21 January 2015

3QFY15 Results Update | Sector: Consumer

ITC
BSE SENSEX
28,889
Bloomberg

S&P CNX
8,730
ITC IN

Equity Shares (m)

7,818.4

MCap INR b/USD b

400/311
-10/-11/-29

AvgVal(INRm)/Vol000 2,481/7,100
Free float (%)

100.0

Financials & Valuation (INR Billion)

Y/E MAR

2015E 2016E 2017E

Net Sales

365.0

413.4

470.7

EBITDA

137.7

156.4

180.6

Adj PAT
Adj.EPS
(INR)
Gr. (%)

98.0

112.1

130.0

12.3

14.1

16.4

11.5

14.4

16.0

BV/Sh.(INR) 35.7
RoE (%)
34.5

38.2

41.2

36.9

39.7

RoCE (%)

47.9

51.3

55.5

P/E (x)

28.6

25.0

21.6

P/BV (X)

9.9

9.2

8.6

Estimate change
TP change
Rating change

TP: INR420 (+19%)

Buy

Muted volumes not the new normal

2,759.6/45.9

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

CMP: INR353

ITCs 3QFY15 performance was below our expectations. Sales grew 2.5% YoY to
INR89.4b (our estimate: INR96.9b), EBITDA grew 5.5% YoY to INR34.6b (our
estimate: INR37b), and adjusted PAT increased 10.5% YoY to INR26.4b (our
estimate: INR27.5b).
Cigarette volumes collapsed 12-13% to a multi-year low: Segment EBIT grew 8.8%
(lowest since 1QFY09) and margin expanded 520bp to 69.7%. The full impact of
excise duty hike (taken in July 2014) coupled with VAT increase in certain states
(Tamil Nadu, Kerala and Assam) impacted cigarette volumes. Three years of
consecutive 15%+ excise duty increase has resulted in aggressive price hikes by
ITC, which has kept cigarette volumes muted since FY12.
Non-Cigarette FMCG posted 11.4% sales growth: Segment volumes grew 7-8%
and EBIT was INR115m. Snacks, noodles and personal care outperformed, while
biscuits remained sluggish. We expect ITC to take price cuts in its FMCG portfolio
to pass on the benefits of input cost correction.
Agri revenues declined 10.6% YoY, impacted by absence of trading in soya and
margins expanded 340bp due to improvement in mix (better realization from leaf
tobacco). Hotels segment posted weak 4.7% YoY growth but margins contracted
1100bp due to lack of operating leverage and higher depreciation. Paper segment
revenue declined 4.7%, led by slowdown in FMCG and cigarettes while segment
EBIT declined 7.7% and margins contracted 60bp to 17.8%.
Maintain BUY: We have cut our earnings estimates for FY15-17 by 3-4% and
model 7.5% cigarette volume decline in FY15. The double digit volume decline is
an aberration in our view and does not set a new normal. At 25x FY16E and 21.6x
FY17E EPS, ITC trades at a discount of ~30% to the sector average. While we
remain bullish on ITC given the relatively attractive valuations, we expect (a)
recent policy action (ban on loose sticks, etc), and (b) speculation on potential
excise duty increase in the budget to cap near term outperformance. We maintain
Buy with a target price of INR420 (26x FY16E EPS, 20% discount to HUVR).

Gautam Duggad (Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404

Manish Poddar (Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

ITC

Key Quarterly Charts

27.1

27.9

30.2

32.8

4QFY13

1QFY14

2QFY14

3QFY14

34.6

28.6
3QFY13

3QFY15

26.9
2QFY13

16
34.9

23.8
1QFY13

17

2QFY15

22.6
4QFY12

Source: MOSL, Company

18

32.8

23.8
3QFY12

86.2
3QFY14

2
88.0

77.8
2QFY14

15

12

3QFY15

73.4
1QFY14

18

89.3

81.8
4QFY13

19

2QFY15

76.3
3QFY13

20

91.6

71.5
2QFY13

21

1QFY15

66.5
1QFY13

12

21

91.5

68.6
4QFY12

62.0

10

13

15

19

1QFY15

18

19

EBITDA growth (%)

4QFY14

15

EBITDA (INR b)

25

23

3QFY12

14

18

20

Sales growth (%)

32.0

Net Sales (INR b)

