TTK Prestige - Elara

8/6/2019 TTK Prestige - Elara

1/8

Aliasgar Shakir [email protected] +91 22 4062 6816

GlobalMark

etsResearch

Elara Securities (India) Private Limited

Positioning for h igher grow thTopline sligh tly below expectation , margin dips

The company reported a mixed quarter with growing topline butdipping margins. Revenues grew by 47% on YoY basis, slightly below

our expectations. Product-wise, electrical appliance and cookware

have been major growth contributors and our view that electrical

appliance would be the key growth contributor was vindicated.

EBITDA was reported at INR238mn, commanding margin of 13.1%,

about 140bps lower on YoY. Enhanced marketing to the tune of

~INR40mn higher in Q4FY11 impacted margins.

Capex on t rack, capacity to double

The company is doubling its pressure cooker and cookware capacity to

8mn and 4.5mn respectively. The overall capex of INR2bn, will be

funded internally, that will be completed by end of FY12E.

Huge scope of grow th

Diversifying from pressure cooker to entire kitchenware has allowed

TTK to widen its target market size from INR10-12bn to over INR80bn.

Further, penetration levels of below 25% in pressure cookers and

electrical appliances offers scope to grow. The company targets

increasing franchisee stores to 500 by FY13E from the current 285,

and further add about 30 odd SKUs over next six months across the

category. We expect the company to grow topline by 31% to INR10bn

in FY12E led by volume growth of about 25%. EBITDA margin is

expected to be 16.1%, leading to a PAT of INR1.2bn.Valuation peaking

TTK is current ly trading at a P/E of 22x on FY12E earnings. Our target

multiple of 24x on the FY12E EPS of INR103, is based on continuous

growth momentum, upgrading our target price to INR2480 with an

upside of 11%. This equates the CNX Midcap index PEG of 0.7x.

Subsequently w e change the rating to Accumulate from Buy.

Y/ E March (INR mn) Q4FY11 Q4FY10 YoY(%) Q3FY11 QoQ (%) Q4FY11E Variance (%)Net Sales 1,819 1,235 47.3 2,365 (23.1) 1,933 (5.9)

Operat ing Expenses 1,581 1,056 49.7 1,942 (18.6) 1,618 (2.3)% of Sales 86.9 85.5 1.4 82.1 4.8 83.7 3.2EBITDA 238 179 33.0 422 (43.6) 315 (24.5)EBITDA Margins (%) 13.1 14.5 (1.4) 17.9 (4.8) 16.3 (3.2)Interest 2 3 (21.4) 2 22.2 1.40 -Depreciation 11 10 7.7 11 - 9 29.3PBT 236 173 36.4 421 (43.9) 314 (25.0)Tax 70 55 29.2 128 (44.9) 91 (22.8)Effective Tax Rate (%) 29.8 31.5 (1.7) 30.4 (0.5) 29.0 0.8Adjusted PAT 166 118 39.8 293 (43.5) 223 (25.8)NPM (%) 9.1 9.6 (0.5) 12.4 (3.3) 11.5 (2.4)Reported PAT 166 118 39.8 293 (43.5) 223 (25.8)EPS 14.6 10.5 39.8 25.9 (43.5) 19.72 (25.8)

Source: Company, Elara Securit ies EstimateKey FinancialsY/E Mar (INR mn) Rev YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%) Fully DEPS RoE (%) RoCE (%) P/E (x) EV/ EBITDA (x)FY09 4,016 23.0 380 9.5 224 13.5 19.8 26.3 31.8 113.2 67.4FY10 5,079 26.5 749 14.7 485 116.7 42.9 39.1 55.7 52.2 34.2FY11E 7,636 50.3 1,217 15.9 837 72.5 73.9 44.0 61.8 30.3 21.1FY12E 10,031 31.4 1,632 16.3 1,169 39.7 103.3 40.6 55.6 21.7 15.7FY13E 12,482 24.4 2,002 16.0 1,385 18.5 122.4 35.2 48.3 18.3 12.8

Source: Company, Elara Securities Estimate

India | Houseware 5 May 2011

Quarterly Update/Target price/ Rating change

TTK Prestige

Rating : AccumulateTarget Price : INR2,480

Upside : 11%

CMP : INR2,239 (as on 4 May 2011)

