Buy Stovekraft Ltd for the Target Rs 900 by Emkay Global Financial Services Ltd
Stovekraft (SKL) is witnessing a transition in kitchen appliance demand dynamics amid multiple tailwinds. The West Asia conflict disrupted India's LPG supply chain, potentially triggering a structural shift in consumer behavior toward induction cooktops (multiple players have indicated strong and sustained demand). The government is reinforcing this via several initiatives (NECP, Go Electric campaign, PLI incentives, EESL procurement tenders) which directly benefit established players like SKL. Beyond induction cooktops, the broader kitchen appliances category is emerging from a post-Covid 3Y demand slowdown, with discretionary spending starting to recover across channels (particularly GT). SKL is also witnessing a ramp-up in exports, (FY26 was hit by tariff and war-related disruptions), led by the commencement of IKEA supplies and new product additions for Walmart. SKL’s heavy capex cycle (FY22-26: Rs5bn) is now behind. With 95% of products manufactured in-house, it can achieve ~2x revenue (Rs25bn vs Rs15bn in FY26) in 2-3Y from existing capacity with limited incremental capex. Hence, we believe incremental revenue growth should translate more meaningfully into profits than in recent years, with improvement in return ratios (we build in >15% over FY27/28 vs 10% in past 2-3Y). Factoring in these positives, we build in FY26-28E revenue/EBITDA/EPS CAGR of 18/24/52%, with 10.5/11/5% FY27E/28E EBITDAM, and raise our TP by ~29% to Rs900 (Rs700 earlier) at 30x FY28E PER (10% discount to TTK Prestige’s current valuation) vs 11x FY28E EV/EBITDA earlier. Maintain BUY.
Multiple tailwinds converging; robust growth expected in induction cooktops
Stovekraft is witnessing a transition in kitchen appliance demand dynamics amid the convergence of multiple tailwinds. The West Asia conflict disrupted India's LPG supply chain, potentially triggering a structural shift in consumer behavior toward induction cooktops (a trend reflected in multiple kitchen appliance players reporting strong and sustained demand. SKL itself reported an 89% YoY jump in induction cooktop revenue. This demand is further supported by several government initiatives (NECP, Go Electric campaign, PLI, and EESL procurement) which benefit established players like SKL.
Growth revival in kitchen appliances; strong export ramp up ahead for SKL
Beyond induction cooktops, the broader kitchen appliances category is emerging from a post-Covid demand slowdown, with discretionary spending starting to recover across channels. SKL is also witnessing a ramp-up in exports (FY26 was hit by war-related issues) led by the commencement of supplies to IKEA (from Q1FY27-end, it targets Rs2- 2.5bnpa revenue upon full production ramp-up) and new business wins from Walmart.
Meaningful margin expansion/earnings growth ahead; valuations supportive
Despite near-term commodity pressure, we expect SKL’s margins to improve by ~100bps by FY28, aided by strategic pricing actions (a 10% price hike in Q1, another round expected in Q2, export price revisions) and stronger operating leverage. Notably, SKL’s heavy capex cycle (FY22-26: Rs1bn) is behind, with 95% of products being manufactured in-house. SKL can achieve ~2x revenue (Rs25bn) in 2-3Y (FY26: Rs15bn) from existing capacity with limited incremental capex (Rs40-50mnpa capex largely for maintenance). Hence, we believe incremental revenue growth should translate meaningfully into PAT than in recent years, driving return ratios to >15% vs 10% during the past 2-3Y. SKL’s valuations are supportive (1SD below LTA on PER basis).
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