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TTK Prestige, India’s largest kitchen appliances company, has deep
penetration into rural and urban markets (30,000 retailers and 340
exclusive stores), strong brand recall, product innovation, increasing
capacity and focus on high-growth segments. These factors, in our view,
should lead to 36% earnings CAGR over FY11-14e. We initiate coverage
with a Buy and price target of `3,647.
Strong brand with a solid distribution network. TTK leads in the
domestic kitchen appliances market and has built a strong brand via high
ad-spend (~7% of net sales). It plans to further expand its network of
over 30,000 retailers. It also operates Prestige Smart Kitchen, a chain of
exclusive franchisee stores, which contributed ~15% to FY11 revenues.
Pressure cooker Рthe fort̩. In FY11, TTK notched ~`3.2bn in sales of
pressure cookers. Over FY07-11, sales registered 18% CAGR, higher
than the market growth rate (~10%). TTK leads in pressure cookers and
enjoys ~40% share in the organized category. We expect its strong brand,
rising demand, product launches and increasing number of LPG
connections to result in 22% CAGR in revenue over FY11-14.
Diversifying risks through other products. The company has scaled
up its kitchen appliances; cookware and gas stove businesses by
leveraging its strong brand. These businesses brought in ~56% of
revenue in FY11. Due to rising demand, we expect revenues in these
segments to grow to `13bn in FY14 from `4.5bn in FY11.
Capex to fuel growth. TTK is raising its capacity for pressure cookers to
8m units and for cookware to 12m units. Capex of `2.3bn is targeted to
cover growth for the next 5 years and reduce dependence on foreign supply.
Valuation. At our DCF-based price target of `3,647, the stock trades at 26x
FY13e earnings and 2.7x EV/sales. Risks. Slow demand, rise in input cost.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TTK Prestige, India’s largest kitchen appliances company, has deep
penetration into rural and urban markets (30,000 retailers and 340
exclusive stores), strong brand recall, product innovation, increasing
capacity and focus on high-growth segments. These factors, in our view,
should lead to 36% earnings CAGR over FY11-14e. We initiate coverage
with a Buy and price target of `3,647.
Strong brand with a solid distribution network. TTK leads in the
domestic kitchen appliances market and has built a strong brand via high
ad-spend (~7% of net sales). It plans to further expand its network of
over 30,000 retailers. It also operates Prestige Smart Kitchen, a chain of
exclusive franchisee stores, which contributed ~15% to FY11 revenues.
Pressure cooker Рthe fort̩. In FY11, TTK notched ~`3.2bn in sales of
pressure cookers. Over FY07-11, sales registered 18% CAGR, higher
than the market growth rate (~10%). TTK leads in pressure cookers and
enjoys ~40% share in the organized category. We expect its strong brand,
rising demand, product launches and increasing number of LPG
connections to result in 22% CAGR in revenue over FY11-14.
Diversifying risks through other products. The company has scaled
up its kitchen appliances; cookware and gas stove businesses by
leveraging its strong brand. These businesses brought in ~56% of
revenue in FY11. Due to rising demand, we expect revenues in these
segments to grow to `13bn in FY14 from `4.5bn in FY11.
Capex to fuel growth. TTK is raising its capacity for pressure cookers to
8m units and for cookware to 12m units. Capex of `2.3bn is targeted to
cover growth for the next 5 years and reduce dependence on foreign supply.
Valuation. At our DCF-based price target of `3,647, the stock trades at 26x
FY13e earnings and 2.7x EV/sales. Risks. Slow demand, rise in input cost.
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