Key data*

Bloomberg /Reuters Code TTKPT IN/ TTKL.BO

Current /Dil. Shares O/ S (mn) 11.3/11.3

Mkt Cap (INRbn/ US$mn) 25/ 570

Daily Vol. (3M NSE Avg.) 174,017

Face Value (INR) 10

1 US$= INR44.5

Source: Bloomberg ; * As on 4 May 2011

Price & volume

Source: Bloomberg

Share ho ldin g (%) Q1FY11 Q2FY11 Q3FY11 Q4FY11

Promoter 74.9 74.9 74.9 74.9

Inst itut ional Investors 8.5 8.5 10.0 11.3Other Investors 3.1 3.7 2.8 2.4

General Publ ic 13.5 12.9 12.3 11.4

Source: BSE

Price performance (%) 3M 6M 12MSensex 2.6 (12.1) 8.1

TTK Prestige 32.2 58.4 262.9

Hawkins Cooker 11.0 5.6 4.8

Source: Bloomberg

0

1

2

3

4

0

500

1,000

1,500

2,000

2,500

3,000

May-10 Sep-10 Jan-11 May-11

Vol. in mn (RHS) TTK prest ige (LHS)


2/8

TTK Prestige

2 Elara Securities (India) Private Limited

Financials (Y/ E Mar)Income Statement (INR mn) FY10 FY11 FY12E FY13ENet Revenues 5,079 7,636 10,031 12,482

EBITDA 749 1,217 1,632 2,002Add:- Non operating Income 11.40 43.00 43.00 43.00

OPBIDTA 760 1,260 1,675 2,045

Less :- Depreciation & Amortization 36 43 55 127

EBIT 724 1,217 1,620 1,918Less:- Interest Expenses 11 8 8 8

PBT 713 1,209 1,612 1,910Less :- Taxes 228 367 443 525

Adjusted PAT 485 843 1,169 1,385Add/ Less: - Extra-ordinaries

Reported PAT 485 843 1,169 1,385Balance Sheet (INR mn) FY10 FY11 FY12E FY13EShare Capital 113 113 113 113

Reserves 1,128 1,802 2,765 3,826

Borrowings 28 22 0 0

Deferred Tax (Net) 31 33 33 33

Total Liabilities 1,301 1,970 2,911 3,972Gross Block 835 1,149 2,649 3,149

Less:- Accumulated Depreciation 432 472 527 654

Net Block 403 677 2,122 2,495

Add:- Capital work in progress 237 237 237 237

Investments 4 226 226 226

Net Working Capital 657 830 326 1,014

Other Assets - - - -

Total Assets 1,301 1,970 2,911 3,972Cash Flow Statement (INR mn) FY10 FY11E FY12E FY13ECash prof it adjusted for non cash items 532 887 1,232 1,520

Add/Less : Working Capital Changes 93 (76) (308) (206)

Operating Cash Flow 626 811 924 1,313

Less:- Capex (80) (314) (1,500) (500)

Free Cash Flow 545 496 -576 813

Financing Cash Flow (215) (179) (235) (332)

Investing Cash Flow (80) (536) (1,500) (500)

Net change in Cash 331 96 (811) 481Ratio Analysis FY10 FY11 FY12E FY13EIncome Statement Ratios (%)Revenue Growth 26.5 50.3 31.4 24.4

EBITDA Grow th 97.1 62.5 34.1 22.7

PAT Grow th 118.1 73.7 38.8 18.5

EBITDA Margin 14.7 15.9 16.3 16.0

Net Margin 9.6 11.0 11.7 11.1

Return & Liquidity RatiosNet Debt/ Equity (x) (0.3) (0.3) 0.1 (0.1)

ROE (%) 39.1 44.0 40.6 35.2

ROCE (%) 55.7 61.8 55.6 48.3

Per Share data & Valuation RatiosDilu ted EPS (INR/Share) 42.9 73.9 103.3 122.4

EPS Grow th (%) 116.8 72.5 39.7 18.5

DPS (INR/Share) 10.0 12.5 15.5 24.5

P/E Ratio (x) 52.2 30.3 21.7 18.3

EV/EBITDA (x) 34.2 21.1 15.7 12.8

EV/Sales (x) 5.0 3.4 2.6 2.1

Price/Book (x) 20.4 13.2 8.8 6.4

Dividend Yield (%) 0.4 0.6 0.7 1.1


Revenue & margins growth trend


Adjusted profits grow th t rend


Return ratios


14.7

15.916.3

16.0

13

14

15

16

17

0

5,000

10,000

15,000

FY10 FY11 FY12E FY13E

(%)

(INRmn)

Net Revenues (LHS) EBITDA Margin (RHS)

118.1

73.7

38.8

18.5

0

20

40

60

80

100

120

140

0

500

1,000

1,500


(%)

(INRmn)

Adjusted PAT (LHS) PAT Growth (RHS)

39.144.0

40.635.2

55.7

61.8

55.6

48.3

20

30

40

50

60

70


ROE (%) ROCE (%)


3/8

TTK Prestige

Hous

eware

3Elara Securities (India) Private Limited

Topline sligh tly below expectat ion,margin dips

The company reported a mixed quarter with growing

topline but dippingmargins. Revenues grew by 47% on

YoY basis,slightly below our expectations. In terms ofQoQ revenues were lower by 23%, since Q4FY11 is

seasonally a silent quarter and records lower sales

historically. Product-wise, electrical appliance, and

cookware have been the major growth contributors led

by companys marketing campaign on induction tops

and cookwares. Our view that electrical appliances

would be the key growth contributor led by a lower

base and new product launches was vindicated.

