1

SYNOPSIS

ITC is one of the India's foremost

FMCG private sector companies

with a market capitalization of over

US $ 33 billion and a turnover of

US $ 7 billion.

During the quarter, the robust

growth of Net Profit is increased by

22.45% to Rs. 17009.80 million.

Net Sales and PAT of the company

are expected to grow at a CAGR of

15% and 20% over 2010 to 2013E

respectively.

ITC is one of the country's biggest

foreign exchange earners US $ 3.2

billion in the last decade.

ITC Ltd has issued and allotted

67,05,860 Ordinary Shares of Rs.

1/- each, upon exercise of 6,70,586

Options by Optionees under the

Company's Employee Stock Option

Schemes.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 214682.50 79722.80 49876.10 6.45 31.24

FY 12E 246909.94 97090.04 61583.83 7.96 25.30

FY 13E 279008.23 110350.84 70431.22 9.10 22.12

Stock Data:

Sector: FMCG

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 216.10/150.00

Volume (2 wk. Avg.) 392000

BSE Code 500875

Market Cap (Rs in mn) 1558066.44

Share Holding Pattern

1 Year Comparative Graph

ITC Ltd. BSE SENSEX

C.M.P: Rs. 201.35 Target Price: Rs. 230.00 Date: Jan. 30th 2012 BUY

ITC Ltd. Result Update: Q3 FY12

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Peer Group Comparison

Name of the Company CMP(Rs.) Market Cap. (Rs. mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

ITC Ltd. 201.35 1558066.44 6.45 31.24 9.80 445.00

Hindustan Unilever Ltd 390.80 84453.62 11.67 33.49 32.06 650.00

Dabur India Ltd 95.90 16994.38 2.74 35.00 15.39 115.00

Godrej Consumer 402.65 13029.36 15.61 25.79 8.49 450.00

Investment Highlights

� Q3 FY12 Results Update

ITC Ltd. has reported net profit of Rs 17009.80 million for the quarter ended on

December 31, 2011 as against Rs 13890.80 million in the same quarter last year,

an increase of 22.45%. It has reported net sales of Rs 62478.40 million for the

quarter ended on December 31, 2011 as against Rs 55137.40 million in the same

quarter last year, a rise of 13.31%. Total income grew by 14.48% to Rs 65329.60

million from Rs 57067.80 million in the same quarter last year. During the quarter,

it reported earnings of Rs 2.18 a share.

Quarterly Results - Standalone (Rs in mn)

As At Dec-11 Dec-10 %change

Net sales 62478.40 55137.40 13.31%

PAT 17009.80 13890.80 22.45%

Basic EPS 2.18 1.80 21.04%

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� Break up of Expenditure

� Segment Revenue (Net)

Segments (Rs. mn) Q3 FY12 Q3 FY11

FMCG 46035.50 38747.30

Agribusiness 11394.10 10375.00

Papers, Packaging 9784.20 8773.30

Hotels 2787.20 2816.30

Total 70001.00 60711.90

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� Allotment of shares

ITC Ltd has issued and allotted 67,05,860 Ordinary Shares of Rs. 1/- each, upon

exercise of 6,70,586 Options by Optionees under the Company's Employee Stock

Option Schemes. Consequently, with effect from December 19, 2011, the issued

and Subscribed Share Capital of the Company stands increased to Rs.

779,61,59,710/- divided into 779,61,59,710 Ordinary Shares of Rs. 1/- each.

Company Profile

ITC Ltd. a public conglomerate company headquartered in Kolkata, India. Its turnover

is $7 billion and a market capitalization of over $33 Billion. It started off as the

Imperial Tobacco Company, and shares ancestry with Imperial Tobacco of the United

Kingdom, but it is now fully independent, and was rechristened to Indian Tobacco

Company in 1970 and then to I.T.C. Limited in 1974. ITC Limited completed “100

years” on 24 August 2010. ITC Ltd. has diversified presence in FMCG, Hotels,

Paperboards and Packaging, Agri Business and Information Technology. The Company

is currently focused on four business groups: FMCG, Hotels, Paperboards, Paper &

Packaging and Agri Business.

