Fundamental Analysis of ITC – Future Plans, Financials & More

Fundamental Analysis of ITC: From being mocked as a meme stock to impressive returns, ITC has seen everything. As of the writing of this article, its 1-year return stood at close to 70%. However, now with the tobacco giant hitting 450 levels, does it make sense to buy it? Can investors expect similar returns in the future? We’ll attempt to answer these questions and others by performing a fundamental analysis of ITC in this article. Fundamental Analysis of ITC We’ll begin our analysis by getting ourselves acquainted with the various businesses of ITC. Yes, it is much more than a cigarette company. Next, we’ll look at the tobacco sector landscape. After this, we’ll quickly move through the financials of the stock. A highlight of the future plans of the company and a summary conclude the article at the end. Company Overview ITC was established 112 years ago as the Imperial Tobacco Company of India in 1910. Over the years, it grew into the nation’s largest tobacco company with multiple business interests. Though the company markets itself as an FMCG player, it is a tobacco company in the true sense. Furthermore, it is a monopoly stock as it controls almost 78% market share of the Indian tobacco industry. What’s more? As a feather in its cap, ITC is the sixth largest publicly listed enterprise in India with a market capitalization of over Rs 5,43,000 crore. It is a diversified company with a presence in FMCG, agribusiness, paperboards & packaging, hotels, and technology industries with brand leadership in various segments. It manufactures and markets cigarettes, branded flour, cereals & spices, biscuits, packaged snacks, incense sticks, notebooks, noodles, shampoo, soaps, frozen foods, perfumes, fruit juices and more. ITC houses some of the most famous Indian brands including India Kings, Gold Flake, Capstan, Aashirvaad, Sunfeast, Yippee, Bingo, Classmate, Mangaldeep, Savlon, Fiama, Engage, B Natural, Dark Fantasy, Fabelle, and more. The scale of ITC’s operations can be gauged from the fact that it owns more than 200 manufacturing facilities and 113 hotel properties. It employs close to 24,000 people. We got a good understanding of the business for our fundamental analysis of ITC. Let us learn about its different business segments in detail in the next section on segment analysis. Segment Analysis ITC segregates itself into five segments: FMCG – Cigarettes is the largest and most profitable division of ITC accounting for 37% of the total revenues and 75% of the total earnings before interest and taxes (EBIT) with an EBIT margin of 60%. FMCG – Others is a fast-growing business segment under which it sells a broad range of personal care, snacks, kitchen staples, hygiene and other products. It registered revenue and EBIT CAGR of 8.8% and 28.5% over the previous five years respectively. Hotels business of ITC is focused towards the premium market and has grown at a fast rate. However, it is comparatively small and brought an EBIT of Rs 557 crore in FY23. Agri business is engaged in the sourcing, procurement and export of agri commodities including leaf tobacco. Paperboards, Paper & Packaging is the second largest division for ITC in terms of EBIT contribution. It includes the B2C business of stationery as well as the B2B packaging business. Others includes the group’s IT services, investment and other businesses. The figures below represent the share of different revenue segments of ITC for the past five fiscals. Segment FY19 FY20 FY21 FY22 FY23 FMCG – Cigarettes 42 41 38 37 37 FMCG – Others 23 22 25 23 23 Hotels 3 3 1 2 3 Agri Business 18 18 22 23 22 Paperboards, Paper & Packaging 11 11 10 11 11 Others 4 4 4 4 4 (figures in %) The data below highlights the change in EBIT margins of different segments of ITC over the past few financial years. Segment FY19 FY20 FY21 FY22 FY23 FMCG – Cigarettes 67 67 60 60 60 FMCG – Others 3 3 6 6 7 Hotels 11 8 -85 -14 21 Agri Business 8 8 7 7 7 Paperboards, Paper & Packaging 21 21 20 22 25 Others 9 13 23 26 16 (figures in %) We learnt about different businesses of ITC and their respective contribution towards the earnings of the stock. Now we’ll move forward to studying the tobacco industry landscape for our