About the Company

ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. Established in 1910 as the ‘Imperial Tobacco Company of India Limited’, the company was renamed as the ‘India Tobacco Company Limited’ in 1970 and later to ‘I.T.C. Limited’ in 1974. It has a diversified presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers, and Agri-Business. It has many famous brands like Wills, Classic, Gold Flake, Aashirvaad, Sunfeast, Bingo, Fiama, Vivel, Classmate, and many others.

Q1 FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 10399 12123 -14.22% 12175 -14.59%
PBT 3128 4812 -35.00% 4512 -30.67%
PAT 2343 3174 -26.18% 3797 -38.29%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 11404 13305 -14.29% 13228 -13.79%
PBT 3436 5192 -33.82% 4743 -27.56%
PAT 2567 3437 -25.31% 3926 -34.62%

 

Detailed Results

    1. The company had a dismal quarter with a 14% consolidated revenue decline YoY and a fall of 25% YoY in consolidated profits.
    2. FMCG-Others segment grew almost 12.2% YoY and segment EBITDA grew 42.4% YoY. The revenues excluding education and stationery products have grown 34% YoY.
    3. The hotel business was similarly severely impacted in Q1 due to restrictions on travel and hotel operations. Q1 revenues fell 94% YoY. Aggressive reduction in controllable fixed costs partly mitigated the impact.
    4. The Agribusiness revenues were up 4% YoY on the back of trading opportunities in oilseeds and rice.
    5. The paper & packaging segment saw its performance impacted by lower offtake from end-user industries. Here export growth helped mitigate weak domestic demand. segment revenues declined by 32.8% YoY.
    6. In Staples, Snacks and Meals category, ‘Aashirvaad’ atta posted strong growth across markets. The brand further fortified its leadership position in the branded packaged atta industry during the quarter with significant value and volume growth.
    7. Sunfeast’ Biscuits and Cakes recorded robust growth driven mainly by a surge in ‘at home’ consumption and the consumers’ preference for trusted brands.
    8. In the Dairy & Beverages category, ‘Aashirvaad Svasti’ range of fresh dairy products and ghee recorded strong growth.
    9. The Chocolates and Confectionery categories were severely impacted reflecting the subdued demand for discretionary products.
    10. The Personal Care Products Business recorded substantial growth in revenue driven by heightened awareness and demand for hygiene products such as hand sanitizers, hand wash, antiseptic liquids, and floor cleaners in the wake of COVID-19 pandemic.
    11. The newly set-up perfume manufacturing plant at Manipura, Himachal Pradesh was re-purposed to manufacture hand sanitizers and service increased demand.
    12. The portfolio was augmented with the launch of several products like ‘Savlon Surface Disinfectant Spray’, ‘Savlon Hexa’ hand sanitizing liquid, ‘Savlon Germ Protection Wipes’, Savlon Hand Sanitizer Sachet, ‘Savlon Hexa advanced’ Soap.
    13. The Agarbatti industry was confronted with significant operational challenges, especially in the initial lockdown phase, mainly due to the higher focus of consumers and trade channels on essential products.
    14. The significant surge in demand across categories in the portfolio was met through technology-enabled solutions leveraging predictive analytics tools, shortened demand planning cycles, focus on fewer SKUs, and higher-value packs, backed by flexible manufacturing plans and responsive supply chain operations to cater to variability in demand.
    15. During the lockdown phase, nearly two-thirds of the throughput was delivered direct-to-customer/market from factories leading to a reduction in time-to-market.
    16. The company was the first in the industry to launch an online ordering system for retailers. It also facilitated swift scaling up of cold-calling and Whatsapp based order taking from retailers and deployed mechanized and non-mechanized delivery modes.
    17. The company also enhanced the presence of its product portfolio in alternative channels and entered into a collaboration with several companies such as Dominos, Swiggy, Zomato, Dunzo.
    18. The company expanded its presence in the emerging channels of Modern Trade and e-Commerce during the quarter, growing at over 20% and 90% respectively.
    19. In the Cigarettes segment, manufacturing operations were resumed in mid-May and thereafter rapidly scaled up. Currently, all factories are operational and production has been scaled up to pre-COVID levels.
    20. The company has launched many new cigarette variants like Gold Flake Luxury filter in the Longs segment, and Navy Cut Deluxe Filter, Gold Flake Indie Mint and Capstan Fresh in the regular size filter segment. The Flake brand was launched in an innovative 5s pack in target markets.
    21. In the Hotels business, the company is progressing towards accreditation by the National Accreditation Board for Hospitals & Healthcare Providers (NABH) for its operating procedures.
    22. In Agribusiness, the company ramped up the direct milk sourcing network in West Bengal to cater to the increasing requirements on the back of the growing franchise of the Aashirvaad Svasti range of dairy products.
    23. While demand for packaging in Pharma has remained stable, there has been a significant adverse impact in categories like publications, décor, wedding cards.
    24. Swift resumption of business ahead of the competition, strong dealer network, and agility in servicing customer needs to be aided in further strengthening market share in the Value Added Paperboards segment. Strategic cost management and import substitution continue to aid margin expansion and strengthen competitive advantage in this space.

