One Origin Many Branches

By MJK Finvestment
 About ITC

 Established in 1910 ITC is one of India's foremost private sector companies and a diversified conglomerate with businesses
spanning Fast Moving Consumer Goods, Hotels, Paperboards and Packaging, Agri Business and Information Technology.

 Over the last decade, ITC’s new consumer goods business has created a diversified portfolio of world class brands that has created and
will continue to create value for the company. Some of these brands are leaders in the segments they operate in.

 Over the years ITC has created sustainable livelihood for 6 million and the company also provides employment to over 32,000 people
across the country.
A Diversified Conglomerate
Cigarettes
 Types of Cigarettes

NO GRAPHICAL WARNINGS.

NO TEXTUAL WARNINGS.

HAS DUTY FREE SIGN.

ILLEGAL CIGARETTES LEGAL CIGARETTES

Different forms of Tobacco Consumption
 Lowest consumption

No of Cigarettes per annum

% Adult Users
(per person)
28.60%
2043
1583

1017
828 744
512
363
89
4%

All Tobacco Products Legal Cigarettes

Source: The Tobacco Institute of India

 Cigarettes Volume in India

CAGR: -4.5%
CAGR: 4.1%
110 109 Legal Cigarettes(Billion sticks) Illegal Cigarettes (Billion sticks)
99
95 26.5
86 24.9 25.7
81 83 22.8 23.9
20.8 21.8

2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018

The consistent rise in the consumption of illegal cigarettes is mainly because of consistent excise rate hikes by government
and strict government regulations thereby curbing the legal cigarettes and fueling the consumption of illegal cigarettes.
 Illegal Trade in India
 Illegal cigarettes account for 25% of the cigarettes industry in India. This makes India the 4th largest illicit market in the world.
 Extreme tax rates and regulations along with pictorial health warnings is boosting illicit trade in India.
 International brand available cheaper than local brands without pictorial warnings lures the smoker to think cigarettes are safe.
Illegal Cigarettes Volume (Billion sticks p.a.)
26.5
18.3
11.1

2004 2010 2018

PPre pictorial Warnings PPost pictorial Warnings

Illegal Cigarettes (Billion sticks)

24.9 25.7 26.5
22.8 23.9
20.8 21.8
18.3 19.5
16.7 17.5
13.5 14.6
11.1 12.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: The Tobacco Institute of India

 Heftiest taxation!

Despite just 9% share of tobacco consumption, legal cigarettes contribute 80% of tax revenue.

Tax per 2000 Cigarettes as % of GDP

Unfair Punishment
91%
7.34%
80%

20%
9%
1.40%
1.20%
0.47% 0.64%
Legal Cigarettes Other Tobacco Products

Share of Total Tobacco Consumed Share of Tax Revenue

USA Japan China Pakistan India

Source: The Tobacco Institute of India

 OLIGOPOLY MARKET

110 109
99 95
86 81 83

2012 2013 2014 2015 2016 2017 2018

Legal Cigarettes(Billion sticks)

12% 10%
75+%

THREE FIRMS DOMINATE THE WHOLE MARKET.

 ITC – Cigarettes Business

 Undisputed leader with not only presence, but leadership in every segment.

 ITC with more than a century of expertise, offers the widest range of brands with the like of Classic, Gold flake, Navy Cut, Bristol and 10
others under its cigarette umbrella.

 Products are manufactured in the State-of-the-Art facilities and then are spread across the nuke and corners of India with an efficient
supply and distribution chain built by the company.

 West Asia remains a region of export interest for ITC where the company has cemented its standing as the 3rd largest player in
countries like Bahrain & Qatar.

 ITC was the first company to introduce “Flavor on demand” product in the economy segment of Western Asia.

