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Gearing up to garner strong revenue growth….

With renewed interest in cookware & kitchen appliances demand, TTK continued to report a solid operational performance in Q4FY21 with strong beat across all parameters. Revenue for the quarter grew 44.7% YoY (twoyear CAGR: 6.4%) to | 554.9 crore (I-direct estimate: | 518.2 crore), partly attributable to favourable base (revenue fell 21%). Domestic sales grew 41.5% YoY to | 533 crore whereas exports sharply increased 218% YoY to | 21.9 crore. On segmental front, cooker (31% of sales), cookware (16% of sales), appliances (48% of sales) categories posted strong revenue growth of 49%, 67%, 34% YoY, respectively.

Despite rise in RM prices, gross margins improved 210 bps YoY (410 bps QoQ) to 45.6%, largely due to price hikes and better channel mix (offline channels performed better than online). Owing to positive operating leverage (employee, other expenses as percentage of sales down 245 bps, 480 bps YoY, respectively) TTK reported one of its all-time high EBTDA margins of 18.5% (up 930 bps YoY, 110 bps QoQ). On the back of a healthy operational performance, exceptional gain of | 11.9 crore (reversal of provision for export obligation made in previous years), ensuing PAT came in at | 82.4 crore vs. | 20.9 crore in Q4FY20.

Capacity expansion, new products to propel revenue growth

Despite a challenging start to the financial year (Q1 revenue down 51% YoY), TTK staged an impressive recovery by exiting FY21 with revenue growth of 5% YoY. Supply chain issues faced in H1FY21 largely stabilised in H2FY21. E-commerce was the key segment to drive sales growth for the year (~20% of revenues) but momentum in other channels (MBOs, LFS, Prestige Xclusive) also picked up pace in Q4FY21.

Among categories, on the back of new launches, cookware segment outperformed (16% of revenues) with healthy sales growth of 16% YoY in FY21. The cookware division posted its highest ever volume during the year driven by domestic, export demand. To meet demand requirements, TTK has nearly doubled capacity for the cookware division and the new plant is expected to be commissioned in the next three months. Citing healthy demand prospects, the management highlighted that its appliance vendors to have doubled capacity.

Valuation & Outlook

TTK in FY21 has aggressively expanded its distribution network by adding new outlets (especially in non-metro cities). It 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 ~120 SKUs to be launched in FY22E that would propel growth, going forward.

Notwithstanding near term challenges, we expect TTK to bounce back rapidly as and when the impact of the pandemic is phased out. TTK, during FY21, has maintained its balance sheet strength with strong cash reserves (| 540+ crore), controlled working capital cycle days (~59 days) and healthy RoIC of ~30%. We expect TTK to sustain its revenue growth trajectory and build in revenue and earnings CAGR of 15%, 14%, respectively in FY21-23E. We reiterate our BUY rating on the stock with a target price of | 9760 (43x FY23E EPS, earlier TP: | 8030).

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