ITC Limited Q4FY21 Result Analysis | Yadnya Investment Academy

ITC Limited recently published its Q4FY21 Results, the company posted a net profit of Rs. 3,748 Cr. this quarter. Let’s find out its other parameters through our analysis:

Introduction

ITC Limited is an Indian company headquartered in Kolkata, West Bengal. ITC has a diversified presence across industries such as cigarettes, FMCG, hotels, packaging, paperboards and specialty papers, and agribusiness. The company has a total of 13 businesses in 5 segments. 

We have done a 5 point analysis on the Q4FY21 Results of ITC Limited, namely:

ITC Limited Result- 6 point analysis

1. ITC Limited:

i) Q4FY21 Results:

• The Gross Revenue from Sales has shown significant growth of 24.1% (YoY) to Rs. 14,023 Cr. in the Q4 of FY21 as compared to Rs. 11,300 Cr. in Q4 of the previous year. Whereas, the revenues have increased by 10.6% QoQ from Rs. 12,673 Cr.
• The Revenue from Operations has shown growth of 24% (YoY) to Rs. 14,157 Cr. in the Q4 of FY21 as compared to Rs. 11,420 Cr. in Q4 of the previous year. Whereas, the revenues have increased by 11% QoQ from Rs. 12,762 Cr.
• The EBITDA of ITC Limited has delivered a growth of 7.4% (YoY) from Rs. 4,164 Cr. In Q4 FY20 to Rs. 4,473 Cr. in the Q4 of FY21. The profits have shown a rise in QoQ by 3.7 % from Rs. 4,315 Cr. in Q3 FY21.
• The EBITDA Margins have shown a fall due to a Rise in Input Prices by 430 basis points (bps) YoY from 38.3% in Q4 FY20 to 34% in Q4 of FY21. And on a QoQ basis, the OPM % has fallen by 230 basis points (bps) from 36.3% in Q3 FY21.
• ITC Limited has delivered a rise in Profit before Tax (PBT) of 7.6% YoY, from Rs. 4,512 Cr. in the Q4 of FY20 to Rs. 4,854 Cr. in the Q4 of FY21. Whereas, the QoQ showed a fall in profits by 0.5% from Rs. 4,880 Cr. in Q3 FY21.
• The profit after tax (PAT) has shown a fall of 1.3% (YoY) from Rs. 3,797 Cr. in the Q4 of FY20 to Rs. 3,748 Cr. in the Q4 of FY21. Net Profit on a QoQ basis has shown a rise of 1.6% from Rs. 3,688 Cr. in Q3 FY21.

ITC Limited- Q4FY21 Results

ii) FY21 Performance:

• The Gross Revenue from Sales has shown growth of 3.9% (YoY) to Rs. 48,151 Cr. in the Q4 of FY21 as compared to Rs. 46,324 Cr. in Q4 of the previous year.
• The Revenue from Operations has shown a good growth of 4.3% (YoY) from Rs. 46,507 Cr. in FY 20 to Rs. 48,524 Cr. in FY21.
• The EBITDA of ITC Limited has delivered a marginal fall of 13.3% (YoY) from Rs. 17,904 Cr. in FY20 to Rs. 15,522 Cr. in the FY21.
• The EBITDA Margins % has also shown a falling trend by 520 basis points (bps) YoY from 39.5% in FY20 to 34.3% in FY21.
• ITC Limited delivered a decrease in Profit before Tax (PBT) of 10.4% YoY, from Rs. 19,167 Cr. in the FY20 to Rs. 17,164 Cr. in the Financial Year 2021.
• The Net Profit of ITC Limited has shown a steep fall of 13.9% (YoY) from Rs. 15,136 Cr. in FY20 to Rs. 13,032 Cr. in FY21.

ITC Limited-FY21 Performance

2. Segment wise –

i. Revenue Growth:

a) Cigarettes:

• The revenue from Cigarettes has increased by 14% (YoY) from 5,131 Cr. in the Q4 of FY20 to Rs. 5,860 Cr. in the Q4 of FY21.
• Quarterly, the revenue from Cigarettes has also increased by 7% (QoQ) from 5,498 Cr. in the Q3.
• The revenue has shown a fall of 4% from Rs. 21,202 Cr. in FY20 to Rs. 20,333 Cr. in FY21.
• The segment revenue is continuously rising from Q1 to Q4 of FY21.

b) FMCG Others:

• The revenue from FMCG Others has increased by 16% (YoY) from 3,184 Cr. in the Q4 of FY20 to Rs. 3,688 Cr. in the Q4 of FY21.
• Quarterly, the revenue from FMCG Others has decreased by 1.5% (QoQ) from 3,744 Cr. in Q3.
• The revenue has shown a rise of 15% from Rs. 12,844 Cr. in FY20 to Rs. 14,728 Cr. in FY21.
• The segment revenue has shown a fall from Q1 to Q4 of FY21.

