Q2FY24 Review: TTK Prestige: All eyes on H2

31 Oct 2023 , 01:31 PM

TTK Prestige reported Q2FY24 results below analysts of IIFL Capital Services estimates with sales witnessing a double digit decline. A festive mismatch contributed to the weakness even as overall demand remained weak, coupled with increased discounting across brands and online channels. While growth in Q3 would look optically strong, a real turnaround in TTK’s performance would depend on a recovery in broad consumption. Analysts of IIFL Capital Services downgrade their EPS estimates by 9-14% and maintain ADD rating with a TP of Rs770. 

A below par performance: 

TTK Prestige (TTK) delivered a Q2FY24 performance which was below analysts of IIFL Capital Services estimates with sales declining by 13% (8% below estimate) and Ebitda/PAT decline of 32%/30% respectively (26% below analysts of IIFL Capital Services estimate). The decline in sales was broad based with double digit declines witnessed across segments, although decline in appliances category was higher at 20%. While a late Diwali this year would result in some shift in sales from Q2 to Q3, overall demand trends have remained under pressure. Competitive intensity has also witnessed an increase with higher discounting by most brands and online channels. 

Likely pick-up in H2:

The shift in festive sales from Q2 to Q3 this year, along with a favourable base is likely to aid a positive growth in Q3FY24, although growth in Q2 + Q3 combined, is still likely to be negative. The repositioning of TTK’s economy brand Judge is progressing well and its positive impact is likely to be witnessed over the next couple of quarters. Buoyant real estate sales also indicate a likely pick-up in H2FY24 in overall demand trends. 

EPS downgrade of 9-14%: 

Analysts of IIFL Capital Services factor in the Q2 miss and also lower analysts of IIFL Capital Services sales estimates for H2 as well as FY25, building in a more gradual pick- up in demand. While a turnaround in TTK’s performance would hinge on a recovery in broad consumption, the repositioning efforts on its economy brand – Judge – are likely to yield results in the medium term. Analysts of IIFL Capital Services downgrade their EPS estimates by 14%/9%/9% for FY24/25/26 and maintain ADD rating with a price target of Rs770.