Maintain ADD on TTK Prestige - On the path of recovery - HDFC Securities

Mr. Naveen Trivedi, Institutional Research Analyst, HDFC Securities

TTK delivered a miss in revenue and margin despite a robust 20% YoY growth in Aug/Sep. Weak performance in July (localised lockdown and supply constraints), resulted in revenue/EBITDA growth of 3/-1% YoY (HSIE 8/8%). West region was among the most impacted markets in July. The company has grown at a healthy pace (15% YoY) in October too and festive demand should be a driver in 3Q. Gross margin was adversely impacted by product mix (decline in cookers). However, cost control measures helped restrict the impact on EBITDA margin. With the recovery in cookers (Sep/Oct), we expect the margin to be healthy in 2HFY21 (price hike will also support). We increase our EPS estimates for FY21/FY22/FY23 by 3/2/1%. We value TTK Prestige at 35x P/E on Sep-22E EPS and maintain the target price of Rs 6,250. Maintain ADD.

Miss in revenue: Revenue grew by 3% YoY (+4% in 2QFY20 and -52% in 1QFY21). Domestic revenue was up 1% only. Cookers declined 9% YoY While Cookware/Appliances/Others grew by 8/7/41% YoY. Supply chain constraints impacted stock availability in the early part of the quarter. However, many products, including pressure cookers, are witnessing improvement towards the end of the quarter. Manufacturing operations were disrupted by labour challenges and stabilised towards the end of the quarter. TTK introduced 62 new SKUs during the quarter, including entry into a new category of casseroles.

Unfavourable mix impacted gross margins: GM contracted by 258bps YoY (-5bps in 2QFY20 and -194bps in 1QFY21) vs an expectation of 39bps YoY expansion. Weak cooker revenue impacted the margin while the focus on cost rationalisation led to Employee/Other expenses declining by 6/5% YoY. EBITDA margin contracted by 50bps YoY to 14.6% (+42bps in 2QFY20 and - 918bps in 1QFY21) vs an expectation of flat EBITDAM YoY. EBITDA declined by 1% YoY (HSIE +8%). PBT declined by 1% YoY while PAT declined by 23% YoY (lower tax rate in the base quarter).

Call takeaways: (1) Decline in July was on account of supply constraints; (2) growth in south markets is lower than non-south; (3) E-comm revenue mix stood at 25%; (4) the company took a 4.5-6% price increase in mixers and stoves in November; (5) MFI sales are expected to recover fully in 3QFY21.

Shares of TTK PRESTIGE LTD. was last trading in BSE at Rs.5747.85 as compared to the previous close of Rs. 5675.7. The total number of shares traded during the day was 371 in over 190 trades.

The stock hit an intraday high of Rs. 5775 and intraday low of 5680. The net turnover during the day was Rs. 2130738.

Source : Equity Bulls

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