Q1FY24 Review: TTK Prestige: Pressure on top line continues

16 Aug 2023 , 11:29 AM

TTK Prestige (TTK) reported Q1FY24 results below analysts of IIFL Capital Services estimates on weak expectations. Driven by multiple factors, consolidated sales declined by 7%. A larger festive period on a soft base would result in an optical growth pickup in Q3. Management is confident of delivering a low-double-digit growth in the medium term, as demand situation normalises. Analysts of IIFL Capital Services forecast EPS Cagr of 16% over FY23-26 and maintain ADD with a TP of Rs800. 

Below estimates: 

TTK reported a net sales / Ebitda / PAT decline of 7%/24%/11%, missing analysts of IIFL Capital Services estimates by 5%/15%/7% respectively. Cookware segment witnessed a higher decline at 15% vs cookers and appliances at 8%. Gross margin expanded by 100bps, but was offset by negative operating leverage from sales decline and losses in the subsidiary – Ultrafresh Modular Solutions — leading to Ebitda margin contracting by 239bps to 10.3%. 

Growth pickup expected in H2: 

Sales performance has been impacted by multiple factors – subdued discretionary demand amid persistent inflation, share of wallet shift towards other discretionary categories such as Travel, Hospitality, Entertainment, etc.; channel upstocking in the base quarter, higher competitive intensity, among others. A larger festive period in Q3 (both Dussehra and Diwali in the same quarter) on a favourable base should result in an optical growth pickup. With the aforementioned factors normalising, overall demand would improve. 

EPS downgrade of 2-4%: 

TTK has revamped strategy around its brand — “Judge” — to address competition in the Economy segment, which is expected to yield results in the coming quarters. The company also plans to introduce a premium brand towards FY24-end. Management sounded confident of delivering a low-double-digit growth in the medium term, aided by the above initiatives and an improvement in overall demand conditions. Analysts of IIFL Capital Services downgrade their EPS estimates by 4%/3%/2% over FY24/25/26 to factor in the Q1 miss. They maintain their ADD rating on the stock with a target price of Rs800.