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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)
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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
Source: Company, Elara Securities Estimate
Revenue & margins growth trend
Source: Company, Elara Securities Estimate
Adjusted profits grow th t rend
Source: Company, Elara Securities Estimate
Return ratios
Source: Company, Elara Securities Estimate
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
FY10 FY11 FY12E FY13E
(%)
(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
FY10 FY11 FY12E FY13E
ROE (%) ROCE (%)
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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
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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
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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
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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
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risks involved) and should consult its own advisors to determine the merits and risks of such an investment . Nevertheless, Elara
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persons in w hose possession this document comes, should inform themselves about and observe, any such restrictions. Upon
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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
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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
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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.
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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
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Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed
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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.
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