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Gearing up to maintain sustained growth momentum

About the stock: TTK Prestige is India’s leading player in kitchen solutions and has succeeded in transforming itself from a company manufacturing pressure cookers to having an entire gamut of home and kitchen appliances.

* It continues to be a market leader in the cooker segment and has material share in other appliance and cookware categories

* The company, over the years, has maintained its balance sheet strength with strong cash reserves (~| 500+ crore) and healthy RoIC of 30%+

Q2FY22 Results: Reported superior operational performance with strong beat on revenue front. Demand for domestic kitchen, home appliance was robust in Q2 driven by stocking requirement by trade channels ahead of Q3 festive season.

* Revenue grew 37% YoY (two-year CAGR: 19%) to | 808.6 crore (I-direct estimate: | 682 crore) driven by strong growth across all categories

* To mitigate cost inflation, TTKP has taken price hikes for select categories in Q2FY22. Gross margins stayed constant YoY (down 470 bps QoQ) to 40%

* On account of positive operating leverage, EBITDA margins improved 220 bps YoY to 16.8% (I-direct estimate: 16.8%)

* Board has approved split of equity shares from face value | 10 to | 1 each

What should investors do? TTK has been a consistent compounder with stock price appreciating at 16% CAGR in the last five years

* We continue to remain positive and maintain our BUY rating on the stock

Target Price and Valuation: We value TTK at | 13000 i.e. 46x FY24E EPS

Key triggers for future price performance:

* In order to cater to strong domestic and export demand, TTK has added annual capacity of 4 mn pieces non-stick cookware in the Gujarat factory

* TTK is further looking to enhance its distribution reach in tier-II/III cites to capture long term growth opportunities

* The company has a healthy pipeline of ~53 SKUs to be launched in Q3FY22, which would propel growth, going forward

* Maintained its guidance of achieving | 5000 crore by FY25 through organic and inorganic route. We roll our estimates to FY24 and model in revenue and earnings CAGR of 16%, 18%, respectively, in FY21-24E

Alternate Stock Idea: Apart from TTK, in our retail coverage we also like Bata India

* Bata has a strong b/s, diversified branded product portfolio and pan India network, which would enable sustained long term profitable growth

* BUY with target price of | 2380

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