New Delhi: ITC`s cigarette volumes have recovered to pre-Covid levels allaying issues on everlasting lack of enterprise, Credit Suisse stated in a report.
Credit Suisse stated ITC`s cigarette volumes noticed giant declines throughout Covid as a big a part of consumption is at work locations and pushed by mobility, each had been constrained within the interval.
As the post-Covid reopening panned out, cigarette volumes recovered. In 4Q FY21, cigarette volumes had been again to pre-COVID levels.
“In our estimate, 4Q FY21 volumes grew 7.5 per cent on a base quarter, which had seen 8 per cent volume decline in 4Q FY20. This is despite many offices still not back to full strength, either followed full or partial work from home.This also provides assurance of no permanent loss of business in cigarettes due to Covid, contrary to the concern that some smokers could have quit permanently,” the report stated.
“We remain positive on ITC as we see (1) strong cigarette recovery post the second wave of Covid-19 as consumer mobility recovers; (2) potential re-structuring leading to a re-rating; and (3) increasing value of the FMCG business with strong EBITDA improvements,” it added.
BNP Paribas stated in a notice that ITC declared a complete dividend of Rs 10.75/share in FY21 (5 per cent dividend yield) which is on the high finish of that introduced by Indian non-public sector corporations.
“We see a potential for further dividend increase based on our expectation of a double-digit earnings CAGR over FY21-23. ITC paid out 100 per cent of its FY21 earnings, and we believe this can continue considering the 12 per cent cash as a per cent of market cap. We see ITC`s improving disclosure levels across divisions as a step in the right direction,” it added.
FMCG division had a powerful 12 months with 16 per cent gross sales progress and its margin enchancment journey continued with fourth consecutive 12 months of 150bp plus margin enlargement.
Agri-business reported a 54 per cent enhance in working revenue on increased gross sales led by wheat exports. Paper board reported a gentle quarter with a 13 per cent enhance in income and a steady margin. Hotels division reported a sequential restoration however its income stays properly beneath pre-Covid levels, BNP Paribas stated.
“We have cut our FY22 EPS estimates by 8 per cent to bake in near-term Covid drag on cigarettes business and higher losses in hotels; however, our FY23 EPS estimate remains largely unchanged. We are enthused with cigarette volume recovery/normalisation, improved break-even in hotels (on much lower revenues) and structural uptick in FMCG revenues/margins. Low base and benign taxation bode well for strong recovery in H2; inexpensive valuation,” Axis Capital stated in a notice.
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