Exhibit 1: Sales mix

Source: Company

The company reported EBITDA of INR238mn,commanding EBITDA margin of 13.1%, about 140bps

lower on YoY, 480 bps lower on QoQ. Typically, due to a

smaller quarter, Q4FY11 has lower operating leverage

and thus commands lower EBITDA margin. In terms of

YoY, EBITDA margins have tapered on account of higher

marketing activities to the tune of ~INR40mn higher in

the Q4FY11. The company has managed rising raw

material prices well. During the quarter, raw material

cost has come down by about 90bps QoQ.

Capex on track, capacity to double

TTKs expansion in pressure cooker and cookware is

going on track and will be on board by July11 The

company has incurred INR400mn of capex in FY11 and

further INR600mn is estimated in the next 3 months. This

will allow the company to double its pressure cooker and

cookware capacity to 8mn and 4.5mn respectively in

Uttarakhand and Coimbature. Additionally, the company

has a capex outlay of INR1bn for new capacity in

pressure cooker and cookware in Gujarat and

Maharashtra that w ill come on board by end of FY12.

Exhib it 2: Capex to be funded int ernally

Source:

Huge scope of grow th

TTKs diversification from a mere pressure cooker

company to a complete kitchenware player hasbroadened the target market. From a mere INR10-12bn

market size, the company now caters to a market size of

over INR80bn including cookware, gas stoves, kitchen

appliances and others. The penetration levels pressure

cookers and electrical appliances are below 25% which

allows further scope to grow .

TTK is adding huge capacities to support growth over

the next five years. The company has a target to increase

its franchiseestores from current 285 to about 500 by

FY13, thus adding 100 franchise stores every year.

Management guides about 60% of the new franchiseestores to come in southern market, where it already has

a strong presence, with the northern market accounting

for the balance. The focus on rural southern market is

expected to fuel growth. TTK plans to add over 30-40

new SKUs over the next six months with new product

launches in each category; this will boost topline.

Exhib it 3: Kitchen appliances to be key driver

Source:

We expect the company to grow topline at 31% in

FY12E led by an aggregate volume growth of about

25%. The company is expected to garner EBITDA margin

of 16.1%, leading to an EBITDA of INR1.63bn and a PAT

of INR1.2bn.

0

1,000

2,000

3,000

Q1 2011 Q2 2011 Q3 2011 Q4 2011

(INRmn)

Pressure Cooker Cookw are Electrical Appliance

Gas Stoves Others

(1,000)

(500)

0

500

1,000

1,500

FY09 FY10 FY11 FY12E FY13E

(INRmn)

Operating Cash Flow Free Cash Flow

0

3,000

6,000

9,000

12,000

2009 2010 2011 2012E 2013E

(INRmn)

Pressure Cookers Cookware

Gas Stoves Electrical App liances

Others


4/8

TTK Prestige

4 Elara Securities (India) Private Limited

Valuations peakingTTK prestige has been rerated from about 10x-12x one

year back to current ly trading at a P/ E of 22x on FY12E

earnings. The CNX Midcap Index trades at a one year

forward P/ E of 12x w ith growth estimates of 17% for

next two fiscals deriving a PEG of 0.7. Our target multiple

of 24x on the FY12E EPS of INR103,is based on sustained

growth momentum, upgrading our target price of

INR2480. Thus in terms of PEG, it equates the midcap

index mult iple of 0.7x. Subsequent ly we change ratings

to Accumulate from Buy.

