Professional Documents
Culture Documents
Rating
Target
:
:
Buy
| 5300
Target Period
Potential Upside
:
:
12 months
19%
Whats changed?
Target
EPS FY15E
EPS FY16E
EPS FY17E
Rating
Introduced at | 189.1
Changed from Hold to Buy
Key financials
| Crore
FY14
FY15E
FY16E
FY17E
Net Sales
1,294
1,579
1,846
2,158
EBITDA
Net Profit
160
112
218
143
264
184
313
220
EPS (|)
95.9
123.0
157.5
189.1
FY14
FY15E
FY16E
FY17E
46.4
36.2
28.2
23.5
Target P/E
55.3
43.1
33.6
28.0
EV to EBITDA
32.3
23.5
19.2
15.9
Price to book
8.9
7.6
6.5
5.5
RONW (%)
19.1
21.1
23.0
23.4
ROCE (%)
23.8
28.1
29.5
30.0
Valuation summary
P/E
Stock data
Particular
Amount
5,176.4
115.1
32.6
5,258.9
52 week H/L
Equity Capital (| Crore)
4832 / 2693
11.7
Face Value
10
Price performance
1M
3M
6M
12M
14.1
21.4
65.5
23.5
Butterfly Gandhimathi
4.9
-6.8
-0.5
-6.1
Hawkins Cookers
7.3
25.5
85.3
103.0
TTK Prestige
| 4447
Analyst
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
After growing revenues and PAT at a CAGR of 30% and 50% (FY0713), TTK Prestige (TTKP) witnessed a weak FY14 owing to varied
factors. While revenues dipped 4.8%, PAT declined 16.0% YoY due
to pressure on margins
As concerns start to ease both at the micro as well as macro level,
we change our stance on TTKP and upgrade it to BUY as we believe
that consumption oriented companies with sound fundamentals and
steady growth will continue to demand premium multiples
Hopes of revival led by multiple factors
FY14 has been a sluggish year for the company. We expect better times
to unfold, going forward. Firstly, concerns relating to south India are
easing and, secondly, there is a change in consumer sentiments. While
both factors will take time to unfold, we remain hopeful of early signs
being visible by H2FY15. The management is confident of achieving the
guided 25% revenue growth. We expect revenues to increase at a CAGR
of 18.6% (FY14-17E) on the back of a revival in demand, new product
launches and planned retail expansion.
New products to boost revival
The company launched water purifiers during Q1FY15 and is also
planning to add ~40 new products that would add to the revenue growth,
going ahead. We expect an improved performance in H2FY15 as the
companys new products are expected to be launched by H1FY15. With
revenue growth expected to revive, we expect the EBITDA margin to also
improve and remain in the range of 13-15%, going forward.
Retail expansion + improving macroeconomic environment = Recovery
Currently, TTKP has a retail network of 546 stores and plans to scale up
the same to 1,000 stores by FY18E. Considering that this addition will be
on a franchisee model there will no stress on TTKPs financials. On the
contrary, we remain hopeful of a revival in revenues owing to this retail
expansion. To push sales, the company adopts the strategy of bundling
related products together. This also aids in revenue growth. The key
factors that we believe would aid the revival are a good monsoon, an
overall improvement in consumer sentiment, an improved situation in the
southern markets and success of new launches.
Marginal revision in FY15E, FY16E; introduce FY17E EPS of | 189.1
We have marginally revised the operating margin estimates for FY15 and
FY16 owing to a pick-up in demand. We, hereby, introduce our FY17
estimates building in 16.9% YoY revenue growth to | 2,158 crore. We
expect the operating margin to improve to 14.6% by FY17E (12.5% in
FY14), translating to a PAT of | 220.4 crore and EPS of | 189.1.
Improving outlook calls for upgrade; recommend BUY
After a sluggish FY14, the companys performance showed some green
shoots in Q1FY15. We believe TTKP is well poised to capitalise on the
revival in the economy considering its retail expansion plans and
continued product launches. The improvement in consumer sentiment
and the likely revival on the back of improved economic parameters will
further aid growth. An inorganic growth, if any, may be an added positive.
We expect companies with consistent growth and healthy fundamentals
to continue to command a premium. We, thereby, upgrade TTK Prestige
to BUY with a revised target price of | 5,300 (based on 28.0x FY17E EPS
of | 189.1).
