literature review of itc ltd

+91-9899775880

011-47044510

011-49075396

• Introduction
• Submission Guidelines
• Call for Paper
• Feedback form
• Subscription Form
• News & Events

Welcome Guest

Home » Journal » XIBA Business Review » Volume 4 Issue 1 » Risk and Return Analysis of ITC Limited - An Empirical Study

Risk and Return Analysis of ITC Limited - An Empirical Study

Xiba business review, volume 4 issue 1.

• Call For Paper
• Journals Price List

Journal Type

• Print Journal
• Online Journal
• National Journal
• International Journal
• Indian Journal
• Peer Review Journal
• Journal with ISSN
• Indexed Journal

Journal Subject

• Management Journal
• Finance Journal
• Human Resource Journal
• Marketing Journal
• Hospitality Journal
• Entrepreneurship Journal
• Commerce Journal
• Psychology Journal
• Computer Science Journal
• Social Work Journal
• Supply Chain Management Journal

Slider jquery of your page of your page 1 2 3 slider jquery by WOWSlider.com v8.8

By department.

• Research Publications 52381
• Researchers 5498
• Organization Units 167
• Projects 121

This repository provides metadata of IIMB Publications and aimed at creating and preserving an archive of Institution scholarship. IIMB Publications include Articles, Working Papers (FULL TEXT), Book Chapters published by Faculty, Doctoral Dissertations by FPM Scholars and Project reports of Students enrolled in various courses of IIMB.

• Students Scholar Bank

Files in This Item:

Google Scholar TM

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

• Share Market News
• e-ATM Order
• FindYourMojo
• Relax For Tax
• Budget 2024
• Live Webinar
• One Click Mutual Fund
• Retirement Solutions
• Execution Algos
• One Click F&O
• Apply IPO through UPI
• Life Insurance
• Health Insurance
• Group Health Insurance
• Bike Insurance
• SME Insurance
• Car insurance
• Home Insurance
• Sovereign Gold Bonds
• New Bonds on Offer
• Government Securities
• Exchange Traded Bonds
• ICICI Bank FD
• Top Performing NPS Schemes
• NPS Calculator
• NPS Important FAQ and Disclosures
• Equity Trending News
• Self learning
• Customer Service
• Corporate Services
• Open Account
• Masters of the Street
• Features and Products
• Will Drafting
• Goal Planner
• Retirement Planning
• Brokerage Fees and Charges
• Business Partner
• Business Partner Opportunity
• Business Partner Earning Calculator
• Business Partner App
• Partner Universe
• Insurance – POSP
• Global Invest
• Equity Research
• Investing-Ideas

ITC Ltd Tobacco Products | NSE : ITC

• Target : 310.0 (16.10%)
• Target Period : 12 Month

19 May 2022

Strong growth across businesses….

ITC is biggest cigarettes & second largest FMCG company in India with ~78% of market share in cigarettes & presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business & agri exports businesses.

• The company has more than 200 manufacturing facilities in India. It has a distribution reach of over 6 million retail outlets across various trade channels & strong 25 brands across various categories

ITC reported strong results with ~9% cigarette volume growth.

• Sales were up 16% YoY, driven by strong growth across segments
• EBITDA was at Rs 5224 crore, up 16.8% YoY, with margins at 31.8%
• Consequent PAT was at Rs 4191 crore (up 11.8% YoY)

ITC’s share price has underperformed the FMCG index with negative 6.8% return (from Rs 286 in May 2017 to 267 in May 2022).

• We expect cigarette volumes, price growth in FMCG business & strong agri exports to drive revenues for the company in future
• We upgrade our rating from HOLD to BUY

We value the stock at Rs 310 on SOTP basis valuing cigarettes business 15x FY24 earnings & FMCG business 6x FY24 sales

• Stable taxation on cigarettes is expected to drive volumes, going forward. Moreover, the company has been gaining market share in cigarettes from last one year through new premium products & aggrieve trade promotions
• FMCG business growing at a sustained pace with continuous improvement in margins in last five years. Opportunity size of existing foods portfolio is large. Given agri commodities constitutes larger part of raw material, input cost pressures is relatively less for the company
• The company is utilising export opportunity in wheat, rice & tobacco in last one year. Recent spurt in global agri prices is likely to aid growth

We also like Dabur in our FMCG coverage.

• Significant shift in consumption towards healthier, natural & Ayurveda based products & aggressively foray in many big categories would be driving growth for Dabur
• Value the business at 55x FY24 earnings. BUY with a TP of Rs 680

Particulars

Shareholding pattern, price chart.