Exhibit 2: EBITDA grew by 5% in 3QFY15

4QFY14

Exhibit 1: Sales came in 7.7% below expectations

Source: MOSL, Company

Exhibit 3: Cig EBIT margin expanded 520bp YoY to 69.7% (all time high)

21,124

22,417

24,117

26,526

25,519

27,218

28,821

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

62.6

22,335

64.4

3QFY13

64.8

69.7

28,863

63.4

20,802

58.3

2QFY13

61.1

67.8

18,998

3QFY12

61.4

64.8

1QFY13

54.1
4QFY12 17,579

18,442

57.0

57.5

EBIT Margins (%)

3QFY15

EBIT (INR m)

Source: MOSL, Company

Exhibit 5: Cig EBIT posted growth of 8.8%; lowest since

1QFY09

Exhibit 4: Cig volumes declined 13% (est. of -6%)

Cig EBIT growth (%)

Cig volume growth (%)

Source: MOSL, Company

21 January 2015

20.3

19.5

20.5

20.3

21.1

20.2

18.0

15.9

18.8

20.8

21.4

19.5

8.8

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

3QFY15

-13.0
3QFY15

2QFY15

1QFY15

4QFY14

-4.0 -2.0 -3.0 -2.5 -4.0

3QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

3QFY12

-2.0

3QFY12

1.5 0.5 1.5 2.5

2QFY14

5.0 5.0

Source: MOSL, Company

ITC
Exhibit 7: Incremental EBIT margins of 0.5%

11631

11787

1QFY14

2QFY14

2,363
3QFY1511988

10575
4QFY13

12841

10616
3QFY13

12885

10590
2QFY13

1QFY15

10587
1QFY13

12612

9799
4QFY12

36.0

29.8

Source: Company, MOSL

3QFY15

18.2

2QFY15

4QFY14

3QFY14

1QFY14

4QFY13

3QFY13

23.1

22.8 20.7 21.9

21.4 22.7

2QFY14

28.3

2QFY13

25.4

1QFY13

20.6

4QFY12

3QFY12

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

Exhibit 11: Agri revenues remain volatile

18.4

Exhibit 12: Hotel EBIT declined 54%

18.9 17.8

Source: MOSL, Company

14.5 14.9
7.3 6.1

2QFY14

4QFY14

9784
3QFY12

14.9
3QFY14 12574

17.8

Agri contri to ITC sales

11.5

9.1

1QFY14

4QFY13

3QFY13

2QFY13

6.9

1QFY13

4QFY12

3QFY12

7.5

10.6

21.3

18.7 18.4

2QFY15

21.6

1QFY15

Exhibit 10: Agri margins expanded due to mix improvement

10.1

3QFY15

EBIT Margins (%)

Source: MOSL, Company

12.8

2,338

4,120

Sales (INR m)
26.7
25.0
21.5

115
(103)

(156)

431

(127)

(189)

104

119
(240)

(303)

(388)

(167)

(468)

EBIT (INR m)

EBIT Margins (%)

16.1

2QFY15

2,720
1QFY13

3QFY15

22.9
20.0

12.4

1QFY15

3,017
4QFY12

Source: MOSL, Company

Exhibit 9: Paper revenues decline due to macro slowdown

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

3QFY12

Exhibit 8: FMCG-others posted EBIT of INR115m

2,783

2,665
3QFY12

Source: MOSL, Company

1.8 1.0
0.5

4QFY14

11.4
3QFY15

2,951

11.9
2QFY15

3QFY14

10.9
1QFY15

2QFY14 2,714

13.7
4QFY14

6.8 7.3 6.5

2,716

16.6
3QFY14

3QFY13

16.1
2QFY14

11.6 11.2

5.5

2QFY13 3,455

18.4

7.4

1QFY14

26.0

10.0

Incr EBIT Margin (%)

1,900

Incr Sales (INR m)

1QFY14

17.0

13.8

4QFY13

30.1
3QFY13

25.7

22.6
1QFY13

2QFY13

22.9
4QFY12

3QFY12

24.1

Sales Growth (%)

4QFY13 4,197

Exhibit 6: FMCG-others posted sales growth of 11.4%

Source: Company, MOSL

Exhibit 13: ..while revenues up muted 5.9% YoY

Sales (INR m)

