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Growth across all category & channels

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 620 Prestige Xclusives.

* We revise upwards our Target to Rs.9,750 (earlier Rs.8,180) and maintain Accumulate rating considering strong performance.

* Q4FY21 revenue growth was strong at 43%YoY led by growth across all categories, channels and geographies along with price hike (5%-19%).

* EBITDA margin was at all-time high of 18% (+910bpsYoY) mainly aided by price hike, better channel & product mix, operational leverage, and cost reduction. EBITDA grew by 191%YoY.

* Sharp surge in commodity prices impacts cost of production, but the company is able to pass on and gross margin improved 310bps YoY.

* TTK has almost doubled its capacity for cookware segment and has significantly expanded distribution in FY21 in high growth areas.

* Second wave of Covid-19 is likely to impact in the near-term, but longterm-demand outlook is positive given ongoing vaccination and strong thrust of GoI to revive the economy. We value TTK at 42xFY23E.

Significant distribution expansion will support future growth.

Q4FY21 consolidated revenue increased 43%YoY aided by revival across all categories & channels along with price hike (5%-19%). The core segments, Pressure Cooker and Cookware grew by 49% and 67%YoY respectively while Kitchen appliances grew by 34%YoY. E-Com sales growth continued to be strong and the revenue mix increased to 19% from 14% in FY20 (16% in Q3FY21). MFI (Micro Finance) routed sales were very small.

TTK has introduced 15 new SKUs during the quarter (127 in FY21) and has slated for launch of ~120 SKUs in FY22. The company has almost doubled its capacity in Cooker segment and the plant is expected to be commissioned in next 3 months. FY22 capex plan is ~Rs.70cr. In FY21, the company has significantly expanded its distribution network in high growth areas. All these initiatives will support market share gains and growth. We expect revenue CAGR of ~14% over FY21E-FY23E.

Record high margins led by price hike, better mix & cost reduction

EBITDA margin improved by 910bps YoY to 18% mainly aided by price hike, better channel & product mix, operational leverage and cost reduction. Despite sharp surge in raw material prices, gross margin improved by 310bps YoY as the company took a hike in prices by ~5%-19% in various categories. 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 218%YoY growth to ~Rs.22cr (+70%YoY in FY21 to Rs.71cr). The company targets doubling its exports in the coming years. Exports contribution has improved to 3.5% in FY21 from 2.2% in FY20. ~90% of exports is cookware and the company has almost doubled its capacity. Also, TTK’s UK subsidiary, Horwood reported a strong growth of 28%YoY (14%YoY in FY21).

Valuation & Outlook

Though Covid-19 second wave impacts the near-term demand, we believe the long term outlook is intact given GoI’s strong thrust to revive the economy. TTK has strong balance sheet and brand recall. The stock currently trades at ~43x 1Yr Fwd P/E. We value at 42x FY23E P/E to arrive at a revised Target of Rs.9,750 (Rs.81,80 earlier). Maintain Accumulate rating

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