ITC Ltd : Stock Analysis: Reasons of Underperformance Source: https://youtu.be/7rqyBeInspo

1. ITC Ltd :
Stock Analysis
Reasons of Underperformance

4. HUL ITC Dabur

5. HUL ITC Dabur
CMP 1938 149.15 432.8
Market Cap 4,35,000 1,83,000 75,922
Promoter Holding 67.20% Nil 67.88%
EPS 30.41 12.17 8.56
PE Ratio 63.72 12.26 50.57

6. Segment Revenue
FMCG - Cigarettes 5,311 41% 16,071 40% 20,713 41%
FMCG - Others 3,312 26% 9,661 24% 12,505 25%
Hotels 552 4% 1,372 3% 1,665 3%
Agri Business 2,095 16% 8,353 21% 9,397 19%
Paperboards, Paper & Packaging 1,555 12% 4,648 12% 5,860 12%
12,826 100% 40,105 100% 50,140 100%
Segment Results
FMCG - Cigarettes 3,756 83% 11,450 85% 14,551 85%
FMCG - Others 108 2% 276 2% 386 2%
Hotels 87 2% 115 1% 178 1%
Agri Business 213 5% 666 5% 777 5%
Paperboards, Paper & Packaging 334 7% 1,020 8% 1,239 7%
4,498 100% 13,526 100% 17,131 100%
Quarter Ending 31.12.19 9 months ended 31.12.19 FY 2018-19
IT IS STILL ESSENTIALLY A CIGARETTE COMPANY FOR THE STREET — AND THE CHEAPEST ONE AMONG ITS CIGARETTE PEERS.
This despite having a presence in the non-tobacco businesses for more than 20 years none of the businesses have
achieved the scale matching the tobacco business
INR cr

7. Quarter
Ending
31.12.19
9 months
ended
31.12.19
FY 2018-19
Segment EBIT/Sales
FMCG - Cigarettes 71% 71% 70%
FMCG - Others 3% 3% 3%
Hotels 16% 8% 11%
Agri Business 10% 8% 8%
Paperboards, Paper & Packaging 21% 22% 21%

8. From 20% at the end of June 2017, the FII holding in ITC declined to 15%
at the end of December 2019

9. • The government increased taxes on cigarettes in the previous two
budgets. It imposed a National Calamity Contingent Duty of Rs 5 per
1,000 cigarette sticks in July 2019; and raised the overall excise duty
to Rs 200-250 for every 1,000 sticks without filter and Rs 440-735 on
cigarettes with filter, depending on the length,

10. • VST Industries Ltd.—maker of Charminar cigarettes—is ramping up its
69-millimetre business
• Four Square-maker Godfrey Phillips India Ltd. is scaling up presence in
the sub 64-mm segment.
• Counterfeiting i.e. Illegal cigarette trade comprising international
smuggled and locally manufactured tax-evaded cigarettes accounts
for a fourth of the industry

11. TAX BURDEN AND SMOKING CURBS TO WEIGH ON CIGARETTE BUSINESS

13. CONGLOMERATE DISCOUNT
• ITC would probably be the most diversified company listed on the
Indian bourses.
• Presence in diverse and unrelated businesses like soaps,
confectionary, safety matches, stationery, food staples, snacks,
apparels, hotels, retail, paperboard and packaging, agri products and
information technology

14. Segment Revenue PE Ratio % of Revenues
FMCG - Cigarettes VST & GPI 15.81 41%
FMCG - Others HUL & Dabur 57.15 26%
Hotels Indian Hotels 29.98 4%
Agri Business Rallis 19.61 16%
Paperboards, Paper & Packaging J K Paper 3.19 12%
PE Ratio Basis Revenues 26.2
Segment Results PE Ratio % of Profit
FMCG - Cigarettes VST & GPI 15.81 83%
FMCG - Others HUL & Dabur 57.15 2%
Hotels Indian Hotels 29.98 2%
Agri Business Rallis 19.61 5%
Paperboards, Paper & Packaging J K Paper 3.19 7%
PE Ratio Basis EBIT 16.3
Average 21.25
Current PE of ITC 12.26