TTK Prestige -Capacity addition and alliances to aid growth; Buy:: Anand Rathi

TTK Prestige
Capacity addition and alliances to aid growth; Buy
Our interaction with the TTK’s management has led us to reiterate its
strengths. Its strategic partnership with Schott, alliances with World
Kitchen, Meyer Corp and Vestergaard Frandson reiterated its focus on
kitchen appliances. Management has guided to 30-35% revenue growth
in FY13, and a 15-16% EBIDTA margin. We maintain a Buy.

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 Strategic partnership with Schott. TTK has announced an alliance with
Schott, Germany, to market high-end induction cooktops and gas stoves
made up of high-end glass, under the brand Prestige Premia, positioned
as premium products with prices ranging from `5,000 to `15,000.
 Recent developments. TTK has announced an alliance with World
Kitchen and Meyer Corp, under which it will market premium storageware
and cookware. It also announced business collaboration with
Vestergaard Frandson, Switzerland, enabling TTK to enter the fastgrowing
domestic water-filter sub-segment.
 Segment-wise performance and guidance. Revenue growth across all
categories has been strong, with kitchen electrical appliances registering
the highest growth of 76%. Management expects FY13 revenue growth
to come at 30-35% and plans to launch 100 products during the year. It
plans to focus on induction cooktop sales (0.93m units sold in FY12).
 Annual report analysis. FY12 debt was `597m (contrasted with FY11’s
`22m); FY12 gross block was `2bn (`0.9bn in FY11). The rises in gross
block and debt stemmed from capacity expansions for pressure cookers
and cookware, and land purchased at Gujarat to set up fresh capacity. On
the rise in inventory, working capital days inched up from 12 in FY11 to
21 in FY12.
 Valuation. At our DCF-based target of `3,637, TTK trades at 20x FY14e
earnings and 2.1x EV/sales. Risks: slow demand, rise in input costs.