Q4FY19— improved performance in cigarettes; FMCG and hotels sustain profitability enhancement

Net revenue grew 13% y-o-y to Rs 119.9 bn (2% ahead of our estimate led by higher-than-expected growth in cigarettes and hotels), Ebitda rose 10% y-o-y to `45.7 bn (1% below our estimate) and recurring PAT was up 19% y-o-y to Rs 34.8 bn (8% ahead of our estimate aided by sharp 43% y-o-y jump in other income). Ebitda margin contracted 100 bps y-o-y to 38.1% largely dragged by 70 bps GM contraction and 60 bps jump in staff cost.

Among segments, (i) core cigarette business delivered 11% revenue growth (led by 8% volume and 3% price/mix-led growth—as per our estimate, volume was a shade higher vs. our estimate of 6% growth) and 10% Ebit growth (dragged by 70 bps compression in Ebit margin), (ii) FMCG business posted modest performance in challenging environment with 7% revenue growth (10% adjusted basis, reported growth dragged by restructuring of the Lifestyle Retailing Business and pipeline calibration in education and stationery products business) and 43% Ebit growth on sustained improvement in profitability and (iii) all other businesses posted healthy revenue/Ebit growth (both 15%) led by beat in hotels and agri-business, while paperboards was marginally below estimates.