Exhib it 4: Valuation Summary

Particulars AmountNet Profits FY12E (INR mn) 1,169.1

Diluted no of shares (mn) 11.3

EPS FY12E (INR) 103.3

Target Mult iple (x) 24x

Fair Value per share (INR) 2,480CMP (INR) 2,239

Upside (%) 11

Source: Elara Securities Estimates


5/8

TTK Prestige

Hous

eware

5Elara Securities (India) Private Limited

Coverage History

Date Rating Target Price Closing Price

1 18-Mar-2010 Buy INR672 INR496

2 14-Jul-2010 Sell INR933 INR1,003

3 1-Nov-2010 Reduce INR1,377 INR1,389

4 19-Jan-2011 Buy INR2,076 INR1,483

5 4-May-2011 Accumulate INR2,480 INR2,239

Guide to Research Rating

BUY Absolute Return >+20%ACCUMULATE Absolute Return +5% to +20%REDUCE Absolute Return -5% to +5%SELL Absolute Return < -5%

0

500

1,000

1,500

2,000

2,500

3,000

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

Not Covered Covered

1

2

3

4

5


6/8

Elara Securit ies (Ind ia) Private Limit ed

6

Disclosures & Confident ialit y for non U.S. Investors

The Note is based on our estimates and is being provided to you (herein referred to as the Recipient) only for information

purposes. The sole purpose of this Note is to provide preliminary information on the business activities of the company and

the projected financial statements in order to assist the recipient in understanding / evaluating the Proposal. Nothing in this

document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to

in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at anindependent evaluation o f an investment in the securities of companies referred to in this document (including the merits and

risks involved) and should consult its own advisors to determine the merits and risks of such an investment . Nevertheless, Elara

or any of its affiliates is committed to provide independent and transparent recommendation to its client and would be happy

to provide any information in response to specific client queries. Elara or any of its affiliates have not independently verified all

the information g iven in th is Note and expressly disclaim all liability for any errors and/ or omissions, representations or

warranties, expressed or implied as contained in this Note. The user assumes the entire risk of any use made of this

information. Elara or any of its affiliates, their directors and the employees may from time to time, effect or have effected an

own account transaction in or deal as principal or agent in or for the securities mentioned in this document. They may

perform or seek to perform investment banking or other services for or solicit investment banking or other business from any

company referred to in this Note. Each of these entities functions as a separate, distinct and independent of each other. This

Note is strictly confidential and is being furnished to you solely for your information. This Note should not be reproduced or

redistributed or passed on directly or indirectly in any form to any other person or published, copied, in w hole or in part, for

any purpose. This Note is not directed or intended for distribution to, or use by, any person or entity who is a citizen or

resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use

would be contrary to law, regulation or which would subject Elara or any of its affiliates to any registration or licensing

requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and

persons in w hose possession this document comes, should inform themselves about and observe, any such restrictions. Upon

request, the Recipient w ill prompt ly return all material received from the company and/ or the Advisors without retaining any

copies thereof. The Information given in this document is as of the date of this report and there can be no assurance that

future results or events will be consistent w ith this information. This Information is subject to change without any prior notice.

Elara or any of its affiliates reserves the right to make modifications and alterations to this statement as may be required from

time to time. However, Elara is under no obligation to update or keep the information current. Neither Elara nor any of its

affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct,

indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the

information. This Note should not be deemed an indication of the state of affairs of the company nor shall it constitute anindication that there has been no change in the business or state of affairs of the company since the date of publication of this

Note. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency

and should not be treated as endorsement of the views expressed in the report. Elara Securities (India) Private Limited

generally prohibits its analysts, persons reporting to analysts and their family members from maintaining a financial interest in

the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views

expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their

securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations

or view s expressed in this report .

Any clarifications / queries on the proposal as well as any future communication regarding the proposal should be addressed

to Elara Securities (India) Private Limited / the company.

Disclaimer for non U.S. Investors

The information contained in this note is of a general nature and is not intended to address the circumstances of any

particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no

guarantee that such information is accurate as of the date it is received or that it w ill continue to be accurate in the future.

No one should act on such information without appropriate professional advice after a thorough examination of the

particular situation.


7/8

Elara Secur it ies (India) Private Limited

GlobalMark

etsResearch

77

Disclosures for U.S. Investors

The research analyst did not receive compensation from TTK Prestige Limited.

Elara Capital Inc.s affiliate did not manage an offering for TTK Prestige Limited.

Elara Capital Inc.s affiliate did not receive compensation from TTK Prestige Limited in the last 12 months.

Elara Capital Inc.s affiliate does not expect to receive compensation from TTK Prestige Limited in the next 3 months.

Disclaimer for U.S. Investors

This material is based upon information that we consider to be reliable, but Elara Capital Inc. does not warrant its

completeness, accuracy or adequacy and it should not be relied upon as such.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument.

Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed

herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue.

Prices, values or income from any securities or investments mentioned in this report may fall against the interests of the

investor and the investor may get back less than the amount invested. Where an investment is described as being likely toyield income, please note that the amount of income that the investor will receive from such an investment may fluctuate.

