ITC Q3 net jumps 21% to Rs 2,052 crore
ITC, India's largest cigarette maker, posted a 21 per cent jump in quarterly net profit on Friday, beating market expectations. ITC said its net profit rose to Rs 2,052 crore for the quarter ended December 31, up from Rs 1,701 crore a year earlier.
Net sales jumped over 23 per cent year-on-year to Rs 7,627 crore against Rs 6,195 crore.
However, EBITDA margins, a key measure of profitability, rose 36.4 per cent year-on-year 120 basis points below consensus 38.2 per cent.
Shares in ITC, a staple for fund portfolios that consider it recession-proof, rose as much as 1.6 percent after the results, after falling more than 10 percent in the past month. The stock trades at 25.5 times its 12-month forward earnings, compared with peers Hindustan Unilever's 28.5 times, and Godrej Consumer's 26.5 times, according to Thomson Reuters Starmine Smart Estimate.
Segment wise break up:
Cigarette volumes improved after four quarters of stagnant growth, aided by the launch of low-cost products during the quarter. Cigarette sales grew at 17 per cent year-on-year aided by a 2-3 per cent volume growth. Cigarettes margins improved by 106 basis points on improved mix. Operating margins for cigarette business rose 106 basis points yoy at 32.8 per cent.
ITC, which is 30.8 per cent owned by British American Tobacco, generates about half its revenue from cigarettes.
Higher taxes and tighter anti-smoking regulations in several states have impacted sales of the company, which makes four out of every five cigarettes sold in India.
"The high incidence of tax on cigarettes has created tax arbitrage opportunities leading to the growth of illegal cigarettes in the country. Consequently, legal industry volumes have come under severe pressure," the company said in a statement.
Net sales from its non-cigarette consumer business grew 30 percent to Rs 1,780 crore. The FMCG segment posted smaller losses at Rs 24 crore against Rs 46.6 crore in the September quarter. FMCG losses are lower yoy and quarter-on-quarter on the back of improved profitability of staples and biscuits.
"The non-cigarette business has shown a good jump. This is a good sign because the company has been focusing heavily on diversification," said Naveen Trivedi, an analyst with Karvy Stock Broking Ltd. in Mumbai.
The hospitality business has not done well, but ITC posted Rs 55 crore in operating margin against estimates of Rs 80 crore.
Paper business operating margin was also below estimates at Rs 228 crore against expectation of Rs 270 crore.
(With inputs from Reuters)
