Good News For Investors
ITC is a gold mine! The company has reported its earnings ratios have increased by a whopping 9.09% YoY in FY18. In the quarter ending Dec 2018, earnings have gone up by 8.71%. Operating margins have also increased by 4.84% YoY in FY18 and 8.08% QoQ in Dec 2018.
Perfect Stock For Wealth Creation
Good Asset quality plays a vital role in wealth creation in long term investments. ITC has hit the bull’s eye in this category as well. The company reported a net increase in its Net Asset Value by 14.92% approx on a YoY basis between (FY17-FY18). The improvement in asset quality was triggered by a 21.43% fall in debt in YOY FY18. Falling debt has also boosted the company’s Book Value by 12.99% YoY (FY17-FY18). This certainly places ITC amongst the most promising companies for long term investors.
Diversification Of Risk
ITC Ltd. has a widely diversified business model. A diversified business model provides a cushion for long term investors against market risks. Second, only to Hindustan Unilever, the company has ventured into FMCG, Cigarettes, Hotels, Infrastructure, IT, Agricultural industry, Paper etc. With a bouquet of successful business ventures under one umbrella, ITC has all the ingredients to create wealth for investors with a time horizon of 1 to 2 years.
Large Cap Advantage
With a market cap of 337939 Crores, ITC is a dominant force in the Nifty large-cap space. The company enjoys 5.51% weight in Nifty 50 and a whopping 42.11% weight in the FMCG segment. Thus ITC can be the next big story in the FMCG sector as well as the Benchmark Nifty Index if the RBI aims at driving GDP growth by lowering lending rates.
The top line revenue of the FMCG giant has increased by 1.57% on a YOY basis in FY18. ITC has also reported a top line growth of 1.40% on a QoQ basis in Dec 2018.
Staggering Growth Story
The company reported a jump in Profit after Tax figures by a staggering 9.68% on a YoY basis in FY18. In the quarter ending Dec 2018, PAT margins have grown 8.61%.
Low Liability Business Model
The company has posted a Y0Y rise in dividend by 8.42% (FY17-FY18). Moreover, it is important to note that the ITC has maintained a low Debt to Equity ratio over the last couple of years.
In the Union Budget 2019, the government rolled out a number of fiscal policies which will beneficial for ITC in the long run. Higher tax exemptions for the salaried class and income support schemes for people in rural India will add liquidity to the economy and attract more business into the FMCG segment. The Reserve Bank’s decision to shore up headline inflation numbers by reducing repo rates by 25 bps, will also boost the purchasing power of the common man. This is definitely good news for an FMCG and Agro-based company like ITC Ltd. The government did not hike excise duties in cigarettes in the recent budget. These are an early indication that ITC’s likely to become a promising goldmine for long-term investors with a timeline of 1 – 2 years.