ITC reported a robust 26% YOY PAT growth at Rs10bn, above our Rs9.4bn estimate. EBITDA margins expanded >6% YOY to 35.8%, driven by steady cigarette business profitability, lower losses in non cigarette FMCG and benefits of mix improvement in the agricultural commodities business.
Personal care revenues are forecast at ~Rs3-3.2bn for FY10E, based on the current run rate. For soaps, current market share is 3-3.5% – impressive, given the recent rollout (~2 years). Both mid /lower-end brands of Vivel / Superia are doing well – it’s the higher-end Fiama where consumer acceptance and retention has been slightly difficult.
FMCG Losses declined ~27% YOY – a positive, as it allays investor concerns on profitability going forward. Management reiterated that loss levels will be reduced to ~Rs4bn (or slightly lower) in FY10.
Management noted that, sequentially, both footfalls and SSS growth are improving in Wilsl Lifestyle retail, which dovetails into our thesis that urban consumption is on a recovery path. In hotels, management noted that occupancies have improved slightly – a full recovery should occur in FY11E.
BOFA Merrill expects ITC to report an EPS of rs 10.82 and 13.2 for fy10 and fy11 respectively.
Credit Suisse expects ITC to report an EPS of rs 10.5 and 12.1 for fy10 and fy11 respectively.
Citi expects ITC to report an EPS of rs 10.15 and 12.5 for fy10 and fy11 respectively.
CLSA expects ITC to report an EPS of rs 10.4 and 12.1 for fy10 and fy11 respectively.
All the brokerages have an OUTPERFORM RATING on the Stock. A Good defensive Bet on correction.