Moneycontrol Bureau Credit Suisse has maintained outperform rating on ITC. Analysing ITC's annual report, it says that cigarette excise duty paid by ITC in FY16 saw an increase of 9 percent, compared to flat growth in FY15. This was partially due to the effective hike in the first four months of the year being 35 percent YoY, as the tax hike in FY15 became effective only after July.
As per Credit Suisse estimates ITC’s volume decline was 7 percent in FY16 which implies average price growth of 14 percent (year-on-year) in the fiscal. It adds that gross sales for cigarettes grew 6 percent (YoY) higher than the 4 percent net sales growth, indicating that ITC did not fully pass on the percentage hike in excise duty during the year.
The brokerage says that Indian Accounting Standards (IND-AS) will impact its FY16 earnings per share (EPS) by 5 percent as employee stock ownership plan (ESOP) accounting shifts from intrinsic value to fair value method.
According to the annual report, there would have been Rs 510 crore additional cost in FY16 and adjusted EPS would have been 5 percent lower.
The FMCG major's free cash flow (FCF) grew 14 percent annually in FY16 driven by a sharp drop in capex. Standalone capex fell from Rs 2500 crore to Rs 1700 crore driven by lower capex in cigarettes and hotels.
Its cigarette revenue in Q4 jumped 10.2 percent at Rs 4639 crore from Rs 4211 crore while EBIT also increased 11.5 percent at Rs 3019 crore against Rs 2706 crore (YoY). Cigarette EBIT margin was at 65.1 percent compared to 64.3 percent (YoY) while hotels revenue grew 4.8 percent at Rs 363 crore versus Rs 346.4 crore (YoY). The company had said that FMCG-cigarettes segment continued to be impacted by severe pressure on legal cigarette industry volumes even as illegal trade grows unabated.Posted by Nasrin Sultana
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