fundamental analysis of ITC. Industry Overview The tobacco industry is one of the most regulated in India with strict rules across the entire value chain from manufacturing to sale of the product. Although the country is the second largest consumer of tobacco globally, legal cigarettes (the key product of ITC) make up only 8% of the total domestic tobacco market. This is because of the stringent and discriminatory taxation and other laws on tobacco products. These regulations have created areas of opportunities for illicit tobacco producers across other forms of consumption such as gutka, zarda, snuff, etc. Thus, amidst such a business environment, the per capita consumption of cigarettes in India stands lowest among developing and developed nations. An old report from 2018 stated that per capita consumption of cigarettes in China stood at 2043 per annum against India’s figure of 89. This leaves a huge headroom for the growth of the tobacco industry in India as the nation slowly moves towards an organised market. Furthermore, going forward a rise in disposable income, increasing urbanization, an increase in the number of female consumers, and similar factors will lead to the growth of the tobacco industry in India. ITC – Financials Revenue & Net Profit Growth The sales and profits of ITC have grown at a steady pace over the past few years at a CAGR of 8.94% and 8.70% respectively. The company reported a net profit of Rs 19,477 crore on revenues of Rs 76,518 crore in FY23. The table below showcases the revenue and net profit growth of ITC over the last five years. Fiscal Year Operating Revenue Net Profit 2023 76,518 19,477 2022 65,205 15,503 2021 53,155 13,383 2020 51,393 15,593 2019 49,862 12,836 5-Yr CAGR 8.94% 8.70% (figures in Rs Cr except for CAGR)Profit Margins Moving on to studying margins for our fundamental analysis of ITC, the stock has demonstrated consistency in margins across our study period with minor fluctuations (excl. FY20 because of the effect of the pandemic). This is because of the primary contribution of earnings from the tobacco division which is a mature business in itself. The table below presents the operating profit margins and net profit margins of ITC for the previous five financial years. Fiscal Year Operating Profit Net Profit 2023 36.4 27.4 2022 34.2 25.5 2021 36.5 27.2 2020 40.9 31.5 2019 39.7 26.5 (figures in %) We noticed above that the cigarette giant boasts high-profit margins. Let us see how it translates into overall profitability by studying its return on equity. Return on Equity / Net Worth(RoE / RoNW) We shall study only return on equity / net worth (RoE / RoNW) for our fundamental analysis of ITC. This is because it is a debt-free stock and management intends to maintain the nil leverage status. Overall, ITC is a highly profitable stock with a strong return on equity of 27.8% as per its recent FY 2022-23 results. The table below showcases its RoE over the previous few years. Fiscal Year RoE / RoNW 2023 27.8 2022 24.4 2021 21.8 2020 23.4 2019 21.3 (figures in %)Debt Analysis An in-depth debt analysis is not relevant to our study as ITC is a debt-free stock with negligible debt. It has maintained its low debt status for a number of years. Future Plans Of ITC So far we looked at the previous fiscals’ data for our fundamental analysis of ITC. In this section, we’ll try to know what lies ahead for the company and its investors. The management is focused on leveraging digital capabilities towards future earnings growth of various divisions such as agri business and FMCG. Furthermore, the company will continue to focus on a multi-pronged go-to-market strategy for its various products to drive higher growth from urban areas as well as tier regions. Overall, product premiumisation and strengthening of supply chains will play their due role towards topline and margin expansion. Fundamental Analysis of ITC – Key Metrics We are almost at the end of our fundamental analysis of ITC. Let us take a quick look at the key metrics of the stock. CMP ₹463 Market Cap (Cr.) ₹5,61,828 EPS ₹15.4 Stock P/E 28 RoE 28% Dividend Yield 2.9% Promoter Holding 0% Book Value ₹56 Debt to Equity 0.00 Price to Book Value 7.9 Net Profit Margin 27% Operating Margin 36% In Conclusion Strong monopolistic