TTK Healthcare - Result Review - Angel Broking

TTKH reported a disappointing set of numbers for 1QFY2014. Topline came flat at Rs.109cr as compare to Rs.108cr in 1QFY2013. The EBITDA margin for the quarter contracted by 370bp yoy to 2.9% primarily due to increase in employee cost and other expenses by 22.2% and 26.7% respectively as compared to 1QFY2013. The margin contraction was attributable to loss of Rs.2cr in the consumer products division. Consequently, net profit declined by 58.2% to Rs.2cr in 1QFY2014.

Contraction in consumer product division is due to restructuring of condom business. However, we believe this restructuring process will reap benefits from next year. We also expect the EBITDA margin to expand on account of increasing contribution from high margin business like food business, thus resulting in better profit. At the current market price, the stock is trading at EV/sales of 0.9x for FY2015E. Hence, we recommend an Accumulate recommendation on the stock with a target price of Rs.632.

Source : Equity Bulls

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