ITC's FY12 earning per share seen at Rs 8, says Indiabulls

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ITC's FY12 earning per share seen at Rs 8, says Indiabulls

In an interview with CNBC-TV18, Anand Mour, FMCG analyst of Indiabulls said, the cigarette business should be doing well for all the three companies—ITC, VST and Godfrey Phillips. “In ITC, I am looking at earning per share (EPS) of about Rs 8 for FY12 and about Rs 9.85 for FY13,” he added.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets ITC BSE | NSE 01/06/12 Are Mutual Funds betting on ITC? Other Stocks in this news VST Industries | Godfrey Phillips India | Dabur India | Marico |

In an interview with CNBC-TV18, Anand Mour, FMCG analyst of Indiabulls said, the cigarette business should be doing well for all the three companies- ITC , VST and Godfrey Phillips . "In ITC, I am looking at earning per share (EPS) of about Rs 8 for FY12 and about Rs 9.85 for FY13," he added.

Also read: FMCG will continue to do well, says Anu Jain

Below is the transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: VST Industries did surprise in terms of the financial performance they report in Q1. Do you think that is sustainable? What are your targets on that company going forward?

A: One should expect roughly about 7 to 8% volume growth coming in for full year FY12. With the kind of price hike, which the company had taken at the start of the year, one should see gross margin being stable. The only risk to that estimate would be the VAT hike in West Bengal that has yet to come. But, otherwise, I expect an earning per share (EPS) of about Rs 83 for FY12 and roughly about Rs 100.50 for FY13.

Q: You also like ITC very much, what kind of targets are you looking, both price and EPS?

A: I believe that the cigarette business should be doing well for all the three companies, ITC, VST and Godfrey Phillips. In ITC, primary I am looking at EPS of about Rs 8 for FY12 and about Rs 9.85 for FY13. That should be driven strongly by cigarette business performance, both on the volume side as well as margin expansion. In ITC's case they had taken certain price increase at the start of the year, which without any corresponding excise hike should actually flow down to the gross margin as well as to the earnings before interest and tax (EBIT) margin.

Q: Dabur and Marico , where do you stand on both those?

A: I have an 'outperform' rating on Marico while 'underperform' on Dabur. If I look at the personal care space, the high raw material prices have being putting pressure on the gross margins. Last year company has been able to absorb some gross margins to cut in advertisements spends. But, going forward, I believe that at least in case of Dabur we are seeing more of the international business growth contributing to the growth of the overall company. The acquisition, which they did last year, should be contributing more to that, while the standalone domestic business should see roughly about growth of lower teens.

If I look at valuations, I find that Dabur being very expensive at this moment. I have an underperform with a target price of Rs 95. I believe that once we look at the trajectory of the growth with the start of the quarter one results, the stock should correct from here.

While in the case of Marico, they had taken certain price increase. I would like to highlight that Parachute remains one of the strongest brand in the FMCG segment in the country. They had taken roughly about 30% price increase and still they had positive volume growth last quarter. I think that just talks about the brand.

I believe that the company should be able to grow significantly. In this first quarter, I am looking at about 26% growth on the bottom-line. While at current price if you just ask me at Rs 161, my target price is of about Rs 160. But the positive trigger to the earnings will come, if we see significant decline in the raw material prices mainly cobra.