Buy TTK Prestige Ltd For Target Rs. 10,675 - ICICI Direct
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Capacity expansion to spur revenue growth…
About the stock:
TTK Prestige is India’s leading player in kitchen solutions and has successfully transformed itself from a company manufacturing pressure cookers to having an entire gamut of home and kitchen appliances.
* It continues to be market leader in the cooker segment and has material share in other appliance and cookware categories
* Over the years, the company has maintained its balance sheet strength with strong cash reserves and healthy RoIC of 30%+
Q1FY22 Results:
Key takeaway from the results were that despite increase in commodity prices, the company has maintained its gross margins.
* With most channels closed in Q1FY22 (except online channel), revenue for the quarter de-grew 36% QoQ (up 71% YoY) to | 356.9 crore
* Gross margin contraction was restricted to ~100 bps QoQ to 44.6% on account of price hikes and better product mix
* On account of negative operating leverage, EBITDA margins contracted by 750 bps QoQ (up 720 bps YoY) to 10.9%
* It continues to carry substantial free cash worth | 490 crore
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 | 10675 i.e. 44x FY23E EPS
Key triggers for future price performance:
* The company has nearly doubled the capacity for the cookware division while the new plant is expected to be commissioned in Q2FY22
* 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 ~80 SKUs to be launched in Q2FY22, which would propel growth, going forward
* Expect revenue recovery to pick up pace from Q2FY22 onwards and model revenue and earnings CAGR of 16%, 17%, respectively, in FY21-23E
Alternate Stock Idea:
Apart from TTK, in our retail coverage we also like Butterfly Gandhimati Appliances
* BGAL has shown consistent improvement on financial performance parameters with working capital days and return ratios getting significantly enhanced in FY21
* BUY with a target price of | 1000
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