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Strong growth & margins

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 611 Prestige Xclusive.

* We revise upwards our Target to Rs.8,180 (earlier Rs.6,870) considering strong performance but revised to Accumulate (from Buy) due to recent sharp increase in stock price.

* Q3FY21 revenue grew by 23.6%YoY led by strong growth across all categories aided by festive demand along with revival in all channels.

* EBITDA grew by 48%YoY aided by strong improvement in EBITDA margin (290bps to 17%) due to operational leverage.

* TTK passes on rise in costs to consumers. Gross margin intact despite surge in raw material prices due to price hike taken (~9%).

* E-Com channel continued to perform well and the revenue mix increased to 16% from 14% in FY20. Modern format channels started functioning and MFI-routed sales revived, will support future growth.

* Demand outlook is positive given strong thrust of the government to revive the economy along with pick up in rural demand. We roll forward and value TTK at 42xFY23E.

Robust revenue growth across all categories

Q3FY21 consolidated revenue increased 23.6% YoY aided by festive demand along with revival in all channels. Strong growth was visible across all categories. Pressure Cooker segment grew by 29%YoY, Cookware by 34%YoY and Other Kitchen appliances by 19%YoY. Direct rural channel contributed double digit growth despite opened up towards end of the quarter. E-Com sales growth was significant and the revenue mix increased to 16% from 14% in FY20. MFI (Micro Finance) routed sales started to revive post lifting of moratorium in October and reached ~4% of the total sales. TTK has introduced 25 new SKUs including new category of casseroles during the quarter which will also support demand forwrad. Given strong government push to revive the economy in the Union Budget along with strong rural demand to support growth in volumes. We expect revenue CAGR of ~10% over FY21E-FY23E.

Strong margins led by operational leverage

EBITDA margin improved by 290bps YoY to 17% due to operational leverage. Despite surge in raw material prices, gross margin intact as the company took a hike in prices by ~9% in the quarter. TTK has strong pricing power which helps the company to pass on surge in costs to the consumer.

Export focus continues…

Exports continued strong performance with 49%YoY growth to Rs.17cr (+41%YoY in 9MFY21 to Rs.49.4cr). The company targets doubling it exports (2.2% of total revenue as of FY20) in the coming years. ~90% of exports is cookware, which is now at 105% capacity utilization. Additionally, TTK’s UK subsidiary, Horwood reported a healthy growth of 8% despite adverse impact of Covid-19 in the UK economy supported by significant online presence of the company.

Valuation & Outlook

Demand outlook is positive given strong GoI’s thrust for reviving the economy in the Union Budget along with strong rural demand. The stock currently trades at ~43x 1Yr Fwd P/E. We roll forward and value at 42x FY23 P/E to arrive at a revised Target of Rs.8,180 (Rs6,870 earlier). Rating revised to Accumulate (earlier Buy) due to recent sharp increase in stock price.

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