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Weak revenues; strong margins Rs942

Takeaways from Q3FY22: (1) modest revenue growth of 5.5% YoY, albeit protecting gross margins (up 86bps YoY), (2) company’s exports grew 43.5% YoY to Rs245mn, (3) timely price hikes helped the company to improve gross margins amidst steep inflationary pressures and (4) e-commerce growth was hindered with the re-opening of offline channels. Steady launch of new innovative products (46 new SKUs in Q3FY22) and distribution expansion are driving volume growth for the company. Its subsidiary revenues were flat YoY. TTK invested in Ultrafresh modular solutions ltd to engage in Modular kitchen business through franchise outlets across India. We model TTK Prestige to report revenue and earnings CAGR of 15.9% and 17.6% over FY21-FY24E with: (1) strong volume growth, (2) price hikes and (3) market share gains from unorganized sector. Maintain ADD with a revised DCF-based target price of Rs1,050 (implied P/E 39x FY24E EPS).

* Q3FY22 performance: TTK reported revenue, EBITDA and PAT growth of 5.5%, 5.1% and 0.8%, respectively, YoY. Segment-wise growth rates YoY: Cookers 10.4%, Cookware 9% and appliances 1.7%. Gross margins expanded 86bps YoY; however, due to higher staff cost and other expenses, EBITDA margins shrank 6bps YoY.

* Steady launch of new products to drive growth: TTK launched 46 new SKUs in Q3FY22 to drive premiumisation. The company further plans to launch 63 new SKUs in Q4FY22. We believe the launch of premium products and higher exports are longterm growth drivers of the company. We model premiumization of portfolio to continue to drive revenue growth as well as EBITDA margins ahead.

* Distribution expansion: Prestige Xclusive chain increased to 670 stores (from 643 stores) in 380 towns in Q3FY22. Re-opening of offline channels took toll on growth of E-commerce sales during the quarter. Aided by good monsoon, rural markets remained robust in Q3.

* Update on Horwood Homewares: TTK’s UK subsdiary HHL reported £4.6mn of sales in Q3FY22 (against £4.7mn in Q3FY21). 9MFY22 EBITDA was up at £1.5mn, from £1.1mn in 9MFY21.

* Maintain ADD: We model TTK Prestige to report PAT CAGR of 17.6% over FY21- FY24E and RoE to be >17% over FY22-24. We remain positive on the company’s business model due to its market leadership in key business segments and competitive advantages. We maintain ADD rating with a revised DCF-based target price of Rs1,050 (implied P/E 39x FY24E).

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