EBIT Margins (%)

EBIT (INR m)

Source: MOSL, Company

21 January 2015

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

3QFY12

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

3QFY12

-4.9 -3.7

3,303
287

8.7

3.6 3.5

3QFY15

7.1

19.7 18.7

12.9

2,616

17.9

2QFY15(96)

11.3

1QFY15
(121)

29.0

2,787
1,017
2,858
829
2,324
262
2,170
153
3,095
555
3,155
406
2,499
89
2,470
87
3,154
622
3,205
599
2,487

36.5

Source: MOSL, Company

3

ITC

Below estimates on all counts

ITC posted muted revenue growth (2.5% YoY) to INR89.4b (est. INR96.9b), with
flattish sales growth (0.6%) for Cigarettes and 11.4% growth in Non-Cig FMCG.
Hotels business posted 4.7% sales growth while Agri Business and Paper
business declined 10.6% and 4.7% respectively.
Cigarette volumes declined ~12-13% but margins expanded 520bp to 69.7% due
to price hikes and mix improvement.
Gross margins improved by 50bp largely led by price hikes in Cigarettes
business. EBITDA grew 5.5% YoY to INR34.6b (est. INR37b) and Adj. PAT
increased 10.5% YoY to INR26.4b (est. INR27.5b). Other income expanded 49%
and drove the PAT growth.

Cigarette volumes decline ~12-13%; 520bp EBIT margin expansion

Cigarette volumes declined 12-13%; multi-year low: This double digit volume
decline was owing to several factors. 3Q15 saw the full impact of 18% excise
duty increase taken in interim budget in July14. This resulted in another round
of price hikes (cumulative ~20% price hike on wtd average basis). This was
exacerbated by VAT increases in Tamil Nadu (largest Cig market for ITC), Kerala
and Assam. Together these 3 markets contribute 30% of ITCs Cig volumes. Due
to three consecutive years of 15%+ excise increase and consequent price
increases by ITC, Cig volumes have remained under pressure post FY12.
Cigarette EBIT grew 8.8% and posted 520bp margin expansion to 69.7% (19th
consecutive quarter of margin exp) on the back of price increases. However,
EBIT growth was the lowest since 1QFY09.
Recent policy action on Cigarettes hasnt helped either. Government is
proposing to ban sale of loose stick cigarettes along with other punitive
measures like a) Raising the minimum legal age for buying Tobacco from 18 to
21 years. b) Raising the fine for smoking in public places from INR 200 to INR
1000. C) Recommends removal of designated smoking zones in hotels and
restaurants. D) Larger graphic health warnings covering 85% of the surface area
of both sides of the pack as compared to the current requirement of covering
40% of the area of one side of the pack. We expect more clarity to emerge on
this in the forthcoming budget session of parliament.
We have revised our Cig volume decline assumption in FY15 to 7.5%.
Our channel checks suggest week on week Cig volume decline has been
arrested.

FMCG: Yet to see recovery

21 January 2015

FMCG sales grew 11.4% to INR23.1b (volume growth of 7-8%) and reported EBIT
of INR115m. We note that FMCG Others segment has slowed considerably in
past 5-6 quarter given the weak consumption demand and macro environment.
We expect ITC to take price cuts to pass on the benefits of commodity cost
correction.
Within the FMCG Others portfolio - Snacks, Noodles and Personal Care
(personal wash and deodorants) outperformed while Biscuits remained sluggish.
ITC likely gained some market share in Biscuits from Britannia, per our channel
checks.
4

ITC

Sunfeast Yippie (Instant Noodles and pasta category) and Aashirvaad atta
continued to gain traction and increased market share.
The company has launched Sunfeast Yumfills Whoopie pie (a premium
chocolate enrobed cake) and Sunfeast Moms magic (premium cookies) in select
markets.

Agri business: As volatile as every; revenues decline 10.6%

Agri Business sales declined by 10.6% YoY to INR16b due to absence of trading
opportunities in Soya while margins expanded 340bp led by improvement in mix
(higher sakes of Leaf Tobacco).
The company has not done any trading in soya during 3QFY15 due to bumper
production in USA, Brazil and Argentina.

