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Innovation leading to market share gains

Key takeaways from Q1FY22: (1) share of e-commerce increased to 32% of net sales, up from 20% in FY21, (2) company’s exports grew 68% (YoY) due to new customer additions and strong off-take from existing customers, and (3) south India market still remains impacted due to extended lockdowns. Steady investment in innovation, distribution expansion and higher focus on rural markets is likely to drive strong revenue growth over FY21-23.

Its subsidiary reported revenue growth of 122% with lockdown relaxations in UK. We model TTK Prestige to report an earnings CAGR of 16.5% over FY21-FY23E with: (1) strong volume growth, (2) price hikes and (3) market share gains from unorganized sector. Maintain ADD with a DCF-based target price of Rs9,751 (implied P/E 43x FY23E; Earlier TP-Rs9,200).

* Q1FY22 performance: TTK Prestige reported revenue, EBITDA and PAT growth of 77%, 634% and 1,329%, respectively, YoY. Segment-wise growth rates: Cookers 79.6%, Cookware 95.3% and Appliances 61.7%. Market share gains from smaller /unorganized players, strong growth in e-commerce and favorable base were chief reasons for higher revenue. Gross and EBITDA margins expanded 350bps and 830bps YoY, respectively due to better revenue mix and timely price hikes.

* Aggressive new products launches: Key long term growth drivers of the company are (1) rising exports, (2) distribution expansion and (3) steady launches of premium and differentiated products. The company launched 21 new SKUs in Q1FY22 and plans to launch ~80 products in Q2FY22, to drive premiumisation.

* Improved distribution and reach: The company added more than 7,000 new outlets in FY21 to improve the reach. It focussed on expanding company-owned outlets too. Prestige Xclusive chain increased to 630 stores in Q1FY22. E-commerce channel contributed 32% of revenues in Q1FY22, up from 24% in Q1FY21.

* Rural and south markets affected by covid-wave 2: Extended lockdowns and delayed recovery impacted the south India and rural markets. TTK’s Tamil Nadu factory was not operational for a month during the quarter. However, we expect strong volume off-take as the situation normalizes in coming quarters.

* Maintain ADD: We model TTK Prestige to report PAT CAGR of 16.5% over FY21- FY23E and RoE to be >16% over FY22-23. We remain positive on the company’s business model due to market leadership in key business segments and competitive advantages. We maintain ADD rating with a DCF-based target price of Rs9,751 (implied P/E 43x FY23E; Earlier TP-Rs9,200).

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