Near-term fortunes of TTK Prestige hinge on festive demand
PremiumTTK Prestige is expected to see the benefits from softening commodity costs from Q3FY23 onwards
Shares of TTK Prestige Ltd, a kitchenware and appliance maker, have increased by almost 34% from their 52-week lows seen on 17 June on NSE. This has helped the stock recoup losses of the first five months of calendar year 2022. The recovery is also in keeping with the rise in broader markets, said analysts.
The stock is now nearly at the same levels as at the beginning of this year.
TTK Prestige’s shares trade at 35 times estimated earnings for FY24, according to Bloomberg data. Some analysts reckon the scope for meaningful near-term upsides appear limited, given the expected margin pressure in the September quarter (Q2FY23). The company is carrying high-cost inventory, the impact of which would be felt on margins this quarter.
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Additionally, Q2 revenue growth is expected to be muted on last year’s high base. As such, the benefit of softening commodities is anticipated to reflect from Q3 onwards.
TTK Prestige maintains high inflation has impacted the consumption of entry-level products in the kitchen appliances segment. “However, the premium products’ market continues to depict strong demand pull. Early Diwali may also result in higher sales in September 2022," said analysts from ICICI Securities Ltd based on their interaction with the management of TTK Prestige. Continued momentum in the premium category is margin accretive at the company level.
“We model TTK to report revenue and earnings CAGR of 14% and 10.7% over FY22-FY24E with strong volume growth, stable margins of about 15%, and market share gains from the unorganised sector," said analysts from ICICI Securities in a report on 6 September. CAGR is compound annual growth rate.
The path ahead is not particularly rosy. Increased competition poses a risk. “Although home improvement and new housing theme is expected to sustain, we believe rising competition (renewed Butterfly under Crompton) will continue to keep earnings for TTK in check," said analysts from HDFC Securities Institutional Research in their Q1 results review.
Overall, in view of the disruptions caused because of the covid-19 pandemic, TTK has rolled forward its ₹5,000 crore revenue target by two years to FY27. Meanwhile, TTK’s UK subsidiary, Horwood Homewares, is suffering because of the steep inflation in the region amid the ongoing geopolitical crisis. A sustained delay in improvement on this front is a risk.
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The stock has seen a smart rebound lately, but TTK’s shares are still down 21% from the 52-week highs seen on 14 December.
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