Hotels: Sequential improvement in EBIT

Hotel revenues grew 4.7% YoY at INR3.3b, impacted by weak macro

environment and pricing environment.
EBIT margins contracted 1100bp due to higher depreciation costs led by revision
in useful life of fixed assets on account of new Companies Act 2013. The
segment reported EBIT of INR287m vs. loss of 96m in 2Q.

Paper: Topline is still soft and is a function of macro recovery

21 January 2015

Paper and Paperboard business sales declined 4.7% YoY to INR12b impacted by
the slowdown in the FMCG and cigarette industry and shutdown of a
manufacturing unit of Nokia in Chennai.
EBIT declined 7.7% YoY to INR2.1b while EBIT margin contracted 60bp YoY to
17.8%.

ITC

Exhibit 14: Segmental performance

1QFY13 2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14 1QFY15 2QFY15 3QFY15

Sales (INR m)
Cigarettes
FMCG - Others
Hotels
Agri business
Paper and packaging

33,042
14,731
2,324
16,914
10,587

33,852
16,908
2,170
20,239
10,590

36,574
17,827
3,095
16,310
10,616

36,232
20,362
3,155
18,545
10,575

35,374
17,447
2,499
21,890
11,631

37,238
19,622
2,470
17,725
11,787

41,161
20,778
3,154
17,864
12,574

40,788
23,145
3,205
20,042
12,612

42,011
19,346
2,487
32,961
12,885

42,509
21,960
2,616
20,587
12,841

41,419
23,141
3,303
15,979
11,988

Sales growth (YoY)

Cigarettes
FMCG - Others
Hotels
Agri business
Paper and packaging

15.0
23.0
0.8
-0.9
10.3

14.0
26.1
2.8
41.1
5.3

13.1
30.1
11.0
43.1
8.5

11.5
26.0
10.4
31.1
7.9

7.1
18.4
7.5
29.4
9.9

10.0
16.1
13.8
-12.4
11.3

12.5
16.6
1.9
9.5
18.5

12.6
13.7
1.6
8.1
19.3

18.8
10.9
-0.5
50.6
10.8

14.2
11.9
5.9
16.1
8.9

0.6
11.4
4.7
-10.6
-4.7

Volume growth (YoY)

Cigarettes

1.5

0.5

1.5

2.5

-2.0

-2.0

-2.0

-3.0

-2.5

-4.0

-13.0

EBIT (INR m)
Cigarettes
FMCG - Others
Hotels
Agri business
Paper and packaging

18,998
-388
262
1,714
2,647

20,802
-303
153
2,597
2,825

22,335
-240
555
1,726
2,286

21,124
119
406
1,275
1,881

22,417
-189
89
1,993
2,516

24,117
-127
87
2,846
2,208

26,526
104
622
2,054
2,317

25,519
431
599
1,455
1,884

27,218
-156
-121
2,025
2,749

28,821
-103
-96
2,983
2,421

28,863
115
287
2,388
2,139

EBIT growth (YoY)

Cigarettes
FMCG - Others
Hotels
Agri business
Paper and packaging

20.5
-49.1
-48.9
9.1
16.6

20.3
-45.8
-64.8
8.8
-2.5

21.1
-48.8
-45.5
21.9
1.9

20.2
-171.2
-51.0
20.8
-3.9

18.0
-51.3
-65.9
16.3
-5.0

15.9
-58.1
-43.0
9.6
-21.9

18.8
-143.2
12.1
19.0
1.4

20.8
263.0
47.3
14.1
0.1

21.4
-17.6
-235.2
1.6
9.3

19.5
-18.8
-209.9
4.8
9.7

8.8
10.7
-53.8
16.3
-7.7

EBIT Margin (%)

Cigarettes
FMCG - Others
Hotels
Agri business
Paper and packaging

57.5
-2.6
11.3
10.1
25.0

61.4
-1.8
7.1
12.8
26.7

61.1
-1.3
17.9
10.6
21.5

58.3
0.6
12.9
6.9
17.8

63.4
-1.1
3.6
9.1
21.6

64.8
-0.6
3.5
16.1
18.7

64.4
0.5
19.7
11.5
18.4

62.6
1.9
18.7
7.3
14.9

64.8
67.8
69.7
-0.8
-0.5
0.5
-4.9
-3.7
8.7
6.1
14.5
14.9
21.3
18.9
17.8
Source: Company, MOSL

