TTK Prestige (TTKPRE) 4200

Transcription

1 Result Update Rating matrix Rating : Hold Target : 4390 Target Period : 12 months Potential Upside : 5% What s changed? Target Changed from 4350 to 4390 EPS Changed from to EPS Changed from to EPS Introduced at Rating Unchanged Quarterly performance Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) Revenue EBITDA EBITDA (%) bps bps PAT Key financials Crore FY15 Net Sales 1,388 1,541 1,789 2,107 EBITDA Net Profit EPS ( ) Valuation Summary FY15 P/E Target P/E EV to EBITDA Price to book RONW (%) ROCE (%) Stock data Particular Amount Market Capitalisation ( Crore) 4,980.0 Debt (FY15) ( Crore) - Cash (FY15P) ( Crore) 29.6 EV ( Crore) 4, week H/L 4970 / 2989 Equity Capital ( Crore) 11.7 Face Value 10 MF Holding (%) 5.1 FII Holding (%) 16.9 Price performance 1M 3M 6M 12M TTK Prestige Butterfly Gandhimathi Hawkins Cookers Research Analysts Bharat Chhoda bharat.chhoda@icicisecurities.com Nirav Savai nirav.savai@icicisecurities.com Focus on market share gain January 20, 2016 TTK Prestige (TTKPRE) 4200 TTK Prestige s (TTKP) Q3FY16 revenues increased 16.7% YoY to crore vs. our estimate of crore. The cooker segment grew 12% YoY to 155 crore while cookware and appliance segment saw growth of 9%, 27% to 85 crore, 202 crore, respectively EBITDA for the quarter grew 27.7% YoY to 58.1 crore. The EBITDA margin increased 110 bps as the raw material to sales ratio declined 190 bps YoY with positive operating leverage Consequently, PAT recorded growth of 32.6% YoY to 37.2 crore (Idirect estimate: crore) Benefit of lower revenue base, green shoots visible in festive season TTK Prestige reported strongest revenue growth in the last 10 quarters, fuelled by aggressive product launches at competitive prices and a lower revenue base compared to the previous year. The management also indicated there was a slight improvement in overall consumer sentiment this festive season. The non-south region, which contributed around 53% of overall revenues, grew at a more rapid pace compared to southern markets. As per the management, Chennai floods impacted southern revenues by around 20 crore in the current quarter. Thought leadership, innovative product launches to drive future growth In the current year, TTKP has been focusing on extending its current product portfolio with launch of new products like multi kadai, roti maker, electric chopper, air fryer etc. Existing products that are expected to grow on a large scale includes LED Lanterns, which aim at penetrating rural markets and, thereby, increasing their presence across geographies. Also, it has achieved its target of launching 100 SKUs in FY16. Going forward, the company expects utilisation at its Vadodara plant to improve as it plans to make more cookware products in-house and replace the imports. Pan-India presence with strong brand recall to help accelerate growth in digital marketplace TTKP s focus is on increasing market share by penetrating newer markets. The company is also exclusively designing various models for the online marketplace, which can further enhance the credibility of its pricing across channels. In consumer durables, touch and feel are vital attributes, which influence the customer buying behaviour. Prestige being a legacy and well trusted brand is a clear beneficiary in the digital marketplace. It also has a strong offline franchise, which makes it a household name in India. It has already started four fulfilment centres in Q3FY16. Currently, the share of online sales contributes less than 5% of overall revenues. Strong financial health, diversified product mix provide comfort TTKP is a net debt free company with strong return ratios and is expected to generate robust cash flows in the next few quarters. Going forward, in the next one or two years, it does not have any organic expansion plans as its current capacities are not fully utilised. It has been constantly focusing on capturing a higher market share in an overall sluggish demand scenario. TTKP over a period of time has been constantly expanding its product mix from cookers to cookware & now appliances as a segment has been dominating its overall growth. We have marginally reduced our & revenue estimates. We have a HOLD rating on the stock with a revised target price of 4390 (28x EPS). ICICI Securities Ltd Retail Equity Research