moat, fast growth prospects across various segments, tobacco division serving as a cash cow, consistent earnings growth and various other factors make ITC a well-balanced stock. Volume recovery in its cigarette business helped the company to clock earnings and consequently the increase in stock price. Going forward, investors should closely monitor quarterly earnings data for different divisions and any regulatory change in the tobacco industry. Do you think ITC will be able to grow faster in the coming years? What are your views on the stock? How about we continue this conversation in the comments below? Written By – Vikalp Mishra By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions. The post Fundamental Analysis of ITC – Future Plans, Financials & More appeared first on Trade Brains. [Image] Here are Some More Investing Tips and Resources. Enjoy! Sponsored [Your Money Under Threat: Don't Let History Repeat!]( From Brazil in 1990, Cyprus in 2013, to Canada in 2022, governments have frozen bank accounts when least expected. Now, under the guise of Federal Reserve System Docket No. OP-1670, the Fed has a plan that could take tracking to a whole new level. From your account balance to every transaction, nothing is off-limits! [Learn how to keep your finances secure here.]( [Privacy Policy/Disclosures]( [Fundamental Analysis of ITC – Future Plans, Financials & More](?site= Fundamental Analysis of ITC: From being mocked as a meme stock to impressive returns, ITC has seen everything. As of the writing of this article, its 1-year return stood at close to 70%. However, now with the tobacco giant hitting 450 levels, does it make sense to buy it? Can investors expect similar returns in the future? We’ll attempt to answer these questions and others by performing a fundamental analysis of ITC in this article. Fundamental Analysis of ITC We’ll begin our analysis by getting ourselves acquainted with the various businesses of ITC. Yes, it is much more than a cigarette company. Next, we’ll look at the tobacco sector landscape. After this, we’ll quickly move through the financials of the stock. A highlight of the future plans of the company and a summary conclude the article at the end. Company Overview ITC was established 112 years ago as the Imperial Tobacco Company of India in 1910. Over the years, it grew into the nation’s largest tobacco company with multiple business interests. Though the company markets itself as an FMCG player, it is a tobacco company in the true sense. Furthermore, it is a monopoly stock as it controls almost 78% market share of the Indian tobacco industry. What’s more? As a feather in its cap, ITC is the sixth largest publicly listed enterprise in India with a market capitalization of over Rs 5,43,000 crore. It is a diversified company with a presence in FMCG, agribusiness, paperboards & packaging, hotels, and technology industries with brand leadership in various segments. It manufactures and markets cigarettes, branded flour, cereals & spices, biscuits, packaged snacks, incense sticks, notebooks, noodles, shampoo, soaps, frozen foods, perfumes, fruit juices and more. ITC houses some of the most famous Indian brands including India Kings, Gold Flake, Capstan, Aashirvaad, Sunfeast, Yippee, Bingo, Classmate, Mangaldeep, Savlon, Fiama, Engage, B Natural, Dark Fantasy, Fabelle, and more. The scale of ITC’s operations can be gauged from the fact that it owns more than 200 manufacturing facilities and 113 hotel properties. It employs close to 24,000 people. We got a good understanding of the business for our fundamental analysis of ITC. Let us learn about its different business segments in detail in the next section on segment analysis. Segment Analysis ITC segregates itself into five segments: FMCG – Cigarettes is the largest and most profitable division of ITC accounting for 37% of the total revenues and 75% of the total earnings before interest and taxes (EBIT) with an EBIT margin of 60%. FMCG – Others is a fast-growing business segment under which it sells a broad range of personal care, snacks, kitchen staples, hygiene and other products. It registered revenue and EBIT CAGR of 8.8% and 28.5% over the previous five years respectively. Hotels business of ITC is focused towards the