Cal­cu­lus

The Economic Times - - Companies -

Of the 53 an­a­lysts track­ing di­ver­si­fied con­glom­er­ate ITC and con­sumer goods com­pany HUL, 46 have rec­om­mended a ‘buy’ on ITC while only seven are bullish on HUL, ac­cord­ing to the lat­est data from Bloomberg.

De­spite the re­cent sell-off seen in the de­fen­sive stocks, ITC re­mains the best-per­form­ing de­fen­sive stock in the Sen­sex as it is still up 7% com­pared to a year ago. The cig­a­rettes-to-con­sumer goods con­glom­er­ate’s per­for­mance in the quar­ter to March val­i­dates its po­si­tion as the favourite FMCG com­pany among in­vestors. ITC has posted 12% rev­enue growth, 18% growth in net profit and 35% op­er­at­ing mar­gin with ex­pan­sion of 2 per­cent­age points amid macroe­co­nomic head­winds such as in­fla­tion and slower spend­ing. Al­though the com­pany’s rev­enue growth in the quar­ter was slightly muted on ac­count of slip­page in cig­a­rette vol­umes, its over­all per­for­mance was in line with ex­pec­ta­tions of traders. The rev­enues of ITC’s breadand-but­ter busi­ness of cig­a­rettes grew 12.6%, with a strong earn­ings growth of 21% mainly due to the com­pany’s de­ci­sion to pass on the in­crease in ex­cise duty. While cig­a­rette vol­umes dropped, the seg­ment reg­is­tered a mar­gin ex­pan­sion of 4.3 per­cent­age points to 62.6%. The FMCG busi­ness posted a record­high seg­ment profit of .` 43 crore and man­aged to break even for the year ended March 2014. The ho­tels busi­ness con­tin­ued to un­der­per­form as it was bogged down by in­creased sup­ply and lower oc­cu­pancy on ac­count of weak eco­nomic en­vi­ron­ment. How­ever, the prof­itabil­ity of this busi­ness im­proved sig­nif­i­cantly in the three months to March. While the paper busi­ness posted 19% rev­enue growth, the high in­put cost led to flat growth in earn­ings. The agro trad­ing busi­ness posted 8% growth in rev­enues and 14% rise in earn­ings. With its dom­i­nance in the cash-gen­er­at­ing busi­ness of cig­a­rettes, ITC ap­pears bet­ter placed than its peers in the FMCG in­dus­try. In­vestors need to watch out, though, for any in­crease in ex­cise duty by the new govern­ment and any de­fi­ciency in mon­soon that may ad­versely af­fect the com­pany’s per­for­mance in the near-term.

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