Results Q1 2021-22
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Management Commentary & Corp Presentation. It has updates about all business segments. See a decent growth in ITC Infotech as well.
Disc : Invested
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News Feed
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Two good and two bad things caught my eye in the presentation.
ITC Sunrise has been mentioned a lot. But, I am more interested in numbers.
ITC Infotech has a dedicated and encouraging slide for itself in the presentation. ITC must’ve realized that IT can augment revenues faster than FMCG. If ITC manages to scale infotech fast, we can have another strong growth driver. Acquisitions are key in IT.
Criticals
ITC e-store is only active in 11 cities. Also, not every product is available. Missed opportunity during lockdown? Few products like shower to shower were not available nationally in the summers.
They have clearly stepped aside of mentioning qoq performance. Not a good thing to do. Optimists are cheering the yoy results, critics are panning against analyst polls.
Questions.
- How can we guage the performance of seperate brands like Fabelle, sunbeam and b’natural? These have been given a lot of social media push.
Edit: engage seems to have lost its position amongst top3 as it’s not mentioned in the presentation.
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Two Good things that I observed …
First ITC infotech has risen in scale and profits … See how it compares with Coforge and Happiest Minds
FMCG others is now 10% of HUL in terms of Operating profits and growing 2X speed … It is now not about individual brands which may be up and down in a quarter , but how they perform as a portfolio matters
Of course Paper Division and Agri continues to good well and Cig has recovered ( esp off from COVID related decline fears )
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Interesting comparison…thinking how is PAT of ITC Infotech almost similar to coforge at around half the revenues…do they have industry leading margins or is it some one off this Q? And if they really do have double margins
…would be interesting to know how?
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Applaud for your remarks. Good ones.
Few points to help:
- Q-o-Q sales point: If I looked at 2019 and 2020, there is same pattern that March to June sales decline so feels like seasonal element over there.
- Feedback on your question about Fabelle, Sunbeam, and B’natural brand recognition: Doing some customer review analysis of it on Amazon or Google helps to see customer traction and feedbacks. I did it and it looks +ve.
Cheers. 
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It would be helpful if you could please tell how you analysed and what are the positives you found out?
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This is a very interesting articles and some very good contribution of thoughts recently by @kb_snn
I may be a minority here, but more I read of these and think deeper, the more I appreciate now every action and recent decisions of ITC management. Why they do not want to demerge, why they do not want BAT shareholding to increase, why they are not interested in short term shareholder value creation by value unlocking of FMCG/Agri etc. is super clear to me and I now completely appreciate them!
The long term existence of ITC as a company depends solely on it being together and in one piece for as long as possible.
Articles such as above clearly mention that in most developed economies cigarette smoking would be gone in merely a decade or two. In Japan, in just 4 years after introducing e-cigarettes, the traditional cigarette volumes fell whopping 5 times! I have no doubt now that just like fossil fuel automobiles, cigarette smoking will be extinct in few decades. It will be for a better world no doubt…and sooner than later would have full thrust from our governments as well just like the case of electric vehicles…
Existence of ITC beyond that would be by two means - 1. What other global giants are doing - extensive R&D on e cigarettes and better way of consuming tobacco like heating instead of burning
2. FMCG/Agri/Technology businesses and other such babies developed by ITC over time
For Point 1 - ITC is clearly lagging behind because e cigarettes market does not exist in India. I am not sure why and I have not researched it. Would be good to have others insights here. But whenever India opens up for e cigarettes or other alternatives, ITC will be much behind the race as compared to global firms. (Philip Morris spent 8 billion $ already on extensive research here and has developed products). ITC maybe protected by some rules initially but this is a big question mark to me as to what the situation would be for ITC whenever India opens up.
A big question mark is why India has not already opened up to e cigarettes’ the way it has opened up to electric vehicles?
For Point 2, the success lies in developing the new babies and for that ITC need to remain as a single entity till as long as possible and all shareholders who truly want to be long term associated with ITC must support that rather than looking for short/medium term value creation…
Disc: This is not a buy/sell recommendation. Above thoughts are purely personal and for academic purposes only. I maybe completely wrong in my assessments. Invested & maybe biased.
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We actually banned e cigarette in very recent years.
Refer below link it will give profit, EBIT and margins trend for last 10 years
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This article is part of new propaganda by international tobacco companies .
To say problem of tobacco is not nicotine but combustion would mean all forms chewing tobacco and snuff etc are better than cigarettes - which is a big lie …
Read this article
That is reason why Indian Govt has banned e- cigarette as it has increased addiction among young people in US , Japan and EU .
Now on @Investor_No_1 points … ITC has already developed e Cig product and used to sell the same in Indian market before the ban … Plus BAT has large portfolio of successful vaping products and other smoke less tobacco product which can be launched in India if GOVT removes the ban … But I sincerely hope Govt doesn’t remove the ban
Will chewing tobacco , snuff and cigarettes etc not be selling 10 years down the line … I don’t think so … When western world can legalise cannabis and other hard drugs , tobacco is lesser evil …
It all depends upon lobbies and how strong they are … That is is reason BAT being stronger in India is dangerous … It can influence Govt in wrong way leading to loss of health among young people …
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India has a large number of tobacco farmers and workers working in those farms, whose interest needs to be protected. Decision to ban vaping was more driven by this fact and it is unlikely to be reversed. This decision is no-brainer from policy makers perspective.
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ITC Infotech seems like a good candidate for spin-off to begin with. It is has very less synergies with the other companies and management cannot give justification about it not fetching good valuations currently since IT has been a beneficiary in pandemic. An independent company can be scrutinsed and its management will be better accountable for its performance.
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Agree on the synergy part and also one more fact that ITC infotech does not need growth capital to transform from a baby to the men’s league anymore…however, if the spin off happens and BAT decides to sell its stake - a new owner can come in, which any existing management would not be comfortable with and may or may not be good for business as well…the new owners can be anyone, they may even delist the spin off company and the retail investors can also lose on wealth generation if the company itself is delisted…
Point I wanted to make is there would be solid reasons behind ITC management not wanting to spin off any business and the more I think of it, the more I feel that these reasons are here to stay for very very long and would always remain…so I am not sure what even long term future would hold over expectations of demergers etc.
Disc: Above all are hypothetical cases and for academic purpose only. I can be completely wrong in my assessments
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Noteworthy news or marketing article?
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The company plans to take the count of Welcome Hotels from 12 (as of FY21-end) to 20 at the end of FY22. Anand said the company has singed 6-7 new properties already and five more are under negotiation. ITC aims to then take this number to 34-35 Welcome Hotels over a three to four year period. In terms of its new boutique hotel brand 'The Storii’, the company plans to add 4-5 new properties every year, starting next year.