c) Hotels:

• The revenue from Hotels has decreased by 38% (YoY) from 466 Cr. in the Q4 of FY20 to Rs. 288 Cr. in the Q4 of FY21.
• Quarterly, the revenue from Hotels has increased by 23% (QoQ) from 235 Cr. in Q3.
• The revenue has shown a fall of 66% from Rs. 1,837 Cr. in FY20 to Rs. 628 Cr. in FY21.
• The segment revenue has shown a rising trend from Q1 to Q4 of FY21.

d) Agri-Business:

• The revenue from Agri-Business has increased by a huge 79% (YoY) from 1,887 Cr. in the Q4 of FY20 to Rs. 3,669 Cr. in the Q4 of FY21.
• Quarterly, the revenue from Agri-Business has increased by 36% (QoQ) from 2,482 Cr. in the Q3.
• The revenue has shown a rise of 23% from Rs. 10,241 Cr. in FY20 to Rs. 12,582 Cr. in FY21.
• The segment revenue is also showing a rising trend from Q1 to Q4 of FY21.

e) Paper, Paperboards, and Packaging:

• The revenue from Paper, Paperboards, and Packaging has increased by 13% (YoY) from 1,459 Cr. in the Q4 of FY20 to Rs. 1,656 Cr. in the Q4 of FY21.
• Quarterly, the revenue from Paper, Paperboards, and Packaging has increased by 12% (QoQ) from 1,478 Cr. in the Q3.
• The revenue has shown a fall of 8% from Rs. 6,107 Cr. in FY20 to Rs. 5,619 Cr. in FY21.
• The segment revenue is also showing a rising trend from Q1 to Q4 of FY21.

ITC Limited- Segment-wise Revenue Growth

ITC Limited- Segment Revenue- QoQ Revenue Trend

ii) EBIT Profit Growth:

a) Cigarettes:

• The EBIT from Cigarettes has increased by 8% (YoY) from 3,403 Cr. in the Q4 of FY20 to Rs. 3,666 Cr. in the Q4 of FY21.
• Quarterly, the revenue from Cigarettes has increased by 6% (QoQ) from 3,453 Cr. in Q3.
• The EBIT has shown a fall of 14% from Rs. 14,853 Cr. in FY20 to Rs. 12,720 Cr. in FY21.

b) FMCG Others:

• The EBITDA from FMCG Others has increased by 19.5% (YoY) from 256 Cr. in the Q4 of FY20 to Rs. 306 Cr. in the Q4 of FY21.
• Quarterly, the EBITDA from FMCG Others has decreased by 15% (QoQ) from 360 Cr. in Q3.
• The EBITDA has shown a rise of 44% from Rs. 914 Cr. in FY20 to Rs. 1,317 Cr. in FY21.

c) Hotels:

• The EBIT from Hotels has decreased and made a loss, it has come down from 43 Cr. in the Q4 of FY20 to Rs. -40 Cr. in the Q4 of FY21.
• Quarterly, the EBIT from Hotels has increased (QoQ) from -67 Cr. in the Q3.
• The EBIT has shown a fall from Rs. 158 Cr. in FY20 to Rs. -535 Cr. in FY21.

d) Agri-Business:

• The EBIT from Agri-Business has increased by 13% (YoY) from 123 Cr. in the Q4 of FY20 to Rs. 190 Cr. in the Q4 of FY21.
• Quarterly, the EBIT from Agri-Business has decreased by 3% (QoQ) from 196 Cr. in Q4.
• The EBIT has shown a fall of 16% from Rs. 1,305 Cr. in FY20 to Rs. 1,099 Cr. in FY21.

e) Paper, Paperboards, and Packaging:

• The EBIT from Paper, Paperboards, and Packaging has increased by 13% (YoY) from 286 Cr. in the Q4 of FY20 to Rs. 323 Cr. in the Q4 of FY21.
• Quarterly, the EBIT from Paper, Paperboards, and Packaging has increased by 13.3% (QoQ) from 285 Cr. in Q4.
• The EBIT has shown a fall of 16% from Rs. 1,305 Cr. in FY20 to Rs. 1,099 Cr. in FY21.

3. Segment-wise Revenue & EBIT Mix: 

i) Revenue & EBIT Mix :

ITC Limited- Revenue Mix

a) Cigarettes:

• The overall share in revenue from Cigarettes accounts for 39.4% in Q4 of FY21 which has gone down from 42.3% in Q4 FY20.
• The overall share in EBIT stands at 84.7% in Q4 of FY21.

