Buy This Outperformer Mid Cap Stock For Strong 13% Gains, PAT Stood At Rs 806mn: Chola Wealth Direct

TTK Prestige - Stock Overview

TTK Prestige was opened at Rs 857 on Friday. It slid 2.06% on Friday from the previous close of Rs 854.45, closing at Rs 837.45, the Current Market Price (CMP). For a 12-month investing horizon, the brokerage has predicted a target price of Rs 940. According to the CMP and the anticipated Target Price, the stock has the potential to gain 13%. According to the NSE, it hit a 52-week low of Rs 755 on March 8, 2022. On the other hand, on 14 December 2021, it touched Rs 1,264.65, the 52 week high.

The company has been developing strategies to double its turnover in 5 years from the base of FY21. The company expects a stable EBITDA margin & ROCE subject to commodity prices remaining stable overlooking the uncertainties due to covid & geopolitical disruptions. TTK Prestige has been thrusting on expanding its distribution network, especially in nonmetro cities which might be the next growth destinations. In FY22, TTK Prestige's exports seem to be expanding as the customers have increased their sourcing from the company & expected to increase further in FY23.

Weak quarter; amidst challenging business environments, PAT stood at Rs 806mn

TTK Prestige reported a revenue of Rs 7.0bn in Q4FY22 (+16.6%YoY/-8.9% QoQ) while PAT stood at Rs 806mn (+9.7%YoY/-11.1% QoQ) amidst the challenging business environments. The outbreak of Omicron virus had a significant impact in the volumes thus declining the revenue. The pressure on consumer spending due to inflation & alternative avenues for spending like travel, tourism, and fashion had a major impact on quarterly financial performance. The company posted an EBITDA margin of 15.7% in Q4FY22, down 230bps YoY/120bps QoQ, amidst unprecedented cost inflation. The elevation in input cost was broad-based (commodity, power & fuel) and sustained its momentum for the entire of FY22, consequently weighed on the margins. However, the company managed to post a considerable better margin profile on account of improved operational efficiencies & price hikes. The kitchen & home appliances segment registered a domestic revenue of Rs 24.3bn in FY22 as against Rs 19.6bn in FY21. The export sector reported strong growth as the revenue grew to Rs 980.8mn in FY22 vs Rs 713.5mn in FY21 (+37.4% YoY). 

Overseas subsidiary & investments

TTK Prestige's operating subsidiary Horwood Homewares Limited (HHL) achieved a sale of GBP18.8mn. This had a growth of 16% against the backdrop of Brexit, geopolitical tensions and COVID-19 pandemic. The operating EBITDA had a creditable increase of 25% at GBP 2mn. The new products introduced by the subsidiary had strengthened its presence in the online channels during the year which had helped it achieve better profitability when compared to previous years and helped perform better than many of its peers. During Q4FY22, TTK Prestige had made a strategic investment in Ultrafresh Modular Solutions Ltd. The investment is based on a business of modular kitchens and kitchen appliances with multiple franchise outlets spread across India.

Brokerage's Comments & View On the TTK Prestige, suggests 'buy'

TTK Prestige has been thrusting on expanding its distribution network, especially in non-metro cities & tier-II cities which might be the next growth destinations. TTK Prestige's exports seem to be expanding as the customers have increased their sourcing from the company during FY22 and it is also expected to increase furthermore in FY23. Key growth catalysts for the long term are expanding distribution network, rising exports & regular launches of premium & differentiated products.

"At the current market price the stock is trading at 31.3x/27.2x its FY23/FY24E earnings, we retain our OUTPERFORMER rating on the stock with a revised target price of Rs 940 (earlier Rs 994)," the brokerage has said.

According to the brokerage, the risk involved would be a rise in commodity prices (aluminium, copper and zinc) and also fuel costs. Irrational discounting by regional brands can be a major factor to watch.

TTK Prestige Limited

TTK Group was founded in 1928 founded by Mr T.T. Krishnamachari who set up the distribution for a wide range of products ranging from Foods, Personal care products, etc. The company is India's largest kitchenware company. TTK Prestige was Established in 1955 as a private limited company, TTK went public in 1994. It is among the leading brands in the kitchen equipment space, especially in the pressure cooker segment. In 2012 Company had an Alliances with global high-end brands for high-end cookware/Store ware/Water Filters/ Gas-tops