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Strong cooker sales and cost control drives beat

TTK Prestige’s (TTK) 4QFY22 sales grew 17% YoY (+13% 3-year CAGR) to INR 6.5bn (5%/ 3% above JMFe/consensus). This was led by 26% growth in Cookers (healthy double-digit volume growth) while Appliances/ Cookware grew 15%/ 6% respectively. Although gross margin contracted by 500bps YoY, EBITDA margin shrank by only 210bps aided by 100bps/ 180bps reduction in employee cost/ other expenses. Adj. PAT grew 8% YoY to INR 792mn (20%/ 15% above JMFe/consensus). Although entry level categories are reeling under inflation-induced pressure, the management remains optimistic over the demand environment led by buoyant middle and upper category demand. While there could be pressure on margin in 1HFY23, TTK expects to reap the benefits of price hikes and likely softening of input prices in 2HFY23 and, hence, believes margins could sustain at current levels. We broadly maintain our FY23-24 estimates with a Mar’23TP of INR 980. We maintain HOLD as we await a better entry point. Key Risks: Commodity price inflation impact on margins and demand.

4QFY22 results summary: TTK’s 4QFY22 revenue grew 17% YoY (3-year CAGR: +13%) to INR 6.5bn as Pressure Cooker, Cookware and Appliances grew 26% YoY (+17% 3- year CAGR), 6% (+13% 3-year CAGR) and 15% (11% 3-year CAGR) respectively. Growth was broad-based across channels. However, gross margin contracted by 500bps YoY (-180bps QoQ) on account of RM inflation despite 300bps higher mix from the Cooker segment (highest margin category). Employee costs grew 2% YoY/ -3% QoQ while other expenses grew 5% YoY. EBITDA margin declined 210bps YoY/ -110bps QoQ to 16.3%. EBITDA grew 3% YoY to INR 1.1bn (12% above JMFe and 9% above consensus; 3-year CAGR: +18%). Adj. PAT grew 8% to INR 792mn, 20% above JMFe/15% above consensus

Demand remains healthy; optimistic of protecting margins: TTK’s 4Q revenue growth was led by 26% growth in the Cooker segment, where it has hiked prices by 5-7% in FY22, thereby implying healthy double-digit volume growth. The management indicated that most of the gains have accrued from the domestic market and does not expect this to be a sustainable growth rate given the high penetration (90%) of the category in urban markets. Moreover, the entry level category remains under some stress due to the inflationary environment while demand for the middle to upper range continues to be buoyant. Having not undertaken any price hike in 4QFY22, TTK rolled out another round of price hikes towards end of Mar’22/ beginning of Apr’22. Although the management expects 1HFY23 to be under some pressure, it expects the benefits of price hikes and likely softening of RM prices to accrue in 2HFY23 and remains optimistic of at least maintaining current margins

Maintain estimates; HOLD: We broadly maintain our FY23-FY24E EPS estimates with a Mar’23TP of INR 980, basis 38x FY24EPS. We maintain HOLD and await a better entry point. Key Risks: Commodity price inflation impact on margins and demand

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