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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

25.98% to Rs. 16143.60 million.

ITC's is the first independent R&D

centre in India to get ISO 9001

accreditation and certified with ISO

14001 for EMS by DNV. It is also

certified for the Standard

ISO/IEC17025:2005.

ITC Ltd has recommended a dividend

of Rs. 4.50 per Ordinary Share of Rs.

1/- each.

Net Sales and PAT of the company

are expected to grow at a CAGR of

14% and 17% over 2011 to 2014E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 12 251738.20 96739.60 61623.70 7.88 31.46

FY 13E 286981.55 111369.86 71877.90 9.19 26.98

FY 14E 315679.70 123390.96 80156.05 10.25 24.19

Stock Data:

Sector: FMCG

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 260.20/185.20

Volume (2 wk. Avg.) 333000.00

BSE Code 500875

Market Cap (Rs in mn) 1938963.20

Share Holding Pattern

1 Year Comparative Graph

ITC Ltd. BSE SENSEX

C.M.P: Rs. 248.00 Target Price: Rs. 280.00 Date: July 05th 2012 BUY

ITC Ltd. Result Update: Q4 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. 248.00 1938963.20 7.88 31.46 10.35 450.00

Hindustan Unilever Ltd 441.20 951621.80 12.75 34.53 27.09 750.00

Dabur India Ltd 114.70 199896.70 2.66 43.12 15.35 130.00

Godrej Consumer 578.30 194664.50 17.76 32.21 9.10 450.00

Investment Highlights

� Q4 FY12 Results Update

ITC Ltd has reported net profit of Rs 16143.60 million for the quarter ended on

March 31, 2012 as against Rs 12814.80 million in the same quarter last year, an

increase of 25.98%. It has reported net sales of Rs 69546.40 million for the quarter

ended on March 31, 2012 as against Rs 59599.90 million in the same quarter last

year, a rise of 16.69%. Total income grew by 18.15% to Rs 71625.10 million from

Rs 60621.50 million in the same quarter last year. During the quarter, it reported

earnings of Rs 2.06 a share.

Quarterly Results - Standalone (Rs in mn)

As At Mar-12 Mar-11 %change

Net sales 69546.40 59599.90 16.69

PAT 16143.60 12814.80 25.98

Basic EPS 2.06 1.66 24.68

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� Break up of Expenditure

� Segment Revenue (Net)

Segment Revenue Q4 FY12 Q4 FY11

FMCG 48,663.80 46,035.50

Agri Business 14,142.20 11,394.10

Paperboards, Paper & Packaging

9,799.40 9,784.20

Hotels 2,858.40 2,787.20

Total 75,463.80 70,001.00

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� Recommended Dividend

ITC Ltd has recommended a dividend of Rs. 4.50 per Ordinary Share of Rs. 1/-

each for the financial year ended March 31, 2012 and the dividend will be paid on

July 30, 2012.

� Awards

ITC Ltd has been awarded the 2012 World Business and Development Award at the

Rio+20 United Nations Summit at Rio de Janeiro, Brazil.

Company Profile

ITC is one of India's foremost private sector companies with a market capitalization of

over US $ 33 billion and a turnover of US $ 7 billion. ITC is rated among the World's

Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by

Forbes magazine, among India's Most Respected Companies by Business World and

among India's Most Valuable Companies by Business. ITC ranks among India's `10

Most Valuable (Company) Brands'. ITC also ranks among Asia's 50 best performing

companies.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,

Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,

Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG

products. While ITC is an outstanding market leader in its traditional businesses of

Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining

market share even in its nascent businesses of Packaged Foods & Confectionery,

Branded Apparel, Personal Care and Stationery.

ITC is widely perceived to be dedicatedly nation-oriented. ITC believes that its

aspiration to create enduring value for the nation provides the motive force to sustain

growing shareholder value. ITC practices this philosophy by not only driving each of

its businesses towards international competitiveness but by also consciously

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contributing to enhancing the competitiveness of the larger value chain of which it is a

part."

