2025-05-22-Jefferies-印度烟草公司（ITC）_大致符合预期的业绩表现_14页_677kb

ITC Limited Summary

Core Content

ITC Limited reported broadly in-line financial results for FY25 despite facing significant pressure in the FMCG and paperboards segments. The company's cigarette business saw a 5% volume growth, which was in line with expectations, though margin pressure persisted due to cost inflation and limited price hikes. The FMCG segment underperformed with a revenue growth of less than 4%, marking the lowest growth in at least 12 quarters, primarily due to weak demand and competitive challenges. The paperboards segment also faced challenges, but the agri segment performed strongly, contributing to a 26% EBIT growth.

Key Financial Highlights

• Net Revenue (ex-hotels): Grew 9% YoY, in line with estimates.
• EBITDA: Increased by ~2% YoY, ahead of estimates.
• EBITDA Margin: Contracted by >240 bps YoY to 34.7%.
• LFL Pre-Ex Net Earnings: Remained flat YoY at Rs49bn.
• Final Dividend: Declared at Rs7.85 per share (FY total at Rs14.35 per share).

Segment Performance

Valuation and Investment Thesis

• Price Target: Rs535, a 24% increase from the prior trading day's closing price.
• SOTP Valuation: Based on 25x Mar-27E earnings for cigarettes, 5x Mar-27E sales for new FMCG, 15x Mar-27E EPS for agri and paperboard, and subsidiary valuation for hotels.
• Investment Thesis: ITC is seen as having good momentum across businesses. The cigarette segment is showing sustained volume recovery, and the agri business is performing well. The FMCG and paperboard segments, however, are under pressure due to macroeconomic conditions and cost inflation.

Risks and Catalysts

Key Risks

• Sharp rise in taxation (e.g., GST or NCCD)
• ESG-related restrictions on tobacco investment

Upside Catalysts

• Volume growth in cigarette business as ITC regains share from illicit trade
• Margin expansion in new FMCG business due to cost optimization

Downside Catalysts

• Adverse regulatory changes
• Continued weakness in FMCG and paperboards segments

Sustainability Initiatives

• Renewable Energy: Targeting 50% of total energy consumption by 2030.
• GHG Emissions: Aiming for a 50% reduction by 2030 compared to FY19.
• Water Management: Targeting a 40% reduction in specific water consumption by 2030 vs FY19.
• Packaging: 100% of packaging to be reusable, recyclable, or compostable by 2028.
• Sustainable Livelihoods: Supporting 10 million people by 2030.

Analysts and Contact Information

• Vivek Maheshwari: Equity Analyst, vmaheshwari@jefferies.com
• Rushabh Bhachawat: Equity Associate, rbhachawat@jefferies.com
• Rajesh Kumar, CFA: Equity Associate, rkumar18@jefferies.com

Summary of Valuation Methodology

• Cigarettes: Valued at 25x Mar-27E earnings
• New FMCG: Valued at 5x Mar-27E sales
• Agri and Paperboards: Valued at 15x Mar-27E EPS
• Hotels: Valued based on subsidiary valuation
• Cash: Valued at book value

Investment Recommendation

• Rating: Buy
• Expected Total Return: 15% or more over 12 months
• Reason: Reasonable valuation and positive outlook on cigarette and agri segments despite challenges in FMCG and paperboards.

Summary of Key Financial Projections

Conclusion

ITC Limited is expected to maintain a Buy rating due to its strong performance in the cigarette and agri segments, despite challenges in FMCG and paperboards. The company's SOTP valuation yields a fair value of Rs535, with the cigarette segment contributing the most to the overall value. Key risks include regulatory changes and ESG restrictions, but upside potential remains based on continued volume growth and margin improvements.