ICICI Direct's research report on VST Industries
VST Industries posted revenue growth of 9.4% but, net of excise, revenues saw 4.6% de-growth. Cigarette sales witnessed growth of 12% to Rs 347.4 crore with flattish YoY volumes. However, on a sequential basis, cigarettes volumes grew 15% during the quarter. Tobacco sales declined 45.3% to Rs 35 crore on account of adverse exports due to the non-availability of containers. The company has not taken a price increase in last nine months and does not intend to make any price changes in the next six months. High priced cigarettes (at a price point of Rs 6, Rs 7, Rs 11) contribute ~45% of total volumes. On an annual basis, the company witnessed 17% cigarettes volume decline in FY21. Though cigarette volumes recovered considerably in the last three months, we believe state wise lockdowns would impact volumes in Q1FY22E. Operating profit increased 3.8% given the overhead spends were down 13.7% during the quarter. PAT increased 3.1% to Rs 72.8 crore. The company declared a final dividend of Rs 114 / share.
Outlook
We maintain HOLD with a revised target price of Rs 3600 (earlier Rs 4200), valuing it at 15x FY23E P/E.
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