premium market and has grown at a fast rate. However, it is comparatively small and brought an EBIT of Rs 557 crore in FY23. Agri business is engaged in the sourcing, procurement and export of agri commodities including leaf tobacco. Paperboards, Paper & Packaging is the second largest division for ITC in terms of EBIT contribution. It includes the B2C business of stationery as well as the B2B packaging business. Others includes the group’s IT services, investment and other businesses. The figures below represent the share of different revenue segments of ITC for the past five fiscals. Segment FY19 FY20 FY21 FY22 FY23 FMCG – Cigarettes 42 41 38 37 37 FMCG – Others 23 22 25 23 23 Hotels 3 3 1 2 3 Agri Business 18 18 22 23 22 Paperboards, Paper & Packaging 11 11 10 11 11 Others 4 4 4 4 4 (figures in %) The data below highlights the change in EBIT margins of different segments of ITC over the past few financial years. Segment FY19 FY20 FY21 FY22 FY23 FMCG – Cigarettes 67 67 60 60 60 FMCG – Others 3 3 6 6 7 Hotels 11 8 -85 -14 21 Agri Business 8 8 7 7 7 Paperboards, Paper & Packaging 21 21 20 22 25 Others 9 13 23 26 16 (figures in %) We learnt about different businesses of ITC and their respective contribution towards the earnings of the stock. Now we’ll move forward to studying the tobacco industry landscape for our fundamental analysis of ITC. Industry Overview The tobacco industry is one of the most regulated in India with strict rules across the entire value chain from manufacturing to sale of the product. Although the country is the second largest consumer of tobacco globally, legal cigarettes (the key product of ITC) make up only 8% of the total domestic tobacco market. This is because of the stringent and discriminatory taxation and other laws on tobacco products. These regulations have created areas of opportunities for illicit tobacco producers across other forms of consumption such as gutka, zarda, snuff, etc. Thus, amidst such a business environment, the per capita consumption of cigarettes in India stands lowest among developing and developed nations. An old report from 2018 stated that per capita consumption of cigarettes in China stood at 2043 per annum against India’s figure of 89. This leaves a huge headroom for the growth of the tobacco industry in India as the nation slowly moves towards an organised market. Furthermore, going forward a rise in disposable income, increasing urbanization, an increase in the number of female consumers, and similar factors will lead to the growth of the tobacco industry in India. ITC – Financials Revenue & Net Profit Growth The sales and profits of ITC have grown at a steady pace over the past few years at a CAGR of 8.94% and 8.70% respectively. The company reported a net profit of Rs 19,477 crore on revenues of Rs 76,518 crore in FY23. The table below showcases the revenue and net profit growth of ITC over the last five years. Fiscal Year Operating Revenue Net Profit 2023 76,518 19,477 2022 65,205 15,503 2021 53,155 13,383 2020 51,393 15,593 2019 49,862 12,836 5-Yr CAGR 8.94% 8.70% (figures in Rs Cr except for CAGR)Profit Margins Moving on to studying margins for our fundamental analysis of ITC, the stock has demonstrated consistency in margins across our study period with minor fluctuations (excl. FY20 because of the effect of the pandemic). This is because of the primary contribution of earnings from the tobacco division which is a mature business in itself. The table below presents the operating profit margins and net profit margins of ITC for the previous five financial years. Fiscal Year Operating Profit Net Profit 2023 36.4 27.4 2022 34.2 25.5 2021 36.5 27.2 2020 40.9 31.5 2019 39.7 26.5 (figures in %) We noticed above that the cigarette giant boasts high-profit margins. Let us see how it translates into overall profitability by studying its return on equity. Return on Equity / Net Worth(RoE / RoNW) We shall study only return on equity / net worth (RoE / RoNW) for our fundamental analysis of ITC. This is because it is a debt-free stock and management intends to maintain the nil leverage status. Overall, ITC is a highly profitable stock with a strong return on equity of 27.8% as per its recent FY 2022-23 results. The table below showcases its RoE over