VST Industries Ltd Research ReportQ3FY21

Volume continues to remain sluggish VST Industries reported dismal set of numbers with ~13% decline in cigarette volumes given demand conditions still remained weak due to continue work from home culture. Moreover, the company faced stiff competitive pressure with peers increasing trade discounts & schemes. Gross revenues witnessed a growth of 3.3% led by 18% increase in cigarettes sales. The increase in sales was largely on account of price increase taken last year after the excise duty increase in budget & change in product mix. High priced cigarettes brands ‘Total’ (| 7/stick) & ‘Edition’ (|11/stick) contributes 45% to volumes. Tobacco sales was down to | 60 crore from | 100 crore in corresponding quarter due to sluggish demand of Indian tobacco in export market. The company paid | 93.5 crore excise duty as against | 24.7 crore in corresponding quarter. Gross margins were higher by 674 bps mainly due to increase in cigarettes prices & change in product mix towards the high priced cigarettes. Operating profit dipped by 7.8% to | 100 crore. Net profit witnessed de-growth of 9.5% to | 73.7 crore. Stability in taxation is key to growth Cigarette Industry faced stiff challenges of excise duty increase & pandemic induced lockdown in FY21. This resulted in significant declined in cigarettes volumes for the Industry. In similar lines, VST also witnessed 22% cigarette volume decline in 9MFY21.