2 We Variance analysis Q3FY16 Q3 Q3FY15 YoY (%) Q2FY16 QoQ (%) Comments Revenue Revenues grew 16.7% YoY, above our estimates. Higher growth was mainly driven by appliances segment, which grew 28% YoY while cooker segment grew 13%. Cookers & appliances combined together comprised 78% of overall revenues Other Income Employee Expenses Raw Material Expenses Other Expenses EBITDA EBITDA Margin (%) bps bps The EBITDA margin increased 111 bps YoY, which was above our estimates. Depreciation Interest Extraordinary (expense)/income PBT Tax Outgo PAT Key Metrics Segment Revenue growth Cooker segment (including microwave cooker) grew 11.5% YoY, which was Cookers highest growth in value terms in the last five quarters Cookware Cookware segment grew 9% YoY Appliances Appliances segment was the fastest growing segment, which grew 27% YoY. This was mainly driven by new product launches Change in estimates ( Crore) Old New % Change Old New % Change New Comments Revenue 1, , , , ,106.8 We have reduced our estimates for & by 1.8% & 4.2%, respectively.by FY18, we expect revenues to grow at a CAGR of 14.9% in FY15-18, which would be driven by revenue from recently launched & new product launches EBITDA EBITDA Margin (%) bps bps 13.1 We have reduced our margin estimates for & on the back of a reduction in revenue growth estimates for FY16 & FY17. PAT EPS ( ) Assumptions Current Earlier FY15 Segment Volumes (lakh pcs) Pressure Cooker Cookware Avg Realisation ( per pc) Pressure Cooker , Cookware ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Diversified product portfolio to aid revenue CAGR of 14.2% (FY15-18E) TTKP witnessed robust revenue growth in FY During FY09-11, revenues grew at a CAGR of 38%. Despite a higher base in FY11-13, revenues grew at a CAGR of 33%. However, FY14 and FY15 were difficult years for the company owing to dampened consumer sentiments. In FY14, revenues declined 4.5% YoY while FY15 registered subdued growth of 8% YoY on a lower revenue base. TTKP s focus on a pan-india presence with aggressive product launches resulted in better growth in FY16. Historically, southern markets used to dominate overall sales but over time due to constant penetration in non-south markets, in Q3FY16 around 53% of revenues were from non-south markets. As a result, its performance was relatively insulated from the Chennai flood catastrophe. Consumer sentiments, in general, are expected to improve, going ahead. Furthermore, new product launches, the planned retail expansion and efforts to enhance ecommerce presence and maintaining price stability on online and offline trade channels lend further hopes of a revival. We expect revenues to grow at 14.9% CAGR in FY15-18E to 2107 crore. Exhibit 1: Revenue trend 2,400 2,107 2,000 1,600 1,358 1,294 1,388 1,541 1,789 crore 1, ,103 - FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 ICICI Securities Ltd Retail Equity Research Page 3

4 EBITDA margin set to see signs of pick up in, EBITDA margins were in the range of % in FY10-13 while EBITDA grew at a CAGR of 38% in FY FY14 witnessed a decline in overall revenue, resulting in a 265 bps decline in EBITDA margins to 12.45%. They further declined to 10.8% in FY15 mainly due to sluggish consumer sentiments. Q3FY16 has shown early signs of a margin revival, mainly driven by new aggressive product launches in the appliances segment, which contributed around 44% of overall revenue in Q3FY16 and also some benefit from lower commodity prices. It reported EBITDA margins of 13%, mainly driven by robust revenue growth in appliances (28% YoY) & cooker (12% YoY) segments. Going forward, we expect a better operating performance from FY17 and FY18 onwards. It would be mainly driven by (a) strong operating leverage due to healthy revenue growth with a change in product mix and (b) better utilisation in the Vadodara plant, which would reduce its dependence on traded products. Exhibit 2: EBITDA and EBITDA margin trend crore % - 5 FY12 FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 FY14 Q2FY15 Q3FY15 Q4FY15 FY15 Q1FY16 Q2FY16 Q3FY16 PAT margin, return ratios to improve from FY16 onwards The PAT margin and return ratios saw a decline in FY14, FY15 owing to lower EBITDA generation. However, we expect the PAT margin and return ratios to improve in owing to a better operational performance compared to FY14 and FY15. Driven by an improvement in PAT margin, we expect PAT to grow at a CAGR of 25.3% in FY15-18E to crore. Exhibit 3: PAT and PAT margin trend Exhibit 4: Return ratios trend crore % FY12 FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 FY14 Q2FY15 Q3FY15 Q4FY15 FY15 Q1FY16 Q2FY16 Q3FY % FY12 FY13 Rturn On Equity FY14 FY15 Return on Capital Employed ICICI Securities Ltd Retail Equity Research Page 4

