ITC 2019-20 Annual Report Analysis

Tue, 31 Mar

ITC has announced its results for the year ended March 2020. Let us have a look at the detailed performance review of the company during FY19-20.

ITC Income Statement Analysis

• Operating income during the year rose 1.2% on a year-on-year (YoY) basis.
• The company's operating profit increased by 3.9% YoY during the fiscal. Operating profit margins witnessed a fall and down at 40.4% in FY20 as against 39.3% in FY19.
• Depreciation charges increased by 17.8% and finance costs increased by 14.0% YoY, respectively.
• Other income grew by 19.3% YoY.
• Net profit for the year grew by 21.5% YoY.
• Net profit margins during the year grew from 27.4% in FY19 to 32.9% in FY20.

ITC Income Statement 2019-20

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Net Sales	Rs m	468,433	474,146	1.2%
Other income	Rs m	21,807	26,006	19.3%
Total Revenues	Rs m	490,240	500,152	2.0%
Gross profit	Rs m	184,254	191,521	3.9%
Depreciation	Rs m	13,966	16,449	17.8%
Interest	Rs m	714	814	14.0%
Profit before tax	Rs m	191,381	200,264	4.6%
Tax	Rs m	63,139	44,418	-29.7%
Profit after tax	Rs m	128,242	155,846	21.5%
Gross profit margin	%	39.3	40.4
Effective tax rate	%	33.0	22.2
Net profit margin	%	27.4	32.9

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ITC Balance Sheet Analysis

• The company's current liabilities during FY20 down at Rs 96 billion as compared to Rs 100 billion in FY19, thereby witnessing an decrease of -4.5%.
• Long-term debt down at Rs 59 million as compared to Rs 82 million during FY19, a fall of 27.6%.
• Current assets rose 24% and stood at Rs 395 billion, while fixed assets fell 5% and stood at Rs 378 billion in FY20.
• Overall, the total assets and liabilities for FY20 stood at Rs 773 billion as against Rs 717 billion during FY19, thereby witnessing a growth of 8%.

ITC Balance Sheet as on March 2020

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Networth	Rs m	571,429	632,511	10.7
Current Liabilities	Rs m	100,120	95,598	-4.5
Long-term Debt	Rs m	82	59	-27.6
Total Liabilities	Rs m	717,390	773,108	7.8
Current assets	Rs m	317,473	395,054	24.4
Fixed Assets	Rs m	399,918	378,054	-5.5
Total Assets	Rs m	717,390	773,108	7.8

ITC Cash Flow Statement Analysis

• ITC's cash flow from operating activities (CFO) during FY20 stood at Rs 147 billion, an improvement of 16.7% on a YoY basis.
• Cash flow from investing activities (CFI) during FY20 stood at Rs -62 billion, an improvement of 11.3% on a YoY basis.
• Cash flow from financial activities (CFF) during FY20 stood at Rs -82 billion on a YoY basis.
• Overall, net cash flows for the company during FY20 stood at Rs 3 billion from the Rs 2 billion net cash flows seen during FY19.

ITC Cash Flow Statement 2019-20

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-19	Mar-20
Cash Flow from Operating Activities	Rs m	125,834	146,897	16.7%
Cash Flow from Investing Activities	Rs m	-55,457	-61,740	-
Cash Flow from Financing Activities	Rs m	-68,686	-81,815	-
Net Cash Flow	Rs m	1,691	3,342	97.6%

Current Valuations for ITC

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 12.7, an improvement from the EPS of Rs 10.5 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 172.0, stands at 14.0 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 3.4 times, while the price to sales ratio stands at 4.5 times.
• The company's price to cash flow (P/CF) ratio stood at 15.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Sales per share (Unadj.)	Rs	38.2	38.6
TTM Earnings per share	Rs	10.5	12.7
Diluted earnings per share	Rs	10.4	12.6
Price to Cash Flow	x	25.7	15.9
TTM P/E ratio	x	29.3	14.0
Price / Book Value ratio	x	6.2	4.3
Market Cap	Rs m	3,543,970	2,735,021
Dividends per share (Unadj.)	Rs	5.8	10.2

Ratio Analysis for ITC

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 4.1x during FY20, from 3.2x during FY19. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 247.1x during FY20, from 269.0x during FY19. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 24.6% during FY20, from 22.4% during FY20. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 31.8% during FY20, from 33.6% during FY19. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 20.3% during FY20, from 18.0% during FY19. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Current ratio	x	3.2	4.1
Debtors’ Days	Days	3	2
Interest coverage	x	269.0	247.1
Debt to equity ratio	x	0.0	0.0
Return on assets	%	18.0	20.3
Return on equity	%	22.4	24.6
Return on capital employed	%	33.6	31.8

To see how ITC has performed over the last 5 years, please visit here.

ITC Share Price Performance

Over the last one year, ITC share price has moved down from Rs 296.7 to Rs 172.0, registering a loss of Rs 124.7 or around 42.0%.

Overall, the S&P BSE SENSEX is down 24.2% over the year.

(To know more, check out historical annual results for ITC and quarterly results for ITC)

Read: Latest Annual Report Analysis of ITC