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Well placed to capitalise on strong demand…

TTK Prestige reported strong topline growth of 24.4% YoY to | 679.4 crore. The management indicated that it lost ~| 20-30 crore on account of non availability of certain SKUs for which the management is shifting the sourcing from China to domestic vendors. Domestic kitchen and home appliance demand was strong as people were working from home most of the time and also due to accentuated preference for home cooked food. Growth was broad based with cooker (30% of sales), cookware (15% of sales) and appliances (51% of sales) categories registering strong revenue growth of 29%, 34% and 19% YoY, respectively. Gross margins largely remained flattish YoY at 41.5% (I-direct estimate: 42.0%) on the back of ~9% price hike on certain categories during the quarter. However, owing to positive operating leverage, TTK reported one of its all-time high EBTDA margins of 17.4% (up 220 bps YoY). Absolute EBITDA grew 42% YoY to | 118.2 crore (I-direct estimate: | 96.2 crore). On the back of healthy operational performance, ensuing PAT increased 42% YoY to | 86.5 crore (I-direct estimate: | 70 crore).

Festive demand, easing of supply chain issues aid growth…

Business momentum in kitchen appliances segment was robust on the back of strong festive demand and opening up of distribution channels that were restricted in the preceding quarters due to the pandemic. The management highlighted that all channels contributed to the growth and direct rural channel, which opened up towards the end of the quarter achieved double digit growth. Distribution through micro finance institutions, which was severely impacted owing to regulatory restrictions, has recovered to ~70% of pre-Covid levels. The management highlighted that the revenue growth outlook looks strong with 20%+ growth clocked by the company in January 2021. Revenues from e-commerce channel grew at a fast rate with overall share at 16%. Exports (~3% of sales) is witnessing robust traction with revenues increasing ~50% in Q3FY21. To meet the demand requirements, TTKP is enhancing its capacity and has outlaid capex worth | 50 crore in FY21E. The same is progressing as per schedule.

Valuation & Outlook

With supply side issues mostly resolved and opening up of all distribution channels, we expect revenue growth trajectory momentum to sustain. Increased work from home trend and accentuated preference for home cooked food would act as a catalyst to spur revenue growth. Factoring in the strong performance in Q3FY21, we increase our earnings estimates for FY22E, FY23E by 8% and 7%, respectively, and build in revenue and earnings CAGR of 9% and 17%, respectively, in FY20-23E, with higher RoIC of ~31% in FY23E. TTKP continues to be virtually debt free and has substantial free cash worth ~| 525 crore. We reiterate our BUY rating on the stock with a target price of | 8030 (38x FY23E EPS, previous TP: | 7100).

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