Brands: Insignia, India Kings, Classic, Gold Flake, American Club, Navy
Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal.
 Cigarette contribution trend

92%

83% 85% 85%

44% 42% 41%

35%

2010 2015 2020 Q1 2020

Revenue Contribution Operating Profit Contribution

 Key parameters
ITC Cigarettes Sales & Growth (%)
CAGR- 10%
25,000 16% 17% 23,679 0.2
13% 11% 9% 6% 4% 20,713 14%
20,000
17,846 18,642 19,048 0.1
16,805 9%
15,456 2% 0
15,000 13,970
12,324
10,574 -0.1
10,000
9,130
-0.2
4,330
5,000
-30% -0.3
- -0.4

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 FY21

ITC Cigarettes PBT & Growth (%)

18000 0.3
CAGR- 12% 17%
20% 21% 20% 11% 15838
16000 7% 14752
12% 5% 6% 0.2
14000 13341 7%
12514 0.1
11196 11752
12000
10016 0
10000
8326 -0.1
8000 6908
5767 -0.2
6000 4938
-0.3
4000 -40% 2535
2000 -0.4

0 -0.5

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 FY21
 Cigarettes – Cash cow business
PROFIT MARGINS
67% 66% 67% 70% 71% 67%
60% 65%
54% 55% 56% 59%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q 1 F Y2 1

INCREMENTAL INVESTMENT AS A % OF TOTAL CFO

67%

31%
22% 22% 19%
15% 11% 9%
5% 4% 3%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 VST Industries
1600 VST Industries Sales & Growth (%) 0.25
CAGR- 11% 23% 1369
1400 1184 0.2
17% 18%
1200
16% 0.15
1005 18%
1000 883 918
789 836 9% 0.1
800 684 669
585 0.05
600 475 4%
6%
6% 0
400 315
-2%
-4% -0.05
200

0 -0.1

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

CAGR- 16% Profit Before Tax & Growth (%)

450 420 0.6
56%
400 0.5
351
350 0.4
39% 279
300
0.3
224 22% 229 227 231
250 211 20% 0.2
200
184 26%
21%
150
135 0.1
97 2% 102
100 2% 0

50 -1% -0.1
-13% -13%
0 -0.2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
 Godfrey Philips
Godfrey Philip Sales & Growth (%)
3000 CAGR- 8% 2699 0.3
2582
18% 19% 2403 0.2
2500 16% 2216 2310 2301 17%
2094 15% 7% 0.1
1867 6% 4%
2000 1767 0
1493 -9% -11% -0.1
1500 1287
-0.2
1000 -0.3
390 -0.4
500
-49% -0.5
0 -0.6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

600 550 0.8

Profit Before Tax & Growth (%) 74%
66%
500 CAGR- 15% 0.6

396
400 39% 0.4
26% 323 314
296 27%
300 255 267 228 0.2
234 11%
205
200 0
141 -3%
-15%
-14%
100 49 -0.2
-23%
-31%
0 -0.4

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
 ITC- Leading the pack
Operating Margins- Cigarettes
67% 70% 71% 67%
65% 67% 66%
56% 60% 59%
54% 55%

31% 28% 30% 31% 32%

28% 27% 26% 25% 28%
20% 23% 20%
16% 17% 14% 15% 14% 17%
11% 13% 9% 9% 13%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 FY21

ITC VST GP

ROCE- Cigarettes
400% 410% 475%

224% 226%
165% 188% 192% 168% 176% 192%

54% 77% 63% 72% 68% 64% 51% 50% 56% 58%
36%
24% 28% 26% 20% 21% 20% 16% 12% 14% 20% 23%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ITC VST GP
ITC FMCG- 3rd Largest in India
Strong Brand Recognition
FMCG Brands scaling up
 FMCG contribution trend

27%
25%

22%

18%

5%

2%
Loss 0.3%

2010 2015 2020 Q1 2020

Revenue Contribution Operating Profit Contribution

 ITC- FMCG

14000
FMCG Sales & Growth (%) 0.3
CAGR- 13% 12505 12844
12000 26% 11329
10512 0.25
23% 24% 9704
10000 9011
0.2
8099
8000 6983 16% 0.15
6000 5526
4472 3378
11% 10%
3633 10% 0.1
4000
8%
2000 8% 8% 0.05
3%
0 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
500
423
400
FMCG Profit Before Tax
316
300

200 164
129
100 71
22 34 28
0

-100 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
-81
-200
-195
-300
-298
-400 -350
 FMCG

INCREMENTAL INVESTMENT AS A % OF TOTAL CFO

39%

19%
12% 11% 11% 10% 10% 9% 8% 7% 7%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

OPERATING MARGINS %
3% 4%
3%
1% 1%
0% 0% 0%
-1%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
-7%
-4%
-10%
Hotels
 Hotel Categories

Established in 1975, ITC Hotels has become synonymous to luxury hospitality. ITC developed concepts like “Responsible
Luxury” and “Branded Accommodation”.

