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Price hike aids strong margins to maintain

TTK Prestige Ltd (TTK), the flagship company of TTK group, mainly operates in the Kitchen Appliances segment. The company has 5 manufacturing plants and a strong distribution network, including 670 Prestige Xclusives.

We revise our Target to Rs. 975 (from Rs.1,225) factoring moderate revenue growth, but upgrade to Buy due to recent correction in price.

Q3FY22 revenue grew by 5.5%YoY (-11QoQ) despite high base (24%YoY in Q3FY21) and shifting of Diwali festive sales to Q2FY22 aided by price hike and healthy demand from rura

Sharp surge in commodity prices impacts cost of production, but the company has taken necessary price hikes in recent quarters.

Gross margin improved by 90bps to 42.4% (40.1% QoQ) despite surge in input costs aided by price hike while EBITDA margin maintained at 16.9% Vs 17.0%YoY & 16.7%QoQ.

TTK targets Rs.50bn revenue by FY25 and has almost doubled its capacity for cookware segment and has significantly expanded distribution in high growth areas.

Demand outlook is positive given strong thrust of GoI to revive the economy and ongoing vaccination. We value TTK at 35xFY24E EPS

Revenue growth moderated due to high base.

Q3FY22 consolidated revenue grew by 5.5%YoY (-11%QoQ) despite high base (24%YoY in Q3FY21) and shifting of Diwali festive sales to Q2FY22 aided by price hike and healthy demand from rural. Revenue growth for H1FY22 was 20%YoY. All channels were active during the quarter. TTK has introduced 46 new SKUs during the quarter and has slated for the launch of ~63 new SKUs for Q4FY22 (127 in FY21). TTK targets Rs.50bn revenue by FY25 and has almost doubled its capacity in Cooker segment along with significant expansion in distribution network in high growth areas (added >2000 outlets in FY21 and looking to enhance further in Tier-II/III cities). FY22 capex plan is ~Rs.50-100cr. All these initiatives will support market share gains. We expect revenue CAGR of ~16% over FY21-FY24E

Gross margin improved led by price hike

Despite sharp surge in raw material prices, Gross margin improved by 90bps YoY to 42.4% (40.1%QoQ) mainly aided by price hike in recent quarters and improved product Mix. EBITDA margin maintained at 16.9% (Vs.17% YoY & 16.7%QoQ). The company took price hike of ~5-7% for Cooker and 7-10% for Appliances in Q3FY22. The input prices have been on uptrend since Q3FY21 and still on higher side. TTK has strong pricing power which helps the company to pass on surge in costs to the consumer. The company does not expect any price hike during Q4FY22.

Export focus continues…

Despite the current logistic issue, exports continued good performance at +44%%YoY to 24.5cr (Rs.68.9cr in 9MFY22 Vs. Rs.71cr in FY21). TTK targets doubling its exports in the coming years. Exports contribution has now improved to ~3.4% in 9MFY22 Vs. 2.2% in FY20. ~90% of exports are cookware, and TTK has almost doubled its capacity.

Valuation & Outlook

GoI’s strong thrust to revive the economy and ongoing vaccination will support demand. TTK has strong balance sheet and brand recall. The stock currently trades at ~37x 1Yr Fwd P/E. We value at 35x FY24E EPS (3Yr Avg=38) to arrive at a revised Target of Rs. 975 (Rs.1,225 earlier), but upgrade to Buy due to recent correction in stock price and strong margins.

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