- 27 Apr 2022
- ICICIdirect Research
VST Industries witnesses muted growthVSTIND - 3154 Change: -24.30 (-0.76 %)
News: VST Industries witnessed a muted growth of 8.8% in consolidated sales to Rs 302.6 crore (Idirect estimate : Rs329.6 crore) on the back of ~3% dip in cigarette sales and 80% jump in tobacco sales. Cigarette volumes have declined by ~5% in Q4FY22. On a full year basis, cigarette volumes have jumped up by 6%. Operating profit witnessed a growth of 8.2% to Rs 106.3 crore (Idirect estimate : Rs118.2 crore). Net profit grew by 19.7% to Rs 87.2 crore (Idirect estimate : Rs86.3 crore) mainly on account of 3x increase in other income (due to reversal of old provisioning) and lower tax provisioning. The company declared a dividend of Rs140 / share (dividend pay-out of 67%).
Views: We believe that cigarette companies have been able to reach to pre-Covid volumes in last two quarters but VST has lost market share in FY22 mainly due to aggressive trade promotion strategy by competitor. VST is concentrating on high priced brands from last few years, which has resulted in improvement is operating margins. We believe stable taxation and concomitant volume growth in cigarette category would be the key growth drivers for the industry. However, losing market share is concerning factor for the company.