Luxury Segment Upper-Upscale Segment Mid Market to Upscale Leisure and Heritage
Segment Segment
 ITC- Hotels

ITC
Hotels 14 Properties (Luxury Collection)

Welcome
Hotels 16 Properties (Owned - 6 & Managed – 11)
15 more to be added (Owned – 4 & Managed – 11)

Fortune

Rest 75 Properties are between Fortune & Welcome

Welcome Heritage Heritage

 ITC is also evaluating opportunities in adjacent markets and markets far away too. Company is also in talks with some hotels overseas.
 ITC is already the 2nd largest luxury hotel chain.
 ITC is also the greenest hotel chain in the world.
 Shifting towards Asset Right Approach

 Currently, out of 10,000 rooms 5,300 are managed.

 Around 4,000 rooms are under construction of which 3,000 are in the managed segment.

 In the next few years, more than 75% of the hotels that are added under our brands will be managed properties

 Going forward out of the 14,000 rooms more than 8,600 would be in the managed segment.

 The hotels under the brand ITC hotels will continue to be owned by the company itself.

 The decision to shift to this approach is mainly because of the capital intensive nature of the Hotels business.

Going forward, more than 75% of new hotels will be under “Managed Properties”
 Hotels contribution trend

4% 4% 4%

3%

1%

0.4%
0% Loss

2010 2015 2020 Q1 2020

Revenue Contribution Operating Profit Contribution

 ITC- Hotels

CAGR- 8% Hotel Sales & Growth (%)

2000 17% 1837 0.4
1800 18% 1665
8% 10% 0.2
7% 5% 5% 4% 6%
1600 1%
1400 1286 1418 0
1187 1342
1200 1074 1133
1001 1006 -0.2
1000 851
-0.4
800
600 -0.6
400 -90%
-0.8
200 25
0 -1

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

CAGR-
400
(3)% Profit Before Tax & Growth (%) 1.2

279 99% 1
300 267
217 0.8
200 178 158
138 140 140 0.6
111
26% 0.4
100 49 56
23% 27% 0.2
0
13%
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021 -0.2
-100
5%
1% -11% -0.4
-200 -51%
-0.6
-65%
-300 -258 -0.8
 Hotels
OPERATING MARGINS
27% 28%
25%

13% 12%
10% 11%
8% 9%
4% 4%
0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

INVESTMENT AS A % OF TOTAL CFO

55%

27%
20%
15%
12% 11% 9% 8% 7% 6% 6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Paperboards, Paper & Packaging
 Paperboards, Paper & Packaging

 Started in 1925, ITC's Packaging & Printing Business is the largest value added converter of paperboard packaging in South Asia. It
converts over 70,000 tonnes of paper, paperboard and laminates per annum into a variety of value-added packaging solutions for the
food & beverage, personal products, cigarette, liquor and consumer goods industries.

 The Division, which was set up in 1925 as a strategic backward integration for ITC's Cigarettes business, is today India's most
sophisticated packaging house. State-of-the-art technology, world-class quality and a highly skilled and dedicated team have combined
to position ITC as the first-choice supplier of high value added packaging.

 The Division supplies value-added packaging to ITC's various FMCG businesses. Its client list includes several well-known national and
international companies like Nokia, Colgate Palmolive, Pernod Ricard, Diageo, British American Tobacco, Philip Morris
International, Agio Cigars, UB Group, Tata Tetley, Tata Tea, Reckitt Benckiser, Radico Khaitan, Akbar Brothers, Surya Nepal, VST
Industries, etc

 With three packaging factories at Tiruvottiyur near Chennai (in the South), Munger in Bihar (in the East), and Haridwar (in the North of
India), the Company offers a comprehensive product range in packaging backed by its packaging expertise over the decades and cutting
edge technology making it truly a "One stop shop for Packaging".
 Paper contribution trend

15%

12% 12% 12%

8%
7% 7%
6%

2010 2015 2020 Q1 2020

Revenue Contribution Operating Profit Contribution

 ITC- PAPER
Paper Sales & Growth (%)
7000 15% 0.2
13% 12% 7% 12% 6107
CAGR- 7% 7% 1% 5860
6000 2% 5363 0.1
5017 5250 4%
4861 4974
5000
4214 0
3923 -2%
4000 3507
3108 -0.1
3000
-0.2
2000 1027

