TTK Prestige Ltd - Not So Strong Quarter; Result Update Q2FY15 :: Edelweiss PDF link

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TTK Prestige Ltd (TTK) reported revenue growth of 10.5% in Q2FY15. The company recorded a 14% growth this quarter in the domestic business but exports revenue was a laggard. EBITDA margins contracted marginally, as expenses increased due to the initial set-up costs associated with two new plants. The company recorded de-growth of 7.7% in Q2FY15 PAT. It witnessed growth across zones and product segments (except rice cookers) during the quarter. We expect TTK to grow its revenue at 15% CAGR for the period FY14-FY16E. At CMP of INR 3941, the stock trades at PE of 38.2x FY15E EPS of INR 103 and 31.5x FY16E EPS of INR 125.

Revenue growth seen across segments and zones 

TTK witnessed revenue growth of 10.5% this quarter at INR 382 cr as against INR 336 cr, supported by secular growth witnessed across segments and geographies. Improvement in the Southern markets was much more than in the Non-South markets on the back of a favourable base effect. The topline growth witnessed in Q2FY15 was primarily due to volume expansion. The company did take a price hike of 5% in September in cookers and cookware segments - its first hike for FY15. The price hike will get reflected in Q3FY15 numbers. We expect TTK to improve its numbers in the second half of FY15. Export sales declined from INR 18.26 cr to INR 9.16 cr. The company expects exports sales to revive in the second half of FY15.

All product segments witnessed decent growth this quarter. The cookers segment reported a 7.2% increase in revenues. Inner lids cooker segment recorded a 28% growth whereas the Outer lid cooker segment grew by 11%. Within the Appliances segment, Induction Cooktops witnessed 6% growth while the overall segment growth was muted at 3%. Revenues from the Cookware segment grew by an impressive 32% on the back of high-value, high-margin product mix while the Others segment revenues reported an impressive growth of 55.6%. TTK saw good traction in the Southern geographies due to a favourable base effect.  The Seemandhra region in particular witnessed good growth.

Initial setup cost for 2 plants adversely impact EBITDA margins

For Q2FY15, EBITDA grew by 4% to INR 46 cr as against INR 44 cr in Q2FY14. The company reported a decline in Ebitda margins by 76bps to 12.1% as other expenses shot up on the back of the initial set-up costs linked to two new factories. Both these plants have yet to reach full capacity utilisation levels. The hike in other expenses is a one-off cost and would reduce going ahead owing to better  capacity utilisation. The company has been proactively working towards reducing its imports by increasing indigenous production, in turn leading to lower RM costs. Imports have been reduced to 10%. The commissioning of the two new plants - one each in Gujarat and Maharashtra - have resulted in increased indigenous production which going ahead would aid in improving gross margins. The company witnessed some pressure on PAT margins, which declined by 144bps to 7.3% in Q2FY15 on the back of higher taxes. Taxes rose marginally as the company lost tax concession on its Roorkee plant. We have revised our Ebitda and PAT margins marginally upwards to factor in the uptick in revenue growth as well as to reflect improving operational performance.