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Margin improvement to continue; upgrade to BUY

Result Synopsis

TTKPT revenue declined 2.9% yoy (6.1% lower than estimates). Sluggish demand post the festive season and lower exports owing to high freight rates and unavailability of containers. On the channel from the new age channels like E-commerce and prestige exclusives performed relatively well during the quarter, while GT and modern trade. Rural Channel driven by MFIs is continuing to face challenges as food inflations continues to remain high. TTKPT has lost revenue worth Rs320mn on account of challenges in MFI channel. The company has able to improve its gross margins, while EBITDA margins were impacted on payment of Rs44mn worth consultancy fees in Q3. Margins are expected to improve going forward as consultancy fees have been paid for and it not likely to occur in future. TTKPT has chalked out the growth strategy where it will be aggressively focus on launching new innovative products which has been lacking by the company. The company is significantly looking to expand its Judge brand to mass market to focus on the volume at lower price point. On the market share front the company has gained market share in cooker and cookware segment and now with more thrust on Judge brand company can continue to gain share further. We now assign 40x multiple vs earlier 45x multiple as growth challenges are expected to persist for few more quarters. We however upgrade the stock to BUY with PT of Rs912 as stock has corrected sharply and expect company to start once again delivering industry leading margins going forward.

We continue to expect FY24-27E growth trajectory of 7.3% revenue CAGR, while margins are expected to improve from FY6 onwards, as onetime consultancy expenses will be behind. We now estimate FY24-27E EBITDA and PAT CAGR of 11.2% and 9.8% respectively. We however remain positive on the stock as company has performed relatively better than peers in the challenging environment and it will be the first one to bounce back once the demand trends improve. We now value the company at 40x on FY27 EPS resulting in PT of Rs912 and assign BUY rating.

Result Highlights

* Topline – Revenue came in lower than estimates as demand has been muted post the festive season and exports have been lower on account of unavailability of containers.

* Margins – EBITDA margin at 10.9% contracted by 150bps on yoy basis, payment of consultancy charges has resulted in lower margins. Gross margins have improved on back of price hikes.

* Exports – Exports have continued to remain sluggish due to container unavailability. However, outlook for exports remains positive.

* New product launches – The company is aggressively focusing new innovative product launches, which company had been lacking in past few quarters. The company has slated for launch around 69 new SKUs during Q4 of FY25

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