Maintain ADD on TTK Prestige - Beat continues; strengthening the core - HDFC Securities

Mr. Naveen Trivedi, Institutional Research Analyst, HDFC Securities

TTK Prestige's 4QFY21 beat ours as well as street's expectation. Revenue grew by 45% YoY (HSIE 31%), clocking 12% 2-year CAGR. It was broad-based growth as cookers / cookware / appliances posted 49/67/34% YoY growth. Kitchen and home appliances categories have recovered well in 2HFY21 and TTK has capitalised on the spur in demand. It gained 1-1.5% market share in cookers and cookware. However, the big surprise came at gross margin, which expanded by 200/400bps YoY/QoQ to 45.6% (40-quarter high) despite the steep raw material inflation. It was driven by favourable product mix and channel mix (traditional channel is margin accretive), price hike, and benefit of carry forward old inventory. Hence, EBITDA margin expanded by >900bps YoY to 18.5% (an all-time high). TTK has recovered well after a weak quarter 1HFY21, clocking 5/21% revenue/EBITDA growth in FY21. Even though we had non- consensus earnings and TP, we increase our EPS by 4% for FY23. As the company is a pure B-C play and its earnings visibility is improving, we increase the target multiple to 40x (38x earlier) on Jun-23E EPS. Our target price is INR 8,880. Maintain ADD.

Beat in revenue; broad-based recovery: Revenue grew by 45% YoY (-14% in 4QFY20 and +24% in 3QFY21), driven by healthy recovery across channels and markets. Cookers/cookware/appliances in FY21 clocked +1/14/4% YoY growth, despite 1HFY21 being massively impacted (both demand and supply impact). The e-commerce channel did exceptionally well in FY21 while the traditional channel picked up in 2HFY21. Consistent new launches (supporting premiumisation story), focus on expanding distribution (smaller towns, tier3/4 cities) reach, and high share from metros (post lockdown bounce back) will deliver healthy growth in FY22/23. TTK also plans to drive the business through PSKs (620 stores), which contribute 14-15% revenue. PSKs also help drive the premium products. Exports grew by >200% YoY.

Beat in margin; all-time high EBITDA margin: Gross margin expanded by 206bps YoY to 45.6% (+146bps in 4QFY20, -29bps in 3QFY21). Employee/Other expenses grew by 13/15% YoY. A&P spends remained healthy at 6% of sales for FY21. EBITDA margin expanded by 931bps YoY to an all-time high of 18.5% (-526bps in 4QFY20 and +219bps in 3QFY21), beating expectations of a +545bps YoY expansion. EBITDA grew by 192% YoY (HSIE 110%), clocking 26% 2-year CAGR. We model ~14.5% EBITDA margin for FY22-24 (15% in FY21, ~13% previous three-year average) but there is a potential to beat our numbers in a healthy demand trajectory.

Call and BS/CF takeaways: (1) TTK took two price increase for appliances(13-15%), cooker/cookware 5-7%; (2) commodity prices are still heading up but steep inflation is over; (3) company may require one more price hike if inflation sustains; (4) cookers and cookware gained 100-150bps market share; (5) A&P spends maintained at 6% of sales; (6) kitchen products seeing shorter replacement cycles; (7) FCF stands at INR 2.5bn vs. INR 1.9bn in FY20.

Shares of TTK PRESTIGE LTD. was last trading in BSE at Rs.8211 as compared to the previous close of Rs. 8442.9. The total number of shares traded during the day was 9873 in over 3743 trades.

The stock hit an intraday high of Rs. 8774 and intraday low of 8140.35. The net turnover during the day was Rs. 83445824.

Source : Equity Bulls

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