Change in estimates
(| Crore)
Revenue
Old
1,568.3
FY15E
New % Change
1,570.6
0.1
Old
1,800.7
FY16E
FY17E
New % Change Introduced
1,837.6
2.0
2,148.3
EBITDA
EBITDA Margin (%)
210.3
13.4
218.5
13.9
3.9
50 bps
256.4
14.2
263.6
14.3
2.8
11 bps
313.0
14.6
PAT
EPS (|)
136.9
117.5
143.3
123.0
4.7
4.7
175.9
150.9
183.6
157.5
4.4
4.4
220.4
189.1
Comments
We introduce FY17 estimates, building in 17% YoY growth in revenues
Assumptions
Current
Introduced
FY15E
FY16E
FY17E
Earlier
FY15E
FY16E
FY13
FY14
55.4
54.3
62.4
70.2
79.0
61.0
68.0
49.5
44.6
53.5
63.1
73.2
53.1
61.1
12.0
7.8
8.4
9.4
10.4
15.6
17.3
921.8
909.3
932.0
941.4
960.2
940.3
949.7
494.5
1,897.4
506.9
1,840.5
537.3
1,932.5
564.2
2,048.5
586.8
2,171.4
519.5
2,032.1
545.4
2,154.1
Comments
Induction Cooktops
Avg Realisation (| per pc)
Pressure Cooker
Cookware
Induction Cooktops
Page 2
Company Analysis
Improving consumer sentiment to aid revenue CAGR of 18.6% (FY14-17E)
TTKPs revenues have grown strongly over FY09-13. During FY09-11,
revenues grew at a CAGR of 38% while during FY11-13 revenue CAGR
stood at 33%. This kind of growth is commendable considering the higher
base. However, FY14 was a difficult year for the company owing to
dampened consumer sentiments. Also, issues of power in Tamil Nadu,
changed government regulations relating to the cap on cylinders and
political issues in southern India further added to the woes.
To counter the decline in southern markets, the company has increased
its penetration in the non-south markets. TTKPs products have been well
received in the non-southern markets. This is also likely to aid growth,
going forward. Apart from the non-south markets, the improving
consumer sentiment and easing tensions with regards to southern India
(a) improved power situation in Tamil Nadu and (b) easing of political
unrest in Andhra Pradesh, will further aid growth. The consumer
sentiment, in general, is also on an uptrend and the impact of the same is
likely to be visible, going forward. Furthermore, new product launches
and the planned retail expansion lend further hopes of revival. We expect
revenues to grow at 18.6% CAGR during FY14-17E to | 2,157.7 crore.
Exhibit 1: Revenue trend
2,400
2,158
1,846
2,000
1,294
FY14
| crore
1,358
FY13
1,579
1,600
1,103
1,200
764
326
401
FY09
281
400
FY08
800
508
FY17E
FY16E
FY15E
FY12
FY11
FY10
FY07
10
18
16
50
25
56
12
11
10
13
14
14
15
21
26
32
34
31
31
30
30
21
18
18
18
20
20
18
21
49
43
38
38
39
37
36
36
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY09
Cookers
Cookware
Appliances
Others
Page 3
16.5
15.6
15.3
15.1
14.3
13.9
15
14.6
9.4
10.1
9.9
FY09
12
FY08
12.5
FY17E
FY16E
FY15E
FY14
FY13
FY12
FY11
FY10
FY07
PAT margin, return ratios to improve from FY15 after weak FY14
PAT margin and return ratios saw a decline in FY14 owing to lower
EBITDA generation. However, we expect the PAT margin and return ratios
to improve over FY14-17E owing to a better operational performance
compared to FY14. Driven by an improvement in PAT margin, we expect
PAT to grow at a CAGR of 25.4% over FY14-17E to | 220.4 crore.
Exhibit 4: PAT and PAT margin trend
250
220
184
13
21.4
18.7
25.026.4
38.1
23.8
33.7
23.0 23.4
19.1 21.1
FY17E
FY16E
FY14
FY13
FY12
FY11
FY10
Return on Equity
FY15E
FY17E
FY09
FY16E
FY15E
FY14
FY13
FY12
FY11
FY10
26
30.0
FY07
143
112
133
113
84
22
34.0
39
10
%
8.7 9.1
45.3
52
10.0 10.3
FY09
FY07
12
50
10.3 9.9
5.6
52
4.2
21
100
6.3
FY08
| crore
150
11.0
FY08
10.4
200
58.1 62.5
65
15
Page 4
Valuation
The key to the strong financial performance of TTKP has been its ability to
successfully transform from a company manufacturing pressure cookers
to one of the countrys largest branded kitchen appliances company. It
has built a strong brand patronage and offers customers a bouquet of
products in the kitchen appliances and cooking segment.
Over the last six years, FY14 has been the first year when the company
had registered a decline in earnings. The year 2014 has been a difficult
one for consumption related companies owing to the dampened
consumer sentiment, which has impacted revenue growth negatively. In
TTKPs case, it has also been hampered by the power situation in Tamil
Nadu, which has impacted the sales of its electric appliance and induction
cook-tops, which had grown at a rapid pace in FY13. The management is
strategically trying to broad base its products and markets to reduce the
impact of the sluggishness in southern markets.
