ITC Ltd. share price target

We believe that ITC would need to take ~5-6% increase in cigarette prices to pass on the duty hike to the consumers, without sacrificing the margin profile of the business. The previous price increase was taken a year back and hence we believe that ITC would not face any hassles to pass on the hike. We had already modelled in a 10% increase in excise duties and 2% volume growth for the cigarette business in FY17E...

ICICI Securities Ltd | Retail Equity Research The government hiked excise on tobacco products other than bidis by 1015%. However, the magnitude of excise increase for cigarettes in particular is not as steep as compared to prior excise hikes. Union Budget...

ITC has seen a significant YTD correction of 12% on weak quarterly results and with poor expectations from the fast-nearing Union Budget 2016, where significant hike in cigarette excise duties is expected. Our trade channel checks indicate a hike (range) of 8-15%, but...

ITC posted a poor set of numbers for 3QFY2016, both on the top-line and bottom-line fronts. The top-line was subdued due to lower growth in Cigarettes & Hotel businesses and de-growth in Agri business, which in turn resulted in a lower profitability of the company. Key highlights: ITCs net sales for the quarter grew by 2.6% yoy to Rs9,177cr. The Cigarettes business posted a 5.7% yoy growth in net sales to Rs4,380cr, aided by price hikes. A muted sales growth in the Cigarettes business resulted in the segment posting a 3.4% yoy growth in its EBIT. The FMCG (others) business, which posted a 7.1% yoy growth in net sales to Rs2,478cr, posted an EBIT level profit of Rs19cr. Further, the Paperboards and Packaging division posted a growth of 5.1% yoy and 12.7% yoy in revenue and segmental EBIT, respectively. The Hotels business posted a 4.5% yoy growth in its top-line, while it reported a de-growth at the EBIT level. The Agri business posted a de-growth of 7.3% yoy in revenue, while its EBIT de-grew by 3.1% on a yoy basis. Overall, the companys OPM expanded by 55bp yoy to 39.3%, owing to lower raw material costs (down 254bp yoy as...

ITCs 3QFY16 results were broadly in line with our expectations. Revenues jumped 2.6% YoY to Rs 91.8bn (vs. our estimate of Rs 92.6bn). The cigarette business posted 5.7% revenue growth and 160bps contraction in EBIT margin. The volume decline of ~9% hampered overall performance.

Background: ITC, with revenues in excess of $7bn, is a market leader in Cigarettes with about 70+% volume share and 85+% value share. Cigarette business is a cash cow accounting for 50% for Sales and ~ 81% of EBIT. To diversify away from cigarettes with a long term perspective, they have other businesses such as FMCG, Hotels, Paperboards, Packaging, Agri-Exports, Branded Apparel & Stationery. ITC also a rural initiative with 6500 `e-choupal's aimed at farmers for...

Revenue growth was below consensus expectations and our estimates Cigarettes volume declined 5-6% yoy as per our estimates; Personal Care business growth was affected by deflationary pricing environment...

While cigarette and hotels business reported fall in EBIT margins, other businesses reported expansion in margins on yoy basis. The FMCG business reported EBIT margins of 0.8% leading to EBIT of Rs188mn. Paperboard margins were positively...

Taxation on cigarettes to increase sharply with GST implementation: GST is likely to be implementedfrom1stApril2017andwillsignificantlychangethetaxationforcigarettes.The latestreportoftheGSTcommittee,headedbyDrArvindSubramanian,hasrecommended...