• Sequential recovery momentum in the Cigarette segment.
• Q4 volumes at nearly to Pre-COVID levels.
• Legal Industry volumes remained impacted (13% Tax Hike from 1st Feb-20)

b) FMCG Others:

• The overall share in revenue from FMCG Others accounts for 24.8% in Q4 of FY21 which has gone down from 24.8% in Q4 FY20.
• The overall share in EBIT stands at 4.4% in Q4 of FY21.

• % Mix declined due to higher overall revenue growth (24%) vs FMCG-others segment (16%).
• 120+ New Launches in FY21 across Hygiene, Health & wellness, Naturals categories
• FY21 Sales : Essential Products (contributing 75%) grew 20% YoY & Discretionary (25% mix) : 2% YoY.
• Spice Manufacturer - Sunrise Foods amalgamated w.e.f July-20, Scheme approval from NCLT in Feb-21.
• FMCG sales through E-commerce channels has doubled YoY, contributes 5% of FMCG revenue

c) Hotels:

• The overall share in revenue from Hotels accounts for 1.9% in Q4 of FY21 which has gone down from 3.8% in Q4 FY20.
• The overall share in EBIT stands at -0.9% in Q4 of FY21.

• Significantly impacted by COVID 2^nd wave, QoQ growth in Revenue but Still below Pre-COVID level

d) Agri-Business:

• The overall share in revenue from Agri-Business accounts for 18.7% in Q4 of FY21 which has gone down from 15.6% in Q4 FY20.
• The overall share in EBIT stands at 4.4% in Q4 of FY21.

• 79% YoY revenue growth driven by Export Opportunities in Wheat, Rice, Oilseeds.
• Strong growth in Value-added spices (led by Sunrise Foods), Agri-business is moving up Value chain with Value Addition, i.e., from Basic Commodity to Value Added Products (leading to Margin expansion)

e) Paper, Paperboards, and Packaging:

• The overall share in revenue from Paper, Paperboards, and Packaging accounts for 11.1% in Q4 of FY21 which has gone down from 12% in Q4 FY20.
• The overall share in EBIT stands at 7.5% in Q4 of FY21.

• Strong Recovery in domestic demand  & robust growth in Exports.
• Robust growth in Cartons & Flexible Packaging.

ITC Limited- EBIT Mix

ii) Segment-wise EBIT Margins:

a) Cigarettes:

• The EBIT margins from Cigarettes have shown a falling trend from 66.3% in Q4 FY20 to 62.8% in Q3 FY21 and finally at 62.6% in Q4 of FY21.

b) FMCG Others:

• The EBIT margins from FMCG Others have increased from 4.6% in Q4 FY20 to 6.4% in Q3 FY21 and finally decreased to 5.1% in Q4 of FY21.

c) Hotels:

• The Hotel Business has reported Losses in FY21 and the EBIT Margins in Q4 FY20 were 9.1%.

d) Agri-Business:

• The EBIT margins from Agri-Business have increased from 6.5% in Q4 FY20 to 7.9% in Q3 FY21 and finally decreased to 5.6% in Q4 of FY21.

e) Paper, Paperboards, and Packaging:

• The EBIT margins from Paper, Paperboards, and Packaging have decreased from 19.6% in Q4 FY20 to 19.3% in Q3 FY21 and finally increased to 19.5% in the Q4 of FY21.

ITC Limited- Segment-wise EBIT Margins

4. FMCG – Others Segment - Sustained Improvement in Profitability:

• The FMCG Others segment has shown consistent growth over some time.
• The segment EBITDA margins account for 3.2%, 5.7%, 7%, 8.1, 8.3, and 9.6% in Q4FY17, Q4FY18, Q4FY19, Q4FY20, and Q4FY21 respectively, which shows a regular rise.
• This is the same with the entire year's EBITDA margins which also have grown consistently, with 2.5%, 4%, 5.5%, 7.1%, and 8.9% in FY17, FY18, FY19, FY20, and FY21 respectively.

ITC Limited- FMCG-Others Segment- Sustained Improvement in Profitability

The factors that helped the segment to grow are:

• Levers of Consistent Margin Expansion
• Robust Product Portfolio
• Operating Leverage
• Supply Chain Efficiencies
• Power of Digital
• Purposeful Innovation

5.Valuations:

• The stock P/E currently stands at 19.97 which is higher than 1 Year Median P/E but lower than the 3 Year and 5 Year Median P/E which states that the stock is slightly undervalued right now.
• The ITC stock has a good dividend yield of 5.12% in which the Interim Dividend was around Rs. 5 per share and a Final Dividend of Rs. 5.75 per share. The total dividend came out to be Rs. 10.75 per share.

ITC Limited- Valuations