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Company confident of delivering double digit revenue growth; maintain BUY

Result Synopsis

TTKPT reported flat revenue growth given the higher base of Q2 FY22 which was propelled by pent?up demand following removal of Covid related lockdowns. Exports was impacted due to global recession and inflationary pressure in developed market. Gross margins were lower on liquidation of high cost inventory.  The company is gradually bringing down high cost inventory carried from previous quarters which would lead to material margin improvement in ensuing quarters.  The company is confident to deliver strong double?digit revenue growth as premium innovative products is not seeing demand slowdown and TTPKT has been pioneer in launching innovative products. Considering the track record of launching new innovative products, brand salience and market share gains, we continue to maintain BUY as we feel TTKPT should command higher multiple as company is market leader in its core categories and has best?in? class margin profile and it also carries substantial free cashflow of Rs6.4bn at the end of the quarter even after deploying sufficient amount of working capital for cost effective supply chain as well as ongoing capex.

We expect FY22?24E growth trajectory of 13% revenue CAGR. With margins also expected to reach 16.5% by FY24, we estimate FY22?24E EBITDA and PAT CAGR of 14% each respectively. We remain upbeat on the stock as company has been able to maintain its margin and improve its market share despite challenging environment and company is confident of strong double? digitrevenue growth despite uncertainties in exports and UK subsidiary Horwood. We continue to value the company at 40x FY24 EPS and arrive at a revised PT of Rs1,096 maintain BUY.

Result Highlights

* Revenue – TTK Prestige lower than expected revenue growth with cookers/cookware/Appliances/others growing at 5%/?6%%/?1%/2% respectively.   

* Margins – Margin contracted on liquidation of high cost inventory carried from previous year. Gross margins contracted 11bps yoy, while EBITDA margin contracted 204bps to 14.8% on negative operating leverage.

* Exports – Exports have taken a hit as due to global recession and inflationary pressure. Export sales for the quarter declined by 27% from Rs 173mn to Rs.239mn. Company is confident of exports coming back in next few quarters.

* UK subsidiary – Horwood achieved a sale of £3.7 million (PY £5.0 million) in Q1. Decline in revenue is on back of steep inflation and ongoing geo?political crisis couple with UK’s own political issues.

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