5 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 country s 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 was the first year when the company had registered a decline in earnings. The year 2014 was a difficult one for consumption related companies owing to dampened consumer sentiments, which had impacted revenue growth negatively. In TTKP s case, it has also been hampered by the power situation in Tamil Nadu, which has impacted the sales of its electric appliance and induction cooktops, 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 and lower disruption from ecommerce players, we expect the revenue and earnings growth to recover, going forward. Revenues and PAT are likely to grow at a CAGR of 14.9% and 25.3%, respectively, during FY15-18E. The non-south markets and new product launches would aid in bolstering growth. Though TTKP s FY15 performance was disappointing, the current trend of the last quarter can drive better FY16 revenue growth. An improvement in financial performance is expected to be driven by higher revenue growth owing to new product launches and improvement in margins due to softness in raw material prices. The company is also enhancing its online presence to buoy revenue growth and also working with major e-tailers to maintain price stability for its products. Also, the company expects the utilisation of its Vadodara plant to improve as it plans to make more cookware products in-house and replace the imports. TTKP is a net debt free company with strong return ratios and is expected to generate robust cash flows in the next few quarters. Going forward, in the next year or two, it does not have any organic expansion plans as its current capacities are not fully utilised. It has been constantly focusing on capturing higher market share in an overall sluggish demand scenario. Over a period of time, the company has been constantly expanding its product mix from cookers to cookware & now appliances as a segment has been dominating its overall growth. We have marginally reduced our and revenue estimates. We have a HOLD recommendation on the stock with a revised target price of 4390 (28x EPS). Exhibit 5: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY15 1, (16.9) , , , ICICI Securities Ltd Retail Equity Research Page 5

6 Company snapshot 5, , , Target Price: , , , , , , , Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Mar-11 Jun-11 Feb-12 Apr-12 May-12 Jan-13 Jun-13 Jul-13 Oct-13 Mar-14 Oct-15 Event Reports 50% topline growth to 760 crore & 60% YoY bottomline growth to 88 crore Successfully concludes long term settlement covering all its workmen at the Hosur unit Enters into agreement with US-based World Kitchen to market and distribute its brands - Corelle, Corningware, Vision, Pyrex and Snapware Signs a business collaboration arrangement with Vestergaard Frandsen, Switzerland to enter the water purifying space Enters into JV with Schott, a German company to launch a range of products in the glass based induction cooktops Receives Japan patent for the company's microwave pressure cooker Sells 5.6% stake to Cartica Capital for 230 crore Launches new mixer grinder (Teon mixer grinder) with stackable jars, which save store space and a lid lock to facilitate hands-free usage Signs Abhishek Bachchan and Aishwarya Rai Bachchan as brand ambassadors Revenues dip for second consecutive quarter; falling 3.8% YoY in Q4FY14. This leads to PAT de-growth of 6.5% YoY After two sluggish quarters, revenues picked up in Q1FY15. TTKP reported 9.8% YoY growth in revenues while PAT remained flat owing to margin pressure Aggressive launch of new products with 100 new SKUs in CY15 Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m)n Change (m) 1 T T Krishnamachari & Company 30-Sep % Nalanda Capital Pte Ltd 30-Sep % Jagannathan (T T) 30-Sep % Mukund (T T) 30-Sep % J.P. Morgan Asset Management (Hong Kong) Ltd. 30-Sep % Venkatesh (T T) 30-Sep % T. Rowe Price International (UK) Ltd. 30-Sep % Tiruvallur (Thatai Lakshman) 30-Sep % Wellington Management Company, LLP 30-Sep % Napean Trading & Investment Company Pvt. Ltd. 30-Sep % Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Promoter FII DII Others Recent Activity Investor name Investor name Investor name Value Shares Investor name Value Shares Wellington Management Company, LLP Deutsche Asset Management (Asia) Ltd Napean Trading & Investment Company Pvt. Ltd HDFC Asset Management Co., Ltd T. Rowe Price International (UK) Ltd J.P. Morgan Asset Management (Hong Kong) Ltd Capital Investment Trust Corporation Van Eck Associates Corporation ICICI Securities Ltd Retail Equity Research Page 6

7 Financial summary Profit and loss statement Crore (Year-end March) FY15 Total operating Income 1, , , ,106.8 Growth (%) Raw Material Expenses , ,177.0 Employee Expenses Manufacturing Expenses Selling & Distribution Expenses Admin & Other Expenses Total Operating Expenditure 1, , , ,830.1 EBITDA Growth (%) Depreciation Interest Other Income PBT Growth (%) Total Tax PAT Growth (%) EPS ( ) Cash flow statement Crore (Year-end March) FY15 Profit before Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Taxes Paid Others CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Others CF from financing activities Net Cash flow Opening Cash Closing Cash Balance sheet Crore (Year-end March) FY15 Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Deferred Tax Liability Other LT Liabilities Total Liabilities 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 Key ratios (Year-end March) FY15 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 ICICI Securities Ltd Retail Equity Research Page 7

8 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 8

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