the previous few years. Fiscal Year RoE / RoNW 2023 27.8 2022 24.4 2021 21.8 2020 23.4 2019 21.3 (figures in %)Debt Analysis An in-depth debt analysis is not relevant to our study as ITC is a debt-free stock with negligible debt. It has maintained its low debt status for a number of years. Future Plans Of ITC So far we looked at the previous fiscals’ data for our fundamental analysis of ITC. In this section, we’ll try to know what lies ahead for the company and its investors. The management is focused on leveraging digital capabilities towards future earnings growth of various divisions such as agri business and FMCG. Furthermore, the company will continue to focus on a multi-pronged go-to-market strategy for its various products to drive higher growth from urban areas as well as tier regions. Overall, product premiumisation and strengthening of supply chains will play their due role towards topline and margin expansion. Fundamental Analysis of ITC – Key Metrics We are almost at the end of our fundamental analysis of ITC. Let us take a quick look at the key metrics of the stock. CMP ₹463 Market Cap (Cr.) ₹5,61,828 EPS ₹15.4 Stock P/E 28 RoE 28% Dividend Yield 2.9% Promoter Holding 0% Book Value ₹56 Debt to Equity 0.00 Price to Book Value 7.9 Net Profit Margin 27% Operating Margin 36% In Conclusion Strong monopolistic moat, fast growth prospects across various segments, tobacco division serving as a cash cow, consistent earnings growth and various other factors make ITC a well-balanced stock. Volume recovery in its cigarette business helped the company to clock earnings and consequently the increase in stock price. Going forward, investors should closely monitor quarterly earnings data for different divisions and any regulatory change in the tobacco industry. Do you think ITC will be able to grow faster in the coming years? What are your views on the stock? How about we continue this conversation in the comments below? Written By – Vikalp Mishra By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions. The post Fundamental Analysis of ITC – Future Plans, Financials & More appeared first on Trade Brains. [Continue Reading...](?site= [Fundamental Analysis of ITC – Future Plans, Financials & More]( And, in case you missed it: - [Business Development: Basic Overview of Activities](?site= - [Linkfest: 05 July, 2023](?site= - [Blog Post: Day 45 of $QQQ short term up-trend; $GLD is in a daily BWR down-trend, see chart](?site= - [GICS vs. ICB Stock Classification: What’s the Difference?](?site= - [What to Expect From the Housing Market in the Second Half of 2023](?site= - FREE OR LOW COST INVESTING RESOURCES - [i]( [i]( [i]( [i]( Sponsored [Build Wealth 10x Faster By Doing This]( As you know, the stock market has been volatile lately, and there's a lot of uncertainty in the air. But we want to assure you that this is not the time to panic. In fact, it's the time to be buying stocks.[Go HERE to Get Their Names And Ticker Symbols]( By clicking the link you are subscribing to the Summa Money Newsletter and may receive up to 2 additional free bonus subscriptions. Unsubscribing is easy [Privacy Policy/Disclosures]( - CLICK THE IMAGE BELOW FOR MORE INFORMATION - [i]( Good Investing! T. D. Thompson Founder & CEO [ProfitableInvestingTips.com]() ProfitableInvestingTips.com is an informational website for men and women who want to discover investing and trading products and strategies to educate themselves about the risks and benefits of investing and investing-related products. DISCLAIMER: Use of this Publisher's email, website and content, is subject to the Privacy Policy and Terms of Use published on Publisher's Website. Content marked as "sponsored" may be third party advertisements and are not endorsed or warranted by our staff or company. The content in our emails is for informational or entertainment use, and is not a substitute for professional advice. Always check with a qualified professional regarding investing and trading guidance. Be sure to do your own careful research before taking action based on anything you find in this content. If you no longer wish to receive our emails, click the link below: [Unsubscribe]( Net Wealth Consultants 6614 La Mora Drive Houston, Texas 77083 United States (888) 983-9123