Cigarettes-to-hotels Company ITC on Friday beat analysts’ estimates and reported a 9.05 per cent rise in standalone net profit for the quarter ended March. The Company which operates through segments such as FMCG; Hotels; Paperboards, Paper and Packaging, and Agri Business saw its total income jump 14.26 per cent to Rs 12,946.21 crore as compared to Rs 11,329.74 crore in the corresponding quarter last year.
The FMCG segment which includes Cigarettes, branded packaged foods businesses (Staples, Snacks and Meals; Dairy and Beverages, and Confections); Apparel; Education and Stationery Products; Personal Care Products; Safety Matches, and Agarbattis saw revenue increase of around 10 per cent YoY to Rs 8,759.84 crore in January-March 2019 against Rs 7,988.29 crore in the same period last year. Revenue from cigarettes increased to Rs 5,485.92 crore from Rs4, 936.45duringthesameperiod.
Non FMCG business which includes Hoteliering Paperboards, Paper, and Packaging, and Agri commodities, saw revenue increase to Rs 4,148.05 crore compared to Rs 3,517.1 crore in the same period last year.
The Investment Rationale:
With a market capitalisation of 239821.43 the company has a P/E of 16.19 and P/B of 4.29 on a standalone basis whereas the industry P/E stands at 19.81 which makes the valuations cheap.
With Profit Margins showing a upward trend the company has been able to maintain its profitability. The brands that the company holds is also impressive Aashirvaad, Sunfeast Dark Fantasy, Bingo, Yumitos, Yippe, Candyman, GumOn, Classmate, Fiama Di Wills, Vivel, Superia, Engage, Wills Lifestyle, John Players, Mangaldeep and Aim, among others .
Armed with steady number, strong fundamentals coupled with a credible management and businesses which have high growth potential ITC certainly is a long term wealth creator.