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Strong performance in difficult environment with best in class margins; upgrade to BUY

Result Synopsis

TTKPT delivered a solid all‐round performance in a challenging environment. Company has been able to largely maintain its gross margins and improve on its EBITDA margins despite strong commodity headwinds. Moreover, while buoyancy in overall demand trends for entry level products has come down, demand for innovative and premium products remains strong. TTKPT has been pioneer in launching innovative products in the market. Company expects margins to remain soft in 1HFY23 and improve from 2H as they feel commodity prices should stabilize going forward. We believe company will able to deliverlow to mid double‐digitrevenue growth on the back of price increase and change in product mix towards premium products. Company has lined up new innovative products for FY23 and is gaining market share in Appliances. Company is also targeting Rs50bn revenue by FY25 which will include Rs10bn of inorganic revenue. Considering the new launch pipeline, brand salience and market share gains, we upgrade the stock to BUY from Add as we feel current correction in stock price gives good opportunity to enter the stock.

After revising our EPS estimates upwards by 8‐12%, we now expect FY22‐24E growth trajectory of 12% revenue CAGR. With margins also expected to reach 17% by FY24, we estimate FY22‐24E EBITDAand PAT CAGR of 15%and 16% respectively.We upgrade the stock as company has been able to maintain its margin and improve its market share despite higher price increases than peers indicating strong brand salience and innovative product portfolio. We continue to value the company at 40x FY24 EPS and arrive at a revised PT of Rs1,138 and upgrade the stock to BUY.

Result Highlights

* Revenue – TTK Prestige delivered better than expected revenue growth with cookers/cookware/Appliances/others growing at 26.5%/5.9%/15.2%/8.3% respectively.

* Margins – Margin contracted lower than peers despite significant commodity headwinds. Gross margins contracted 501bps yoy, as the company has not taken pricing actions in Q4. EBITDA margin contracted 213bps to 16.3% on back of lower gross margins.

* Exports – Exports continued to be robust though impact of logistics issues continued during current quarter as well. Export sales for the quarter grew by 44% from Rs 170.8mn to Rs.245.1mn.

* UK subsidiary – Horwood achieved a sale of £4.9 million (PY £4.8 million) in Q4. The subsidiary introduced new products and strengthened its presence in the online channels during the year which helped it perform better than most of its peers. In FY22 the revenue growth of Horwood stands at 16%.

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