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Innovation leading to market share gains

We remain structurally positive on TTK Prestige as (1) the company continues to invest aggressively in innovation and plans to launch 120 products in FY22. Steady investments in innovation, branding and distribution expansion is resulting in market share gains, (2) there is steady reduction in replacement cycle of TTK’s products. It results in structural growth prospects for the company and (3) the improvement in revenue mix is margin accretive. We model TTK Prestige to report an earnings CAGR of 16.5% over FY21-FY23E with: (1) strong volume growth, (2) price hikes in mid-teens and (3) market share gains across segments. Maintain ADD with a DCF-based target price of Rs9,000 (implied P/E 40x FY23E; Earlier TP-Rs7,820).

Q4FY21 performance:

TTK Prestige reported revenue, EBITDA and PAT growth of 43%, 190% and 270%, respectively, YoY. Segment-wise growth rates: Cookers 49%, Cookware 66.7% and Appliances 33.7%. Market share gains from smaller /unorganized players, strong growth in rural markets and favorable base were key drivers of growth. Gross and EBITDA margins expanded 310bps and 910bps, respectively due to better revenue mix and cost saving initiatives.

Steep price hikes to pass on additional costs:

Prices of key raw materials are up 20-40% YoY and in order to pass on additional costs, the company has raised prices by 10-18%. We also expect better revenue mix and cost saving initiatives to help the company to maintain margins in FY22-23.

All sales channels doing well:

While E-commerce was doing well during FY21, the offline channel also reported healthy recovery in H2FY21. The E-commerce accounted for 19% revenues of TTK Prestige in FY21. The rural sales are also rising rapidly due to higher investments in rural markets.

Reduction in replacement cycle to drive long term growth:

Key long term growth drivers of the company are (1) improving affordability of cookware and appliances, (2) premiumization of its portfolio and (3) reduction in replacement cycle of the products. Current replacement cycle across products is as follows: Pressure cookers- 5 years, Cookware- 2 years, Induction cooktop-3 years and Mixers – 4 years.

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 Rs9,000 (implied P/E 40x FY23E; Earlier TP-Rs7,820).

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