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

one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last

decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture

significantly enhance its competitiveness by empowering Indian farmers through the

power of the Internet. ITC's production facilities and hotels have won numerous

national and international awards for quality, productivity, safety and environment

management systems. ITC was the first company in India to voluntarily seek a

corporate governance rating.

ITC's R&D Centre the first independent R&D centre in India to get ISO 9001

accreditation and certified with ISO 14001 for Environment Management Systems by

DNV. The R&D Centre is also certified for the standard ISO/IEC17025:2005, by

National Accreditation Board for Testing and Calibration Laboratories (NABL). This

certification is awarded for "General requirement for the competence of Testing &

Calibration Laboratories".

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

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� Russell Credit Ltd.

� 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) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 214682.50 251738.20 286981.55 315679.70

Other Income 5181.70 8253.40 9491.41 10535.47

Total Income 219864.20 259991.60 296472.96 326215.17

Expenditure -140141.40 -163252.00 -185103.10 -202824.21

Operating Profit 79722.80 96739.60 111369.86 123390.96

Interest -481.30 -779.20 -701.28 -715.31

Gross profit 79241.50 95960.40 110668.58 122675.65

Depreciation -6559.90 -6985.10 -7543.91 -7921.10

Profit Before Tax 72681.60 88975.30 103124.67 114754.55

Tax -22805.50 -27351.60 -31246.78 -34598.50

Profit After Tax 49876.10 61623.70 71877.90 80156.05

Equity capital 7738.10 7818.40 7818.40 7818.40

Reserves 151261.20 179570.00 251447.90 331603.95

Face value 1.00 1.00 1.00 1.00

EPS 6.45 7.88 9.19 10.25

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Quarterly Ended Profit & Loss Account (Standalone)

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

Description 3m 3m 3m 3m

Net sales 60852.20 62478.40 69546.40 68850.94

Other income 1808.00 2851.20 2078.70 2369.72

Total Income 62660.20 65329.60 71625.10 71220.65

Expenditure -38662.30 -38667.40 -46912.90 -44753.11

Operating profit 23997.90 26662.20 24712.20 26467.55

Interest -141.80 -156.70 -148.20 -163.02

Gross profit 23856.10 26505.50 24564.00 26304.53

Depreciation -1701.30 -1738.90 -1880.40 -1974.42

Profit Before Tax 22154.80 24766.60 22683.60 24330.11

Tax -7011.70 -7756.80 -6540.00 -7493.67

Profit After Tax 15143.10 17009.80 16143.60 16836.43

Equity capital 7773.00 7796.20 7818.40 7818.40

Face value 1.00 1.00 1.00 1.00

EPS 1.95 2.18 2.06 2.15

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares(in mn) 7738.10 7818.40 7818.40 7818.40

EBITDA Margin (%) 37.14% 38.43% 38.81% 39.09%

PBT Margin (%) 33.86% 35.34% 35.93% 36.35%

PAT Margin (%) 23.23% 24.48% 25.05% 25.39%

P/E Ratio (x) 38.48 31.46 26.98 24.19

ROE (%) 31.37% 32.89% 27.72% 23.62%

ROCE (%) 53.93% 55.12% 45.72% 38.59%

Debt Equity Ratio 0.006 0.004 0.003 0.003

EV/EBITDA (x) 24.07 20.04 17.41 15.71

Book Value (Rs.) 20.55 23.97 33.16 43.41

P/BV 12.07 10.35 7.48 5.71

Charts:

Net sales & PAT

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P/E Ratio (x)

EV/EBITDA(x)

12

P/BV

Outlook and Conclusion

� At the current market price of Rs.248.00, the stock is trading at 26.98 x FY13E

and 24.19 x FY14E respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.9.19 and Rs. 10.25 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 14% and

17% over 2011 to 2014E respectively.

� On the basis of EV/EBITDA, the stock trades at 17.41 x for FY13E and 15.71 x

for FY14E.

� Price to Book Value of the stock is expected to be at 7.48 x and 5.71 x

respectively for FY13E and FY14E.

� 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.280.00 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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