Valuation and view

21 January 2015

Cigarette segment posted one of its worst performances in recent times on both
volume and EBIT growth front. We have cut our FY15-17E estimates by 3-4% to
bake in lower than expected Cig volume growth. The double digit volume
decline is an aberration in our view and does not set a new normal. We are now
building in 7.5% volume decline in FY15E.
ITCs underperformance is primarily to do with overhang around policy actions
contemplated by government and also the muted Cig volume growth delivery.
After underperformance of last 18 months vis--vis sector, valuations at 30%
discount to sector, largely discounts the negatives related to policy action, in our
view. At 25x FY16E and 21.6x FY17E EPS, it trades at lowest P/E in our coverage
universe.
While we remain bullish on ITC given the relative attractive valuations, we
expect near term underperformance to continue owing to a) Recent policy
action (ban on loose sticks etc) and b) Speculation on potential excise duty

ITC

increase in budget. We maintain a Buy with a TP of INR420 (26x FY16E EPS, 20%
discount to HUVR).
Exhibit 15: Revised numbers by 3-4% to incorporate 3QFY15 miss

Exhibit 16: ITC P/E (x): Valuations at long term averages

24.0

22.9

Jan-15

Oct-13

Jul-12

Jan-10

Jan-15

Oct-13

Jul-12

Apr-11

Jan-10

Oct-08

Jul-07

Source: Bloomberg, Company, MOSL

Apr-11

-50

7.0
Apr-06

52.5

13.9
Jan-05

47.4

50

Oct-08

15.0

LPA (%)

100

22.9

23.0

Change (%)
FY15E
FY16E
FY17E
-3.6
-4.8
-5.0
-2.8
-4.7
-3.9
-2.7
-4.5
-3.7
Source: Company, MOSL

FY17E
495,610
187,907
135,078

ITC PE Relative to Sensex PE (%)

150
30.9

31.0

Old
FY16E
434,393
164,050
117,409

Exhibit 17: P/E trades in line with Sensex

Avg(x)

Apr-06

39.0

Peak(x)
Min(x)

FY15E
378,608
141,759
100,740

Jan-05

PE (x)
Median(x)

FY17E
470,657
180,639
130,036

Jul-07

Sales
EBITDA
PAT

New
FY16E
413,447
156,375
112,139

FY15E
364,976
137,723
97,994

Source: Bloomberg, Company, MOSL

Exhibit 18: ITC trades at ~30% discount to our coverage

Company
Asian Paints
Nestle
Pidilite
Britannia
Hindustan
Unilever
Colgate
Emami
GSK Consumer
Dabur
Marico
Godrej
Consumer
ITC

21 January 2015

P/E
FY16E FY17E
46.0
38.5
46.3
39.1
44.6
36.7
40.2
32.5

Earnings
Growth
FY14-17E
20%
14%
20%
22%

Peak
P/E
10 yr
39.2
44.2
40.4
40.7

1 yr
34.8
39.5
30.8
28.0

Avg P/E
3 yr 5 yr
33.7 30.7
39.7 37.5
26.0 23.7
23.5 25.2

10 yr
24.7
30.9
20.3
23.1

Relative P/E to
Sensex (%)
FY16E
FY17E
195
196
197
201
186
183
157
150

Avg P/E relative to Sensex (%)

1 yr
3 yr
5 yr
10 yr
118
125
97
56
147
165
141
96
93
74
52
29
75
57
62
46

44.6
36.9
36.6
34.1
35.5
33.3

37.6
30.0
30.3
29.3
30.1
28.5

14%
21%
17%
17%
17%
15%

39.3
43.3
36.8
38.4
37.6
32.9

34.1
34.4
27.8
31.9
31.9
27.6

32.4
34.2
24.6
28.0
28.3
27.1

29.6
31.2
24.2
26.3
27.8
26.8

27.5
26.3
20.0
20.5
25.5
23.2

186
137
135
119
127
114

189
131
133
126
132
119

114
115
74
100
100
73

32.1
25.0

26.9
21.6

23%
14%

38.5
30.9

30.1
26.7

31.9
27.2

28.6
25.3

23.8
22.8

106
60

107
66

89
67

117
129
65
87
89
81

90
100
55
69
79
72

74
66
27
30
62
47

113
84
51
82
63
45
Source: Company, MOSL

ITC

Story in charts
Exhibit 19: Volume growth of -13% in 3Q

Exhibit 20: Sales CAGR of 13.5% over FY15-17E

Sales (INR b)