Where an investment or security is denominated in a different currency to the investors currency of reference, changes in

rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The

information contained in this report does not constitute advice on the tax consequences of making any particular

investment decision. This material does not take into account your particular investment objectives, financial situations or

needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before

acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances

and, if necessary, seek professional advice.

Certain statements in this report, including any financial projections, may constitute forward-looking statements. These

forward-looking statements are not guarantees of future performance and are based on numerous current assumptions

that are subject to significant uncertainties and contingencies. Actual future performance could differ materially from these

forward-looking statements and financial information.


8/8

Elara Securit ies (Ind ia) Private Limit ed

8

IndiaElara Securit ies (India) Pvt. Ltd.Kalpataru Synergy, 6th Level,East Wing, Opp Grand Hyatt,Santacruz East,Mumbai 400 055, India

Tel : +91 22 4062 6868

EuropeElara Capital Plc.29 Marylebone Road,London NW1 5JX,United Kingdom

Tel : +44 20 7486 9733

USAElara Securities Inc.477 Madison Avenue,220, New York,NY 10022, USATel:212-430-5870

Asia / PacificElara Capital (Sngapore) Pte. Ltd.30 Raffles Place#20-03, Chevron HouseSingapore 048622

Tel : +65 6536 6267

Harendra Kumar Head - Institut ional Equit ies & Global Research [email protected] +91 22 4062 6871Sales

Joseph K. Mammen Global Head Sales & TradingLondon +44 78 5057 7329 [email protected] +44 20 7467 5578

Jonathan Camissar London +44 79 1208 7272 [email protected] +44 20 7299 2575

Anu ja Sarda London +44 77 3819 6256 [email protected] +44 20 7299 2577

David Somekh New York +1 646 808 9217 [email protected] +1 212 430 5872

Nikhil Bhatnagar New York +1 718 501 2504 [email protected] +1 212 430 5876

Samridh Sethi New York +1 718 300 0767 [email protected] +1 212 430 5873

Amit Mamgain India +91 98676 96661 [email protected] +91 22 4062 6843

Koushik Vasudevan India +91 98676 96668 [email protected] +91 22 4062 6841

Nirav Shah India +91 90040 27862 [email protected] +91 22 4062 6842

Prashin Lalvani India +91 98334 77685 [email protected] +91 22 4062 6844

Saira Ansari India +91 98198 10166 [email protected] +91 22 4062 6812

Sales Trading & DealingAnanthanarayan Iyer India +91 98334 99217 [email protected] +91 22 4062 6856

Dharmesh Desai India +91 98211 93333 [email protected] +91 22 4062 6852

Manoj Murarka India +91 99675 31422 [email protected] +91 22 4062 6851

Vishal Thakkar India +91 98694 07973 [email protected] +91 22 4062 6857

ResearchAbhinav Bhandari Analyst Construction, Infrastructure [email protected] +91 22 4062 6807

Aliasgar Shakir Analyst Mid caps aliasgar.shakir@elaracapit al.com +91 22 4062 6816

Alok Deshpande Analyst Oil & Gas [email protected] +91 22 4062 6804

Anand Shah Analyst Paints, Fertilizers [email protected] +91 22 4062 6821

Himani Singh Analyst FMCG, Hotels, Hospitals [email protected] +91 22 4062 6801

Mohan Lal Analyst Media & Retail [email protected] +91 22 4062 6802

Pankaj Balani Analyst Derivative Strategist [email protected] +91 22 4062 6811

Pralay Das Analyst Informat ion Technology, Telecom [email protected] +91 22 4062 6808

Ravindra Deshpande Analyst Metals & Cement [email protected] +91 22 4062 6805

Ravi Sodah Analyst Cement [email protected] +91 22 4062 6817

Sumant Kumar Analyst FMCG [email protected] +91 22 4062 6803

Surajit Pal Analyst Pharmaceuticals, Real Estate surajit [email protected] +91 22 4062 6810

Pooja Sharma Associate Construction, Infrastructure [email protected] +91 22 4062 6819

Gurunath Parab Production gurunath [email protected] +91 22 4062 6815

Access our reports on Bloomberg: Type ESEC Also available on Thomson & Reuters

Member (NSE, BSE)

Regn Nos: CAPITAL MARKET SEBI REGN. NO.: BSE: INB 011289833, NSE: INB 231289837 DERIVATIVESSEBI REGN. NO.: NSE: INF 231289837CLEARING CODE: M51449.Website: ww w.elaracapital.com Investor Grievance Email ID: investor [email protected]

TTK Prestige - Elara

Documents

Transcript of TTK Prestige - Elara