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Result Synopsis

TTKPT delivered muted revenue growth despite favorable base. Lower rural demand has resulted in muted revenue growth. General trade has done well during the quarter, they continued to feel the pressure from the e-commerce and modern format stores which did well during this quarter ahead of the festive season. Rural Channel driven by MFI has not performed well as they had their own issues to deal with. Gross margin has contracted 238bps on sequential basis on higher commodity prices. Company believes commodity prices are expected to remain at elevated levels impacting margin going forward. EBITDA was impacted by payment of Rs79mn to the consultant to chalk out blueprint for long term strategy and plan. Phase 1 study has been completed by the consultant and report is currently being evaluated by the company. Additional expenses and investments are expected to continue for few more quarters keeping margin under the check. Management believes 2HFY25 will result be better for the company as well as for the industry with rural expected to remain largely subdued. Given the challenges company is facing in terms of demand and elevated commodity prices impacting growth and margin in the near term. We now value the company at 42x vs 45x considering lower growth and margins and reiterate our Neutral stance with revised PT of Rs946.

We continue to expect FY24-27E growth trajectory of 8.5% revenue CAGR, while we moderate our margin expectation as there will be expenses towards, the consultancy fees and new launches. We now estimate FY24-27E EBITDA and PAT CAGR of 11.5% and 9.3% respectively. We however remain mildly 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 42x on FY27 EPS resulting in PT of Rs946 and assign Neutral rating.

Result Highlights

* Topline – Revenue was marginally lower than estimates with revenue growing by 4.6%. Muted topline was on account of lower rural demand and subdued performance of alternate channels like MFI and institutional channel.

* Margins – Company EBITDA margin at 10.7% contracted by 144bps on yoy basis, this is lower than the company’s historical margins. Lower EBITDA margins are on account of payment of consultancy fees amounting to Rs79mn.

* Exports – Exports sales have declined for the quarter; however, exports orders remain robust. Unavailability of containers have resulted in lower exports. Exports shipments have been deferred to H2 of FY25

* New product launches – The company is aggressively focusing new innovative product launches, which company had been lacking in past few quarters. The company has introduced 72 new SKU’s in Q2 which has been well received.

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