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Result Synopsis

TTKPT registered disappointing performance with revenue declining 9%. Revenue decline can be attributed to1) shifting of Diwali festival to Q2 vs Q3 in the previous year, 2) lower demand on high inflationary environment, 3) decline in wallet share for the kitchen and 4) Lower pick?up in inventory by the dealers. Gross margins have seen sequential expansion; however, the expansion was lower than expected as company is still holding high costs 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 in FY24 as premiuminnovative products is not seeing demand slowdown and TTPKT has been pioneer in launching innovative products. Considering the track record of launching new innovative products and brand salience, 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 Rs7bn at the end of the quarter even after deploying enough working capital for cost effective supply chain as well as ongoing capex

We expect FY22?25E normalized growth trajectory of 9% revenue CAGR. With margins also expected to reach 15.3% by FY25, we estimate FY22?25E EBITDA and PAT CAGR of 7.5% each respectively. We remain upbeat on the stock as company has been able to protect its margin and market share despite challenging environment and company is confident of strong double?digit revenue 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 Rs987 maintain BUY.

Result Highlights

* Business Update – Shifting of festival from Q3 in the previous year to Q2 in the current year has resulted in subdued Q3 as expected. Wallet share in the kitchen has been taken away travel and tourism resulting in normalization of spends. Inflationary environment has also resulted lower spends towards kitchen appliances

* Margins – Company is not expecting much negative surprise in commodity prices and expect to improve gross margins in coming quarters. Company wants to achieve EBITDA margins in the range of 14.5%?16%.

* Inventory provisioning – The company has made provisioning of Rs30mn on account of inventory which company feels is not serviceable.

* Product mix – Product mix is shifting towards more electrical products. For e.g., induction cook?top is taking preference over gas stoves which is now reached the state of maturity. Also, there is strong demand for mixer grinders.

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