List of products and brands

In FMCG, ITC has a strong presence in:

� Cigarettes: W.D. & H.O. Wills, Gold Flake Kings, Gold Flake Premium, Navy

Cut, Classic, Benson & Hedges, Silk Cut, Capstan,

� Foods: Kitchens of India; Ashirvaad; Minto, Sunfeast; Candyman; Bingo;

Sunfeast Pasta

� Apparel: Wills Lifestyle and John Players brands

� Personal care: Fiama di Wills; Vivel; Essenza di Wills; Superia; Vivel di

Wills brands of products in perfumes, haircare and skincare

� Stationery: Classmate and Paperkraft brands

� Safety Matches and Agarbattis

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Other Businesses include:

� Hotels

ITC's hotels have evolved into being India's second largest hotel chain with over

80 hotels throughout the country. ITC is also the exclusive franchisee

in India of two brands owned by Sheraton International Inc. - The Luxury

Collection & Sheraton which ITC uses in association with its own brands in the

luxury 5 Star segment. Brands in the hospitality sector owned and operated by

its subsidiaries include Fortune and WelcomeHeritage brands.

• Infotech India Ltd.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd,

provides IT services and solutions to leading global customers. ITC Infotech has

carved a niche for itself by addressing customer challenges through innovative

IT solutions.

• ITC's Agri-Business

ITC's Agri-Business is one of India's largest exporters of agricultural products.

The Company's 'E-Choupal' initiative is enabling Indian agriculture significantly

enhance its competitiveness by empowering Indian farmers through the power

of the Internet.

Group Companies

Subsidiaries

� ITC Infotech

� Surya Nepal Pvt. Ltd.

� Landbase

� King Maker Marketing Inc., USA

� Technico Pty Ltd. Australia

� Russell Credit Ltd.

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� Wimco Ltd.

� Srinivasa Resorts Ltd.

� Fortune Park Hotels Ltd.

� Bay Islands Hotels Ltd.

� Gold Flake Corporation Ltd.

Joint Ventures

� Maharaja Heritage Resorts Ltd.

� ITC Filtrona

Associate Companies

� Gujarat hotels Ltd

� International Travel House

Facilities

It employs over 26,000 people at more than 60 locations across India and is listed

on Forbes 2000. ITC Limited completed 100 years on 24 August 2010. In addition,

ITC's businesses have created sustainable livelihoods for more than 5 million people, a

majority of whom represent the poorest in rural India.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value (Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 183822.40 214682.50 246909.94 279008.23

Other Income 3743.30 5181.70 8521.12 9628.87

Total Income 187565.70 219864.20 255431.06 288637.09

Expenditure -120791.90 -140141.40 -158341.02 -178286.26

Operating Profit 66773.80 79722.80 97090.04 110350.84

Interest -533.60 -481.30 -615.00 -688.80

Gross profit 66240.20 79241.50 96475.04 109662.04

Depreciation -6087.10 -6559.90 -6878.38 -7291.08

Profit Before Tax 60153.10 72681.60 89596.66 102370.96

Tax -19543.10 -22805.50 -28012.83 -31939.74

Profit After Tax 40610.00 49876.10 61583.83 70431.22

Equity capital 3818.20 7738.10 7738.10 7738.10

Reserves 136281.70 151261.20 212845.03 283276.24

Face value 1.00 1.00 1.00 1.00

EPS 10.64 6.45 7.96 9.10

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Jun-11 30-Sep-11 31-Dec-11 31-Mar-12E