1000 -0.3
-33%
0 -0.4

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

Paper Profit Before Tax & Growth (%)

CAGR-
1400 7% 20% 1239
1305 0.3

1200 14% 19% 0.2

3% 1042 0.1
937 964 921 966
1000 892 908 5%
819 6% 8% 0
-7% 3% -2%
800 684 -0.1

600 -0.2
-0.3
400
-0.4
200
160
-0.5
-52%
0 -0.6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
 Paper

OPERATING MARGINS

23% 24% 23%

22% 21% 21%
19% 20%
18% 18% 18%
16%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

INCREMENTAL INVESTMENT AS A % OF TOTAL CFO

83%

38%
27%
22%
18%
14% 11% 9% 8% 7% 6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 ITC- Agri

ITC's Agri Business is the country's second largest exporter of Agri-products. It currently focuses on exports and domestic
trading of:

 Feed Ingredients- Soyabean

 Food Grains- Wheat & Wheat Flour, Rice, Pulses, Barley & Maize

 Marine Products- Shrimps and Prawns

 Processed Fruits- Fruit Purees/Concentrates, Frozen Fruits

 Coffee
E Choupal efficient framework
ITC- integration
Baraah mahine hariyali!
 Agri contribution trend

30%

21%
20%
19%

7% 7% 7%
5%

2010 2015 2020 Q1 2020

Revenue Contribution Operating Profit Contribution

 ITC- AGRI
12000 Agri Sales & Growth (%) 0.3
CAGR- 10% 26% 10241 0.25
10000 23% 9397
20% 8380 8265 8068
0.2
7752 16%
8000 7201 7457 0.15
9%
5695 11% 0.1
6000 8%
4748 4% 0.05
8%
3862 3764
4000 0
-2%
-0.05
2000
-11% -0.1

0 -0.15

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
Profit Before Tax & Growth (%)
CAGR-
1000
6% 934 906 0.35
904
900 30% 835 849 0.3
777 789
800 731 0.25
700 643 0.2
600
566 0.15
14%
500 436 14% 14% 0.1
8%
400 3% 0.05
300
-3% 2% 0
-6% 179
200 -0.05
100 -8% -0.1
-11%
0 -0.15

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
 Agri
OPERATING MARGINS
12% 13%
11% 11% 11% 11% 11%
10% 11%
8% 8%

5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

83% INCREMENTAL INVESTMENT AS A % OF TOTAL CFO

38%
27%
22%
18%
14% 11% 9% 8% 7% 6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 Revenue from operations

ITC Sales & Growth

60000 CAGR- 10% 18% 18% 0.2
18%
48353 49404 0.18
50000
42777 43449 0.16
13% 38835 39192 0.14
40000
29901 11% 0.12
26525 35317 9%
30000 0.1
22575
19136 10% 0.08
20000
0.06
0.04
10000
2% 0.02
0
1% 2% 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

10% 8%
13% 12% 13% 13% 11% 11% 13% 14% 14%

90% 92%
87% 88% 87% 87% 89% 89% 87% 86% 86%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Domestic Exports
 Profit Before Taxability
Gross Profit Margin
58% 58% 57% 59% 58% 66% 66%
56% 55% 55% 56%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CAGR- 12% ITC Profit Before Tax & Growth

20000 17615 0.25
18000 20% 17010
19% 21% 14396
16000 18% 13540 0.2
14000 12512 12690 18%
11555
12000 9833 0.15
10000 8139
8000 6791 0.1
5705
6000 8%
4000
6% 0.05
7% 4%
2000
0
1% 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Profit Before Tax Margins

35% 36%
33% 33% 32% 32% 32% 33%
30% 30% 31%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 Net profitability

PAT & PAT Growth

CAGR- 14%
18000 23% 24% 0.25
20% 15585
16000 22% 0.2
14000 18% 12824
12000 11223 0.15
9608 10201 14%
10000 8785 9313
8000
7418 9% 10% 0.1
6162 10%
6000 4988 0.05
4061
4000
0
2000
-3%
0 -0.05

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

PAT Margins
32%
25% 25% 25% 24% 24% 26% 27%
21% 22% 23%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 Consistently generating free cash flows
CFO FCF
14,690 12,276
13,169 12,583
9,843 9,799 10,627 10,371 9,442
7,344 7,459 7,556
6,256 6,710 6,552
5,509 4,495
4,457 4,019 3,847 4,620
3,216