Volume growth (%)

Sales growth (%)

19.4
16.6

17.2

182

212

248

296

329

365

413

FY15E

FY16E

13.3

16.3

FY14

-4.0

FY13

-2.5

-0.3

FY12

-2.8

FY11

-2.9

7.6

FY10

7.2

3.3

11.0
11.1

13.8

Source: Company, MOSL

Exhibit 21: EBITDA margins were up 140bps YoY in FY14

57.0
37.9

58.4

57.7

37.8

37.7

Exhibit 22: PAT CAGR of 15.2% over FY15-17E

PAT (INR b)

59.6

38.4

24.8

25.1

PAT Margin (%)

27.1
26.8
26.7

27.6

23.6

40.7

49.9

61.6

74.2

87.9

98.0

112.1

130.0

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY17E

22.4

FY16E

36.0

Source: Company, MOSL

EBITDA Margin (%)

FY15E

35.8

55.6

FY13

35.0

FY11

FY10

34.9

FY12

57.3

58.6

FY14

Gross Margin (%)

471
FY17E

3QFY15E

2QFY15

1QFY15

FY14

FY13

FY12

FY11

FY10

FY09

-13.0

Source: Company, MOSL

Source: Company, MOSL

Exhibit 23: Operating Performance Metrics

Volume growth (%)
Sales (INR b)
Sales growth (%)
Gross Margin (%)
EBITDA Margin (%)
PAT (INR b)
PAT Margin (%)
Net Working Capital as a % of sales
RoE (%)
Dividend payout ratio

21 January 2015

FY10
7.6
182
16.3
61.3
34.9
40.7
22.4
-5.8
28.9
109.4

FY11
-0.9
212
16.6
57.3
35.0
49.9
23.6
-2.9
31.3
80.2

FY12
6.4
248
17.2
58.6
35.8
61.6
24.8
-3.1
32.8
66.4

FY13
1.5
296
19.4
55.6
36.0
74.2
25.1
0.6
33.3
65.4

FY14
-2.8
329
11.1
57.0
37.9
87.9
26.7
3.6
33.5
63.5

FY15E
-7.5
365
11.0
57.7
37.7
98.0
26.8
0.7
34.5
78.4

FY16E
FY17E
0.0
3.0
413
471
13.3
13.8
58.4
59.6
37.8
38.4
112.1
130.0
27.1
27.6
-2.2
-3.6
36.9
39.7
81.9
81.9
Source: Company, MOSL

ITC

Corporate profile: ITC

Company description

Exhibit 24: Sensex rebased

ITC is an associate of BAT (British American

Tobacco) controls more than 2/3rd of the cigarette
market in India. ITC has emerged as a diversified
conglomerate
with
leading
presence
in
Paperboards, Hotels and Processed foods. EChoupal, the agri rural initiative of the company
has been widely appreciated for its foresight in
harnessing the potential in the rural market.

Exhibit 25: Shareholding pattern (%)

Exhibit 26: Top holders

Dec-14

Sep-14

Dec-13

Promoter

0.0

0.0

0.0

DII

34.8

34.8

34.3

FII

21.0

20.5

19.5

Others

44.2

44.6

46.1

Note: FII Includes depository receipts

Exhibit 27: Top management

Name

Holder Name

% Holding

Tobacco Manufacturers India Ltd

LIC of India
Specified Undertaking Of the Unit Trust Of India
Myddleton Investment Company Ltd
New India Assurance Company Ltd