• The company is scaling up D2C brands through acquisition of minority stake in new age brands
• Key Risk: (i) Commodity inflation to keep FMCG margins under check (ii) Any abrupt increase in taxes or duties on cigarettes

Research Analyst

Sanjay Manyal [email protected]

Key Financial Summary

Q4FY22 Results: Cigarette volume, FMCG price growth & agri exports to drive revenue growth

• Revenue witnessed growth of 16% to Rs 16426 crore on the back of 10% growth in cigarettes, 31.8% growth in paperboard, 29.6% growth in agri & 12.3% growth in FMCG businesses. Hotels business also saw strong recovery with 35.4% growth. However, it still remains lower than pre-Covid revenues. There was some impact of Covid-19 third wave on hotel business during the quarter
• Cigarettes volume growth was ~9% during the quarter. The company is gaining market share through aggrieve trade promotions. It saw 128 bps improvement in cigarette segment margins. Cigarettes volumes are higher than pre-Covid numbers. New product launches are gaining traction & supporting volume growth
• FMCG sales growth of 12.3% was led by strong growth in education & stationary segment due to re-opening of schools, sustainable growth in staples and high growth in discretionary categories. Though hygiene portfolio (Savlon) sales came down from the peak, it still remains significantly higher than pre-Covid numbers. FMCG growth is led by mix of volumes, pricing growth & product mix enhancement
• EBITDA margin for the FMCG segment was up by 75 bps to 9% despite huge pressure on commodity inflation. The company was also able to maintain full year margins at 9% (up 10 bps) despite incessant commodity inflation & lower sales of high margin stationary business sales in earlier quarters
• The company is scaling up its D2C business with ITCstore.in. It is present in 15 cities with 700 new products in more than 45 categories. In last few quarters ITC has acquired minority stake in D2C brands like ‘Mother Sparsh’ & ‘Mylo’
• The company is continuing its focus new product innovation. It has launched 110+ new products in hygiene, health & wellness, natural & convenience categories
• E-commerce sales have grown by 50% in Q4 and has grown 3x in the last two years contributing 7% of FMCG sales. Digital presence through ‘Unnati’ app has been expanded to 3 lakh retail outlets. Rural stockist & market coverage increased to 1.4x and direct distribution increased to 1.1x in FY22
• The 29.6% growth in agri business is contributed by wheat exports due to significant increase in wheat prices globally after Ukraine-Russia war. It is important to note that this growth came on already high base in corresponding quarter. Moreover, leaf tobacco also saw strong volume led growth during the quarter. The strategic sourcing supported branded packed foods business i.e. wheat, dairy & spices
• Hotels business growth of 35% led by recovery in occupancies & ARRs. However, ARRs still remain below pre-Covid levels. Exit occupancies are higher than pre-Covid levels. Q4 revenues are at 84% of Q4FY20 levels. Segment EBIT was at Rs 32 crore
• Paperboard, paper & packaging business saw 31.8% sales growth to |2183 crore led by demand revival across end user segments. Segment profit witnessed a growth of 39.1% to Rs 450 crore with 107 bps improvement in margins. The company has increased capacity of value added paperboard in FY22. Moreover, it is setting up a greenfield project in Nadiad, Gujarat for packaging & printing products. This would be commissioned in Q2FY23
• ITC Infotech witnessed 16.3% revenue growth (Rs 2853 crore) in FY22 with 16% growth in EBITDA (Rs 717 crore) & 19.9% growth in PAT (Rs 541 crore)
• Operating profit grew 16.8% to Rs 5224.4 crore led by operating leverage given the company saw strong sales growth across segments. High commodity inflation resulted in gross margin contraction of 56 bps however, the company was able to save 70 bps & 27 bps in overhead & employee spends, respectively. Net profit grew 11.8% to Rs 4191 crore
• The company declared a final dividend of Rs 6.25/share. Along with the interim dividend of Rs 5.25/share, total dividend was at Rs 11.5/share, which is 4.3% dividend yield

Financial Summary

Profit and loss statement ₹ crore, key ratios ₹ crore, balance sheet ₹ crore, cash flow statement ₹ crore, previous reports pdf:.

ANALYST CERTIFICATION

I/We, Sanjay Manyal MBA (FINANCE) Research Analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or comanaging public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material conflict of interest various companies including the subject company/companies mentioned in this report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

RATING RATIONALE

ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%

Pankaj Pandey                                                                                                     Head – Research                                                                             [email protected]

ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

Copyright© 2022. All rights Reserved. ICICI Securities Ltd. ®trademark registration in respect of the concerned mark has been applied for by ICICI Bank Limited