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ICICI Direct Report
VST Industries Ltd. reported resilient sales despite manufacturing, supply chain as well as retail selling points remaining closed for approximately 40 days.
Gross sales declined merely 4.4% but net of excise, sales were down 19.4%. Cigarette sales de-grew 4% to Rs 274.7 crore while tobacco sales fell 7% to Rs 40 crore. Cigarette volumes were down 39% (similar to ITC's decline of approximately 40%).
The company took a blended price hike of 11% after the excise increase in Budget in February 2020. The new price points for ‘Edition', ‘Total' are Rs 11, Rs 7, respectively.
More, importantly it curtailed trade promotions and schemes (18-20% of MRP) in Q1 as biggest focal point stayed improving supply by expanding manufacturing and distribution in second half of Q1.
July continues to remain disrupted with many localised lockdowns. VST Industries is gradually increasing promotions with competitive intensity rising in Q2.
Operating profit was down 13.2% to Rs 99.3 crore. Operating margins expanded 264 basis points to 40.4% with gross margin expansion of 612 basis points (due to withdrawal of promotions) and 343 basis points (percentage to sales) rise in employee spends.
Net profit saw flat growth at Rs 75.7 crore with reduction in corporate tax rate.
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