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

FCF/PAT

92%
79% 81% 80% 74% 74% 79%
62% 62% 68%
51%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 Revenue contribution

Segment Wise Revenue

8%
14% 13% 13% 12% 12% 12% 12% 12% 12% 0%
15% 14%
3% 3% 3% 3% 3% 3% 3% 4%
4% 4% 4%

21% 18% 19% 18% 19% 20% 30%

19% 20% 20% 22% 21%

18% 18% 19% 22% 24% 24% 25% 25% 25%

21% 22%
27%

44% 44% 43% 42% 41% 42% 43% 42% 42% 41% 41%
35%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021

Cigarettes FMCG Agri Hotels Paper Boards, Paper and Packaging

 Cigarettes dominating

Segment Wise Profit Before Tax

6%
12% 12% 7%
11% 10% 7% 7% 7% 7% 7% 7% 7%
4% 1% 0% 0% 1% 1% 1% 1%
4% 3% 1% 7% 7% 6% 5% 4% 5%
7% 7% 7% 0% 5%
8% 8% 0% 1% 2% 2%
1% 0%

92%
83% 83% 84% 85% 86% 86% 86% 85% 85%
81% 81%

-4% -2% -1%

-6%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 -9% Q1 2021

Cigarettes FMCG Agri Hotels Paper Boards, Paper and Packaging

 Focusing towards the FMCG

Segment Wise Capital Employed

26% 25% 25% 24% 26% 26% 25%

30% 29% 29% 29%

18% 20% 20% 20%

22% 22% 24%
20% 21% 22% 20%

10% 9% 11% 9%
7% 11% 12% 12%
13% 12% 11%
15% 17% 19% 24%
22%
14% 15% 13%
25% 25% 27%

29% 28% 27%

24% 24% 24% 23% 23%
15% 15% 12%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cigarettes FMCG Agri Hotels Paper Boards, Paper and Packaging

 Segment wise ROCE

22% 22%
20% 22%
18% 19% 17% 17% 16% 17% 18%
10% 9% 4% 1% 3% 3% 3%
9% 4% 1% 2%
13% 13%
15% 15% 15% 16% 17% 17% 16% 14%
12%

3% 5% 6%
2010 2011 2012 2013 2014 2015 1% 2016 1% 2017 0% 2018 2019 2020
-16% -3% 1%
-20% -10%

FMCG Agri Hotels Paper Boards, Paper and Packaging

CIGARETTES ROCE 510%

400% 410%

224% 226%
188% 192% 168% 176% 192%
165%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
 Shareholding pattern

British American Tobacco Company

10.70%
Life Insurance Corporation (LIC)

General Insurance Corporation

29.48%
9.50%
New India Assurance Company

Oriental Insurance Company

Special Undertaking of Unit Trust of 8%

India
Mutual Funds

Public 1.10%
1.50% 16.30%
1.80%

KMP
Sanjeev Puri (Chairman & MD)
Nakul Anand (WTD)
Sumant Bhargavan (WTD)
Rajiv Tandon (CFO)
Management
Association with ITC Profile
Chairman & MD since May 2019. Puri is an alumnus of the Indian Institute
1986 of Technology, Kanpur, and Wharton School of Business.
WTD since Jan 2011. Anand has been acknowledged in the hotels and
1978 tourism industry for his vision and commitment.
WTD since Nov 2018. Responsible for overseeing the FMCG Businesses of
the Company. Set up the Snack Food category under the brand name
1986 ‘Bingo!’.
WTD since Jan 2016. He is currently a Member of the CII National
1987 Committee for CFOs and also of the Capital Markets Committee of FICCI.
 Buying ITC = Undervalued Stock + FD

ITC has changed its dividend payout policy very recently, company use to pay out 55%-60% of profits back in the form of
dividends which has now changed to 80%-85%

Particulars FD ITC Dividend

Investment 1,00,000 1,00,000
Rate/Dividend Yield 5.7% (SBI Bank 60-120 months) 5.5%
Exit Load Yes No
Capital Appreciation/Depreciation No Yes (Less downside Maybe)
12 92% 10.15 82%100%
10
10 69% 73% 8.5 80%
8 56% 55% 54% 6 56% 56% 56%
6.25 5.75 60%
6 5.25 4.75 5.15
4.45 4.5 52% 40%
4
2 20%