Analyst’s View

ITC has been one of the biggest conglomerates in the history of modern India. The company has done well to diversify into other FMCG segments and build many leading brands like Aashirvaad, Bingo, etc. The company has seen a modest performance in the current quarter with severe disruption in its FMCG-Cigarettes and the Hotels business due to the lockdown. The company is doing well in maintaining a leadership position in many of its brands. The company has shown resilient growth in its FMCG segment due to the increase in at-home consumption and the migration towards trusted brands in the food space.  It has also done well to expand the manufacturing capability of Savlon Brand and to capitalize on the demand surge for Health & Hygiene products by introducing many new products under the Savlon brand. It remains to be seen whether there are any more disruptions in the future from COVID-19 and how long will it take for the Hotels business to get back to its feet. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments, and its mammoth cash-generating ability, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption.


 

 

Q4 FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 12176 12946 -5.95% 12997 -6.32% 49821 48269 3.22%
PBT 4512 4954 -8.92% 5036* -10.41% 19167* 18444 3.92%
PAT 3797 3482 9.05% 4142 -8.33% 15136 12464 21.44%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 13228 13902 -4.85% 13960 -5.24% 53991 52036 3.76%
PBT 4743 5142 -7.76% 5049* -6.06% 20026* 19138 4.64%
PAT 3926 3593 9.27% 4048 -3.01% 15585 12824 21.53%

*Includes an exceptional item of Rs 132.11 Cr which represents the loss of tobacco leaf stocks destroyed in a fire at a third party owned warehouse. The insurance claim for this is under process.

Detailed Results

    1. The company had a modest quarter with a 5% consolidated revenue decline YoY and a rise of 9% YoY in consolidated profits.
    2. FY20 performance was decent with 4% consolidated revenue growth and 21.5% profit growth. The growth in profits was mainly due to fall in corporate tax rate which was instituted earlier this year.
    3. Free cash flow in FY20 was up 30% YoY.
    4. The Board recommended a dividend of Rs 10.15 for FY20.
    5. FMCG-Others segment grew almost 5% YoY and segment EBITDA grew 32.8% YoY.
    6. The Education and Stationery Products segment was doing well until February but was severely impacted in the peak month of March due to the closure of educational institutions from the COVID-19 lockdown. This segment grew 5% YoY in Q4.
    7. The hotel business was similarly severely impacted in March due to the closure of the company’s facilities. FY20 revenues grew 10% YoY while segment EBITDA grew 12 % YoY in the same period.
    8. The Agribusiness was also impacted in March from the supply chain disruptions from COVID-19.
    9. The paper & packaging segment saw modest revenue growth of 5.3% YoY in Q4 driven by higher in-house pulp production, enhanced operating efficiencies, and benign input costs.
    10. The Company entered into a Share Purchase Agreement (‘SPA’) to acquire 100% of Sunrise Foods Private Limited (SFPL), an Indian company primarily engaged in the business of spices under the trademark ‘Sunrise’.
    11. ITC has been ranked #1 globally amongst peers (comprising companies with a market capitalization between USD 38 Bln. and USD 51 Bln.) and overall #3 globally on ESG performance in the Food Products industry by Sustainalytics — a renowned global ESG ratings company. ITC has been rated ‘AA’ by MSCI-ESG – the highest among global tobacco companies.
    12. The cigarette business was the most impacted in Q4 due to the steep increase in taxes since Feb 2020 and the operational disruptions from the lockdown.
    13. The FMCG-Others EBITDA margins rose 160 bps to 7.1% in Q4 despite the heightened competitive intensity, early closure of educational institutions that impacted the Education & Stationery Products Business, elevated input costs, gestation costs of new products/categories and manufacturing facilities and impact due to disruptions following the outbreak of the pandemic.
    14. Earnings per share for FY20 was at Rs 12.33 vs Rs 10.19 a year ago.
    15. In Q4 the company launched Aashirvaad Nature’s Super Foods, a differentiated range of products comprising Gluten-Free Flour, Ragi Flour, and Multi-Millet Mix which are naturally gluten-free, rich in dietary fiber and a source of protein.
    16. In the Spices segment, the company expanded its geographical footprint to 17 states and recorded healthy volume growth in FY20.
    17. In the Instant Noodles category, YiPPee! noodles sustained its growth momentum and overall market standing as a strong, competitive #2 brand in the noodles space.
    18. Due to the demand surge for Health & Hygiene products from COVID-19, the company rapidly expanded manufacturing capacity manifold and enhanced availability of the ‘Savlon’ antiseptic liquid, soap, handwash, hand sanitizer, and ‘Fiama’ handwash products in the market. The newly setup perfume manufacturing plant at Manpura, Himachal Pradesh was re-purposed in quick time to manufacture hand sanitizers and service increased demand.
    19. The company also launched ‘Savlon Surface Disinfectant Spray’ and ‘Savlon Hexa’ hand sanitizing liquid for quick and persistent action.
    20. The manufacturing facilities in staples category (atta, biscuits, and noodles) has returned back to 100 % utilization.
    21. Other FMCG categories and Paperboards and Packaging are operating at 80-85% of normal levels.
    22. The company developed and launched many products during the lockdown such as the Savlon Disinfectant Spray, Savlon Hexa with added protection, Savlon Wipes, Nimwash, B-natural Plus range of Immunity beverages, Home and Family Packs of some of the company’s trusted brands, etc.
    23. The company has also tied up with various companies like Dominos, Swiggy, Zomato, Dunzo, Amway, etc for the last-mile delivery of its products.
    24. The company is also introducing innovations like ‘ITC Store on Wheels’ to ensure direct reach to consumers in residential agglomerations. It is also increasing availability in e-commerce platforms including the ITC eStore.

