenditure declined by a minor 2% during the quarter, but overall in the first half the company's expenditure saw a minor 1% increase.

Another reason for ITC's bottomline growth is lower interest outgo. In the last quarter (i.e. 1QFY01) ITC's net interest outgo declined by 27%. During this quarter too, the net interest outgo declined by 27%.

The company's core business is being adversely affected by the punitive taxation policies and also the public ban on smoking by some state governments'. But the company's increasing focus on its hotel, packaging, sport wear retailing and information technology (IT) business is aimed to provide a cushion against a drastic fall in the company's tobacco business. However, we continue to see ITC maintain its market leadership position in this segment. With its huge cash flows the company stands a good chance to consolidate in the other businesses too.

At the current market price of Rs 767, ITC quotes at a PER of 18.7 times its 2QFY01 annualised earnings. Given its improved performance in 1HFY01, and also ITC's future investment plans, the stock might see some positive activity in the days to come. But a lot will also depend on the company's success ratio in its other businesses.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407