0 0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Dividend Per Share Dividend Payout Ratio

 Valuations of Individual Business
CIGARETTES VALUATION FMCG VALUATION
Company EBIT Market Cap Mcap /EBIT Company Sales (Rs Cr) Market Cap (Rs Cr) Mcap/Sales
VST Industries (Rs Crore) 392 5300 14 HUL 39,585 507,328 13
Godfrey Philip (Rs Crore) 453 4721 10 Nestle 12,677 157,402 12
BAT (Billion GBP) 11 61 5 Colgate 4,445 38,585 9
Philip Morris (Billion $) 11 126 11 Marico 7,074 47,349 7
ITC Cigarettes Value Britania 12,151 90,808 7
Average Multiple 10.22
ITC FMCG Value
Cigarettes EBIT 14,227
Average Multiple 9.6
Cigarettes Mcap (Approx.) 145,347
FMCG Sales 13,185
FMCG Mcap (Approx.) 126,786

*Worldwide tobacco stocks are known for steady and *All the brands are developed, the company has given a
high dividend pay-outs and high yields. For e.g. BAT target of 1,00,000 lakh crore FMCG revenue target by
offers 7-8% D/Y and trades at 2011 levels. 2030.

HOTELS VALUATION
Company EBIT EV EV/EBIT *Over the years company has been
ITC Hotels Value
Average Multiple 22.2 continuously capital into the hotels
Indian Hotels 737 15,941 21.6 which Is returning just 3-4%.
Hotel EBIT 152
Hotel Mcap (Approx.) 3375 However, going forward we can
EIH 222 5,057 22.8
expect less capex.
 Valuations
AGRI VALUATION PAPER VALUATION
ITC Agri EBIT (Rs Cr) EV (Rs Cr) EV/EBIT ITC Paper EBIT (Rs Cr) EV (Rs Cr) EV/EBIT
KRBL 743 6548 8.8 JK Paper 541 3300 6.1
LT Foods 410 3382 8.2
ITC Paper Value
ITC Agri Value Average Multiple 6.1
Average Multiple 8.5 Paper EBIT 1135
Agri EBIT 807 Paper Mcap (Approx.) 6924
Agri Mcap (Approx.) 6884

CIGARETTES FMCG HOTELS PAPER AGRI

1,45,347 1,26,786 3,375 6,924 6,884

ITC Current Market Cap (Approx.)-

2,10,000
ITC Market Cap (Approx.)- 2,89,316
 Valuations
Max 30
30 29 Avg 24
28
24 25 24 25 25 26
21
16
12

Min 12

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Current

P/E Avg (x) Min (x) Max (x)

297
280
256
235
217 219
206
172 184
151
121
88

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 C URRE N T
 Only a Diversified Conglomerate?

Tobacco

Potatoes

Spices

Wheat

Sourcing Production Packaging

 Why ITC is an interesting study?

 ITC stock is cheap on every valuation count and the gap is huge when compared to other FMCG players.
 Dividend yield of 5.5%, when the Risk free rates are 6%.
 The Net Profit has almost doubled in the last 6 years, making it more attractive.
 Given the addictive nature of Cigarettes, company is able to pass on the costs very easily.
 The target for 1,00,000 crores of FMCG Revenue by 2030.
 Highest Free Cash Flow Generation in the whole industry.

Company Revenue (TTM) PAT (TTM) Revenue CAGR (10 Yr) CFO FCFF ROCE P/E
HUL 39,585 6,866 8% 7,623 7,307 114% 71
Colgate 4,445 845 9% 889 950 67% 45
Nestle 12,677 2,080 9% 1,484 2,294 98% 76
Britania 12,151 1,697 12% 1,484 1,461 37% 54
Total 68,858 11,488 - 11,480 12,012 - -

ITC 48,862 14,715 10% 14,690 12,276 33% 15

 Concerns

 Consistent decrease in Legal Cigarettes Volume.

 FMCG Business margins not at par with other players.
 Hotels giving a drag in the ROCE.
 Higher taxation and strict regulatory regime for tobacco.
 ESG trend is making institutional investors vary of investing in ITC.
 What kind of business we like to own?

Debt Free
Cash Flow +ve
Free Cash Flow +ve
Growth
ROCE > COC
Dividend Paying
Leader
Reasonably Priced