With improving consumer sentiments and easing of concerns relating to
southern India, we expect the companys revenue and earnings growth to
recover, going forward. Revenues and PAT are likely to grow at a CAGR
of 18.6% and 25.4%, respectively, during FY14-17E. The non-south
markets and new product launches would further bolster growth.
After a sluggish FY14, the companys performance showed some green
shoots in Q1FY15. We believe TTKP is well poised to capitalise on the
revival in the economy considering its retail expansion plans and
continued product launches. The improvement in consumer sentiment
and the likely revival on the back of improved economic parameters are
expected to further aid growth. Organic growth, if any, may be an added
positive. We expect companies with consistent growth and healthy
fundamentals to continue to command a premium. We, thereby, upgrade
TTK Prestige to BUY with a revised target price of | 5,300 (based on 28.0x
FY17E EPS of | 189.1).
Exhibit 6: Price earning ratio trend
24.0x
4,000
20.0x
3,000
16.0x
2,000
12.0x
8.0x
1,000
Avg. Price
8.0x
12.0x
16.0x
20.0x
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
24.0x
Exhibit 7: Valuations
FY14
FY15E
FY16E
FY17E
Sales
(| cr)
1,286.5
1,570.6
1,837.6
2,148.3
Growth
(%)
(4.7)
22.1
17.0
16.9
EPS
(|)
95.9
123.0
157.5
189.1
Growth
(%)
(18.2)
28.2
28.1
20.0
PE
(x)
46.4
36.2
28.2
23.5
EV/EBITDA
(x)
32.3
23.5
19.2
15.9
RoNW
(%)
19.1
21.1
23.0
23.4
Page 5
RoCE
(%)
23.8
28.1
29.5
30.0
Company snapshot
5,500.00
5,000.00
4,500.00
4,000.00
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Key events
Date
Jun-10
Jan-11
Mar-11
Jun-11
Feb-12
Apr-12
May-12
Jan-13
Jun-13
Jul-13
Oct-13
Mar-14
Event
Launched new range of pressure cookers, induction base cookware, microwave pressure cookers, inner lid pressure cookers (Prestige Apple)
Signed an MoU with Government of Gujarat for establishing a state-of-the-art facility for manufacture of pressure cookers and kitchenware
Reported a 50% topline growth to | 760 crore & 60% YoY bottomline growth to | 88 crore
Successfully concluded a long term settlement covering all its workmen at the Hosur unit
Entered into an agreement with US based World Kitchen to market and distribute its brands - Corelle, Corningware, Vision, Pyrex and Snapware
Signed a business collaboration arrangement with Vestergaard Frandsen, Switzerland to enter the water purifying space
Entered into a JV with Schott, a German company to launch a range of products in the glass based induction cooktops
Received Japan patent for the company's microwave pressure cooker
Sold 5.6% stake to Cartica Capital for | 230 crore
Launched a new mixer grinder (Teon mixer grinder) with stackable jars, which save store space and a lid lock to facilitate hands-free usage
Signed Abhishek Bachchan and Aishwarya Rai Bachchan as brand ambassadors
Revenues dipped for the second consecutive quarter; falling 3.8% YoY in Q4FY14. This lead to a PAT de-grwoth of 6.5% YoY
Jun-14
After two sluggish quarters, revenues picked up in Q1FY15. TTKP reported a 9.8% YoY growth in revenues, while PAT remained flat owing to margin pressure
Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10
Name
T T Krishnamachari & Company
Cartica Capital, Ltd.
Thornburg Investment Management, Inc.
Jagannathan (T T)
Venkatesh (T T)
Mukund (T T)
J.P. Morgan Asset Management (Hong Kong) Ltd.
Lakshman (T T)
Tiruvallur (Thatai Lakshman)
Nalanda India Equity Fund Ltd.
Shareholding Pattern
Latest Filing Date % O/S Position (m)n Change (m)
31-Mar-14 60.03
7.0
0.0
30-Jun-14 7.30
0.9
0.0
30-Jun-14 3.92
0.5
0.1
12-Sep-14 2.96
0.3
0.0
30-Jun-14 2.52
0.3
0.0
12-Sep-14 2.44
0.3
0.0
30-Jun-14 2.41
0.3
0.0
3-Jun-13 2.28
0.3
0.3
30-Jun-14 2.28
0.3
0.0
30-Jun-14 1.75
0.2
0.0
(in %)
Promoter
FII
DII
Others
Recent Activity
Investor name
Investor name
Thornburg Investment Management, Inc.
Axis Asset Management Company Limited
Deutsche Asset Management (India) Private Ltd.
