Maintain ‘hold’ on TTK Prestige with TP of Rs 7,957

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Published: January 26, 2018 1:40:41 AM

TTK Prestige (TTK) reported 15% y-o-y like-for-like (LfL) growth in domestic revenue on a weak base of Q3FY17 (2% de-growth in net revenue). Top-line growth was largely driven by volume growth across product categories, except cookware.

TTK Prestige, domestic revenue, Top line growth,  cookwareTTK Prestige (TTK) reported 15% y-o-y like-for-like (LfL) growth in domestic revenue on a weak base of Q3FY17 (2% de-growth in net revenue). Top-line growth was largely driven by volume growth across product categories, except cookware.

TTK Prestige (TTK) reported 15% y-o-y like-for-like (LfL) growth in domestic revenue on a weak base of Q3FY17 (2% de-growth in net revenue). Top-line growth was largely driven by volume growth across product categories, except cookware. TTK’s export business and UK subsidiary Horwood remains under pressure. EBITDA grew 37% y-o-y to R66.5 crore with margin improving 320bps to 14.5%. Higher capacity utilisation (currently ~85%), favourable product mix (value added products) resulted in 350bps improvement in gross margin, mitigating the impact of higher personnel cost. We adjust our numbers to model the impact of excise duty, resulting in marginal upward earnings revision of 1.0%/0.2% for FY18/FY19. We downgrade TTK to Hold from ‘Add’ with a revised DCF-based FY19 target price of Rs 7,957.

Total revenue grew 14% y-o-y on LfL basis to Rs 46,000 crore in Q3FY18 (7% growth on reported basis) on the back of healthy volume growth (12%-25%) across product categories, except cookware. Cooker and appliances segments witnessed LfL growth of 18% (9% reported) and 20% (14% reported) y-o-y. Gas stoves, mixer grinders and small appliances witnessed strong growth within appliances segment. Cookware segment being more festival oriented grew a mere 2% (4% de-growth reported) due to early festive season. TTK maintained 15% GST adjusted growth outlook for FY18. Management indicated price hike in Q4FY18 if raw material prices continue to rise. Management highlighted non-traditional channels like (Prestige Smart Kitchen) PSKs, online and large format stores were more buoyant vis-a-vis traditional trade channels as the latter remains impacted by GST-related challenges. Management said recovery in south markets was seen during Q3FY18 while non-south markets continued on growth trajectory. TTK said it will invest in capacity addition (brownfield projects) in FY18-19 as current utilisation has reached ~85%. TTK increased its PSK count from 529 in Q3FY17 to 541 in Q3FY18, driving strong growth from the channel.

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