Analyst’s View

ITC has been one of the biggest conglomerates in the history of modern India. The company has done well to diversify into other FMCG segments and build many leading brands like Aashirvaad, Bingo, etc. The company has seen a modest performance in the current quarter with severe disruption in its FMCG-Cigarettes and the Hotels business due to the lockdown. The company is doing well in maintaining a leadership position in many of its brands. The company has shown resilient growth in its FMCG segment despite the supply chain constraints brought on by COVID-19.  IT has also done well to expand the manufacturing capability of Savlon Brand and to capitalize on the demand surge for Health & Hygiene products by introducing two new products under the Savlon brand. It remains to be seen how the company will restructure its vast supply chain structure to function efficiently in the post COVID world and whether there are any more disruptions in the future from COVID-19. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments, and its mammoth cash-generating ability, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption.


 

Q3 FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 12996.63 12267.65 5.94% 12525.8 3.76% 37645.42 35322.72 6.58%
PBT 5035.53* 4821.19 4.45% 4807.7 4.74% 14654.97* 13490.25 8.63%
PAT 4141.93 3209.07 29.07% 4023.1 2.95% 11338.97 8982.42 26.24%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 13960.5 13168.8 6.01% 13497.27 3.43% 40762.96 38133.6 6.90%
PBT 5049.25* 4828.19 4.58% 5042.11 0.14% 15282.88* 13996.18 9.19%
PAT 4047.87 3136.96 29.04% 4173.72 -3.02% 11658.1 9231.4 26.29%

*Includes an exceptional item of Rs 132.11 Cr which represents the loss of tobacco leaf stocks destroyed in a fire at a third party owned warehouse. The insurance claim for this is under process.

Detailed Results

    1. The company had a modest quarter with 3.43% revenue growth YoY and a decline of 3% YoY in profits.
    2. 9M performance was good with 6.9% revenue growth and 26% profit growth. The growth in profits was mainly due to fall in corporate tax rate which was instituted earlier this year.
    3. The FMCG-Cigarettes segment saw revenues rise 5.3% YoY while profits from the segment rose 6.4% YoY.
    4. The FMCG-Others segment revenue was up 6.1% YoY. Segment EBITDA grew 48% YoY. The margins for the segment rose 230 bps YoY.
    5. Hotels segment also showed good performance with segment revenues up 22.2% YoY and EBITDA up 40.1% YoY.
    6. The company commissioned Welcomhotel Amritsar on 1st November 2019. ITC Royal Bengal has received a good response and is setting new benchmarks since its inception a short while ago.
    7. Paper division saw almost flat revenues and profits due to slowdown in the FMCG and liquor industry and depressed realizations on the softening of global pulp prices.
    8. Agribusiness revenue grew 10.4% and saw profits of 16.7% YoY. This was mainly driven by trading opportunities in oilseeds, pulses & coffee and scaling up of value-added segments (spices and frozen snacks).
    9. Aashirvaad continues to maintain a leadership position in its segment.
    10. Shortage of potato due to extensive crop damage in parts of Karnataka and Maharashtra caused by excessive rainfall adversely impacted Bingo! potato chips sales.
    11. The company added two new variants ‘Herby Spin’ and ‘Chatpata Swing to its Tedhe Medhe range.
    12. The company also launched `Sunfeast’ Bounce Loops in vanilla, chocolate and jam flavours in the quarter.
    13. The company also launched ‘Candyman’ Fantastik, a crispy wafer roll filled with chocolate cream in the quarter.
    14. In personal care, the company saw a consolidation of Savlon handwash and the introduction of two new deodorants for women under the Engage brand.
    15. In the stationary products business, the company continues to occupy a leadership position in this segment.
    16. The company also launched `Mangaldeep Lo Smoke Agarbatti’ with 80% less smoke.
    17. The company sustained its leadership position in the legal cigarette market.

Analyst’s View

ITC has been one of the biggest conglomerates in the history of modern India. The company has done well to diversify into other FMCG segments and build many leading brands like Aashirvaad, Bingo, etc The company has seen good performance in the current quarter with good revenue and EBITDA growth in its FMCG-Others and the Hotels business. The company is doing well in maintaining a leadership position in many of its brands. The company has shown resilient growth in its FMCG segment despite the current industry slowdown. It remains to be seen how long will it take for the company to bring up the earning power of its new segments and how will the future of the cigarette industry pan out in the country. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments and its mammoth cash-generating ability, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption.

 

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