24.8
14.5
11.2
4.1
1.9

Exhibit 28: Directors

Designation

Name

Name

Yogesh Chander Deveshwar

Chairman

Yogesh Chander Deveshwar

Kurush Noshir Grant

Biswa Behari Chatterjee

Executive VP & CS

Anil Baijal*

Krishnamoorthy Vaidyanath

S S H Rehman*

Biswa Behari Chatterjee

Meera Shankar*

Anthony Ruys

Serajul Haq Khan*

Nakul Anand

Sunil Behari Mathur*

Pradeep Vasant Dhobale

Angara Venkata Girija Kumar*

S B Mainak

Pillappakkam Bahukutumbi
Ramanujam*

Kurush Noshir Grant

R E Lerwill*
*Independent

Exhibit 29: Auditors

Exhibit 30: MOSL forecast v/s consensus

Name

Type

Deloitte Haskins & Sells

P Raju Iyer
S Mahadevan & Co
Shome & Banerjee

Statutory
Cost Auditor
Cost Auditor
Cost Auditor

21 January 2015

EPS (INR)

MOSL forecast

FY15
FY16
FY17

12.3
14.1
16.4

Consensus
forecast
12.6
14.7
17.3

Variation (%)
-2.4
-4.3
-5.1

ITC

Financials and valuations

Income Statement
Y/E March
Net Sales
Operational Income
Total Revenue
Change (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Other Inc. - Recurring
Profit before Taxes
Change (%)
Margin (%)
Tax
Deferred Tax
Tax Rate (%)
Profit after Taxes
Change (%)
Margin (%)
Reported PAT

(INR Million)
2017E
470,657
5,761
476,418
13.9
295,778
180,639
15.5
38.4
11,846
442
19,292
187,643
16.0
39.9
57,231
375
30.7
130,036
16.0
27.6
130,036

2010
181,532
2,392
183,924
16.4
120,619
63,305
24.8
34.9
6,087
820
3,756
60,153
24.7
33.1
20,286
-822
35.1
40,689
24.7
22.4
40,689

2011
211,676
2,914
214,590
16.7
140,467
74,123
17.1
35.0
6,560
679
5,798
72,682
20.8
34.3
22,804
2
31.4
49,876
22.6
23.6
49,876

2012
247,984
3,490
251,475
17.2
162,788
88,687
19.6
35.8
6,985
980
8,253
88,975
22.4
35.9
26,777
574
29.4
61,624
23.6
24.8
61,624

2013
296,056
2,957
299,013
18.9
192,543
106,470
20.1
36.0
7,956
1,059
9,387
106,842
20.1
36.1
29,348
3,310
24.4
74,184
20.4
25.1
74,184

2014
328,826
3,560
332,386
11.2
207,631
124,755
17.2
37.9
8,999
236
11,071
126,591
18.5
38.5
37,911
828
29.3
87,852
18.4
26.7
87,852

2015E
364,976
4,553
369,528
11.2
231,805
137,723
10.4
37.7
9,886
546
14,114
141,405
11.7
38.7
43,129
283
30.7
97,994
11.5
26.8
97,994

2016E
413,447
5,009
418,456
13.2
262,080
156,375
13.5
37.8
10,866
492
16,799
161,817
14.4
39.1
49,354
324
30.7
112,139
14.4
27.1
112,139

Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Liability
Capital Employed

2010
3,818
136,826
140,644
1,077
7,850
149,571

2011
7,738
151,795
159,533
1,093
8,019
168,645

2012
7,818
180,101
187,919
791
8,727
197,437

2013
7,902
214,977
222,879
664
12,037
235,580

2014
7,953
254,667
262,620
511
12,970
276,101

2015E
7,953
275,843
283,797
511
12,335
296,643

2016E
7,953
296,141
304,094
511
11,625
316,230

(INR Million)
2017E
7,953
319,677
327,630
511
10,827
338,969

Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Investments

119,679
38,255
81,424
10,090
57,269

127,658
44,208
83,451
13,334
55,547

138,033
48,197
89,837
23,923
63,166

165,884
54,698
111,186
15,786
70,603

181,756
62,269
119,487
23,598
88,234

201,756
72,155
129,601
25,000
97,552

221,756
83,021
138,735
25,000
107,770

241,756
94,867
146,889
25,000
122,630

Curr. Assets, L&A

Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates

81,279
45,491
8,581
11,263
15,945
80,491
34,449
7,860
38,182
788
149,571

97,901
52,692
8,851
22,432
13,926
81,588
39,792
7,362
34,435
16,313
168,644

112,957
56,378
9,824
28,189
18,565
92,445
46,989
10,273
35,183
20,512
197,437

142,600
66,002
11,633
36,150
28,815
104,595
50,571
12,540
41,485
38,006
235,580

160,975
73,595
21,654
32,894
32,832
116,193
54,498
13,976
47,719
44,782
276,101

187,668
95,169
21,999
41,972
28,528
143,178
63,229
14,294
65,656
44,490
296,643

213,261
105,987
22,655
53,748
30,871
168,536
73,248
16,790
78,497
44,725
316,230

239,164
118,693
25,789
61,185
33,497
194,714
84,425
19,264
91,025
44,450
338,969

Balance Sheet

21 January 2015

10

ITC

Financials and valuations

Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %

2010

2011

2012

2013

2014

2015E

2016E

2017E

10.7
12.3
36.8
10.0
109.4

6.4
7.3
20.6
4.5
80.2

7.9
8.8
24.0
4.5
66.4

9.4
10.4
28.2
5.3
65.4

11.0
12.2
33.0
6.0
63.5

12.3
13.6
35.7
8.3
78.4

14.1
15.5
38.2
9.9
81.9

16.4
17.8
41.2
11.4
81.9

Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)

33.1
28.5
14.8
42.5
9.6
2.8

54.8
48.4
12.7
36.2
17.1
1.3

44.8
40.2
10.8
30.1
14.7
1.3

37.6
34.0
9.0
24.9
12.5
1.5

32.0
29.0
8.0
21.2
10.7
1.7

28.6
26.0
7.2
19.0
9.9
2.3

25.0
22.8
6.3
16.6
9.2
2.8

21.6
19.8
5.5
14.3
8.6
3.2

Return Ratios (%)

RoE
RoCE

28.9
40.8

31.3
43.5

32.8
45.6

33.3
45.8

33.5
45.9

34.5
47.9

36.9
51.3

39.7
55.5

Working Capital Ratios

Debtor (Days)
Asset Turnover (x)

15
1.2

15
1.3

14
1.3

13
1.3

18
1.2

22
1.2

20
1.3

19
1.4

Leverage Ratio
Debt/Equity (x)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

2010
60,153
3,756
6,087
820
19,464
-6,956
700
51,497

2011
72,682
5,798
6,560
679
22,806
-438
607
52,362

2012
88,975
8,253
6,985
980
27,352
-114
2,996
64,445

2013
106,842
9,387
7,956
1,059
32,658
16,494
1,454
58,771

2014
126,591
11,071
8,999
236
38,739
22,551
1,428
64,893

2015E
141,405
14,114
9,886
546
43,411
-53
0
94,365

2016E
161,817
16,799
10,866
492
49,678
-1,322
0
108,020

2017E
187,643
19,292
11,846
442
57,606
7,148
0
115,885

Extraordinary Items
Incr Decr in FA
Pur of Investments
CF from Invest.

0
12,041
28,891
-40,933

0
11,224
-1,722
-9,502

1
20,964
7,619
-28,582

2
19,714
7,437
-27,149

3
23,684
17,631
-41,313

0
21,402
9,318
-30,720

0
20,000
10,218
-30,218

0
20,000
14,860
-34,860

Issue of shares
Incr in Debt
Interest Income
Interest Paid
Dividend Paid
Others
CF from Fin. Activity

7,207
-698
3,756
820
13,965
-5,091
-9,612

5,220
16
5,798
679
38,182
-3,864
-31,691

7,650
-303
8,253
980
34,435
-10,292
-30,106

9,223
-127
9,387
1,059
35,183
-5,903
-23,662

6,911
-153
11,071
236
41,485
-2,946
-26,837

0
0
14,114
546
47,719
-20,415
-54,567

0
0
16,799
492
65,656
-16,677
-66,025

0
0
19,292
442
78,497
-13,940
-73,588

Incr of Cash
Add: Opening Balance
Closing Balance

953
10,310
11,263

11,170
11,263
22,433

5,757
22,432
28,189

7,961
28,189
36,150

-3,257
36,150
32,893

9,079
32,894
41,973

11,776
41,972
53,749

7,437
53,748
61,186

(INR Million)

Cash Flow Statement

Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation and Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
Diff in dep
CF from Operations

21 January 2015

11

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chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL,
and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to
accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Anosh Koppikar
Kadambari Balachandran
Email : anosh.Koppikar@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact : (+65)68189232
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931

Motilal Oswal Securities Ltd

21 January 2015

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com

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