Jagannathan (T T)
Mellon Capital Management Corporation
Source: Reuters, ICICIdirect.com Research
Value
4.97m
3.14m
0.89m
0.80m
0.08m
Shares
0.08m
0.05m
0.01m
0.01m
0.00m
Investor name
Investor name
Columbia Management Investment Advisers, LLC
SBI Funds Management Pvt. Ltd.
DSP BlackRock Investment Managers Pvt. Ltd.
Veritas Asset Management (UK) Ltd.
Goldman Sachs Asset Management International
Value
-5.09m
-4.31m
-4.23m
-3.59m
-2.26m
Shares
-0.10m
-0.08m
-0.07m
-0.06m
-0.04m
Page 6
Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Manufacturing Expenses
Selling & Distribution Expenses
Admin & Other Expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Growth (%)
Total Tax
PAT
Growth (%)
EPS (|)
| Crore
FY14
1,293.8
-4.8
732.3
91.0
47.0
174.2
89.1
1,133.6
160.2
-21.4
14.8
8.5
7.9
151.8
-18.1
40.0
111.8
-16.0
95.9
FY15E
1,579.1
22.0
875.3
110.7
56.5
208.1
109.9
1,360.6
218.5
36.4
25.9
3.1
11.1
200.5
32.1
57.1
143.3
28.2
123.0
FY16E
1,846.5
16.9
1,028.0
121.3
66.2
238.9
128.6
1,582.9
263.6
20.6
26.9
3.0
23.1
256.8
28.1
73.2
183.6
28.1
157.5
FY17E
2,157.7
16.9
1,189.5
141.8
77.3
285.7
150.4
1,844.7
313.0
18.7
29.0
2.7
27.0
308.2
20.0
87.8
220.4
20.0
189.1
| Crore
FY14
151.8
14.8
-37.2
0.4
-47.1
2.3
85.0
-9.0
-70.5
6.2
-73.3
0.3
-88.1
-23.2
96.3
-14.7
-3.0
32.6
29.6
FY15E
200.5
25.9
-87.5
30.4
-57.1
3.1
115.3
0.0
-11.9
0.0
-11.9
0.0
-20.6
-50.3
-2.5
-73.4
30.0
29.6
59.6
FY16E
256.8
26.9
-85.6
30.0
-73.2
3.0
157.9
0.0
-17.0
0.0
-17.0
0.0
-0.3
-64.4
-0.5
-65.3
75.6
59.6
135.2
FY17E
308.2
29.0
-99.6
25.6
-87.8
2.7
178.0
0.0
-17.4
0.0
-17.4
0.0
-0.6
-77.4
0.1
-77.9
82.7
135.2
217.9
FY14
FY15E
FY16E
FY17E
95.9
108.6
502.2
20.0
25.4
123.0
145.2
582.0
36.9
51.1
157.5
180.6
684.3
47.3
116.0
189.1
214.0
807.0
56.7
187.0
12.5
11.8
8.7
75.7
42.3
32.3
13.9
12.8
9.1
75.0
42.0
30.0
14.3
14.0
10.0
75.0
42.0
30.0
14.6
14.3
10.3
75.0
42.0
30.0
19.1
23.8
19.5
21.1
28.1
23.3
23.0
29.5
27.8
23.4
30.0
30.7
46.4
32.3
4.0
4.0
8.9
36.2
23.5
3.3
3.3
7.6
28.2
19.2
2.7
2.8
6.5
23.5
15.9
2.3
2.4
5.5
0.2
0.0
2.1
1.0
0.0
0.0
2.2
1.1
0.0
0.0
2.5
1.3
0.0
0.0
2.7
1.5
Balance sheet
| Crore
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Other LT Liabilities
Total Liabilities
FY14
FY15E
FY16E
FY17E
11.7
573.7
585.3
26.9
20.5
5.0
637.7
11.7
666.7
678.3
6.3
23.1
5.0
712.8
11.7
785.8
797.5
6.0
25.7
5.0
834.2
11.7
928.9
940.5
5.4
28.8
5.0
979.7
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds
412.5
72.9
339.6
24.3
363.9
9.0
266.8
149.1
49.4
3.9
29.6
498.8
198.6
35.4
234.1
264.8
637.7
434.1
96.8
337.2
14.6
351.8
9.0
322.7
180.7
66.8
3.9
59.6
633.7
214.4
67.5
281.8
351.9
712.8
456.9
123.6
333.3
8.8
342.1
9.0
377.6
211.4
82.7
3.9
135.2
810.8
234.0
93.7
327.7
483.1
834.2
477.9
152.3
325.5
5.3
330.8
9.0
441.4
247.2
96.7
3.9
217.9
1,007.1
254.8
112.5
367.3
639.9
979.7
Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios
EBITDA Margin (%)
PBT Margin (%)
PAT Margin (%)
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Page 7
RATING RATIONALE
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
Disclosures:
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