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ITC

ITC’s first performance has been the result of a drastic cost cutting, which saw its net profit grow by 15 per cent over the corresponding previous quarter and 23 per cent sequentially. Total income at Rs 1,485.90 crore (Rs 1,433.99 crore) was up 4 per cent YoY but down 6 per cent sequentially. Against this, its total spending was down 0.13 per cent from the corresponding previous quarter to Rs 1,088.68 crore (Rs 1,090.07 crore).

Net sales was up 1 per cent to Rs 1,428.85 crore (Rs 1,408.02 crore) year-on-year. Income from the FMCG business was up 6 per cent over the year-ago period and 5 per cent sequentially thanks to a rise in the sale of cigarettes. Income from hotels business was up 22 per cent YoY but was down 14 per cent sequentially. Agri business, which had been performing very well for ITC, has been slipping and income was down 23 per cent YoY and 9 per cent sequentially. Revenue from paperboards was up 8 per cent YoY and down 3 per cent sequentially.

ITC’s main bet during the quarter has been a prudent cost cutting, which saw its operational costs decline by 3 per cent YoY to Rs 816.89 crore (Rs 839.57 crore). Raw material consumption was down 1 per cent, while staff cost was up 15 per cent YoY.

ITC has been able to improve its margins on the back of cost reduction resulting in an operating profit of Rs 611.96 crore (Rs 568.45 crore) up 8 per cent from the year-ago period.

Other income at Rs 57.05 crore (Rs 25.97 crore) was up by a huge 120 per cent over the year-ago period. Interest was down 36 per cent from the year-ago period at Rs 5.46 crore (Rs 8.55 crore). Depreciation went up by 11 per cent from the corresponding previous quarter to Rs 59.41 crore (Rs 53.33 crore).

ITC profitability has always been a product of good show in the cigarettes business. This quarter too the cigarettes contributed close to 93 per cent to the total profits, while its other FMCG businesses continue to be a drag. Though hotels have begun contributing to its revenues its impact on the profits is still minimal. The agri business division contributed 4 per cent of the profit and paperboards division the balance 9 per cent. Net profit at Rs 397.22 crore (Rs 343.92 crore) was up 15 per cent from the yaer-ago period.

The stock is currently trading at Rs 735.60 discounts its June quarter annualized EPS of Rs 64.19 by 11 times.

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