Description 3m 3m 3m 3m

Net sales 58601.80 60852.20 62478.40 64977.54

Other income 1438.40 1808.00 2851.20 2423.52

Total Income 60040.20 62660.20 65329.60 67401.06

Expenditure -38840.90 -38662.30 -38667.40 -42170.42

Operating profit 21199.30 23997.90 26662.20 25230.64

Interest -164.50 -141.80 -156.70 -152.00

Gross profit 21034.80 23856.10 26505.50 25078.64

Depreciation -1664.50 -1701.30 -1738.90 -1773.68

Profit Before Tax 19370.30 22154.80 24766.60 23304.96

Tax -6043.10 -7011.70 -7756.80 -7201.23

Profit After Tax 13327.20 15143.10 17009.80 16103.73

Equity capital 7738.10 7773.00 7796.20 7796.20

Face value 1.00 1.00 1.00 1.00

EPS 1.72 1.95 2.18 2.07

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

No. of shares (in mn) 3818.20 7738.10 7738.10 7738.10

EBITDA Margin (%) 36.33% 37.14% 39.32% 39.55%

PBT Margin (%) 32.72% 33.86% 36.29% 36.69%

PAT Margin (%) 22.09% 23.23% 24.94% 25.24%

P/E Ratio (x) 18.93 31.24 25.30 22.12

ROE (%) 28.99% 31.37% 27.92% 24.20%

ROCE (%) 51.97% 54.23% 47.11% 40.41%

EV/EBITDA (x) 11.51 19.54 16.05 14.12

Book Value (Rs.) 36.69 20.55 28.51 37.61

P/BV 5.49 9.80 7.06 5.35

Charts:

Net sales & PAT

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P/E Ratio (x)

EV/EBITDA(x)

11

P/BV

Outlook and Conclusion

� At the current market price of Rs.201.35, the stock is trading at 25.30 x FY12E

and 22.12 x FY13E respectively.

� Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.7.96 and Rs. 9.10 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 15% and

20% over 2010 to 2013E respectively.

� On the basis of EV/EBITDA, the stock trades at 16.05 x for FY12E and 14.12 x

for FY13E.

� Price to Book Value of the stock is expected to be at 7.06 x and 5.35 x

respectively for FY12E and FY13E.

� We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.230.00 for Medium to Long term investment.

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Industry Overview

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer

packaged goods. Items in this category include all consumables (other than

groceries/pulses) people buy at regular intervals. The most common in the list are

toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,

packaged foodstuff, and household accessories and extends to certain electronic

goods. These items are meant for daily of frequent consumption and have a high

return.

A major portion of the monthly budget of each household is reserved for FMCG

products. The volume of money circulated in the economy against FMCG products is

very high, as the number of products the consumer use is very high. Competition in

the FMCG sector is very high resulting in high pressure on margins

FMCG companies maintain intense distribution network. Companies spend a large

portion of their budget on maintaining distribution networks. New entrants who wish

to bring their products in the national level need to invest huge sums of money on

promoting brands. Manufacturing can be outsourced. A recent phenomenon in the

sector was entry of multinationals and cheaper imports. Also the market is more

pressurized with presence of local players in rural areas and state brands

Fast moving consumer goods (FMCG) sector is scaling new heights due to the entry of

foreign brands and development of organized retailing in a big way. Indian packaged

food industry, which is currently estimated at around US$ 10 billion, is driving retail

sales to a major extent in India. FMCG firms have also started tapping net savvy

consumers to give a boost to their revenue. Companies, including Dabur, Himalaya

Herbal Healthcare, Neutrogena, Oriflame, Amul, Future Group, Aditya Birla Retail,

REI Agro and Carrefour are making efforts to expand their reach through internet.

A recent study has revealed that lesser developed eastern states such as Bihar, Orissa,

Chhattisgarh and Assam are leading rural sales in India. The analysis has

strengthened the fact that rural markets are driving consumption of FMCG products.

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• US FMCG giant McCormick, that has recently formed a joint venture (JV) with

Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food

industry and achieve sales of US$ 85 million in the first year of operations in

the country.

• FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian

breakfast cereal market by launching oats cereal under its flagship brand

‘Horlicks’. The breakfast cereal market in India is currently dominated by

PepsiCo and Kellogg’s.

• Oral and dental hygiene products manufacturer Colgate Palmolive has decided

to invest Rs 200 crore (US$ 40 million) to establish a greenfield facility at an

upcoming industrial estate in Sanand which is being developed by state-run

Gujarat Industrial Development Corporation (GIDC).

__________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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Firstcall India Equity Research: Email – info@firstcallindia.com

C.V.S.L.Kameswari Pharma

U. Janaki Rao Capital Goods

A. Rajesh Babu FMCG

H.Lavanya Oil & Gas

Ashish Kushwaha Diversified

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