Q3FY24 Review: TTK Prestige: Near term demand headwinds

7 Feb 2024 , 12:46 PM

TTK Prestige (TTK) reported Q3FY24 results below analysts of IIFL Securties estimates with sales/Ebitda/PAT growing at 6-7% YoY. Demand environment remains unpredictable with trade channels destocking in December and management estimates two more quarters for demand to recover. Analysts of IIFL Capital Services downgrade their EPS estimates for FY24/25/26 by 6-8% to factor in the Q3 miss and a more gradual recovery in sales growth. Analysts of IIFL Capital Services forecast sales/Ebitda/EPS Cagr of 11%/21%/21% over FY24-26 and maintain ADD rating with a target price of ₹800. 

Below estimates: 

TTK Prestige reported Q3FY24 results below analysts of IIFL Capital Services estimates with sales/Ebitda/PAT growing 6%/6%/7% – 6%/22%/21% below their estimates respectively. Within major segments, cookware clocked higher growth at 6%, followed by appliances at 4.5% and cookers at 2%. The miss at Ebitda level was driven by lower sales and gross margin (flattish vs. analysts of IIFL Capital Services estimate of 50bps expansion). TTK recorded a decent festive season followed by a sluggish December. 

Demand scenario remains unpredictable: 

The trade channels focused on de-stocking post the festive season, indicating weak consumer sentiments. The pressure on demand has been witnessed more in the lower middle class segment and with the share of wallets still normalising, it may take a couple of more quarters for demand to recover, per the management. The repositioning of Judge brand is on track, with the benefits expected to accrue in FY25. 

EPS downgrade of 6-8%: 

Analysts of IIFL Capital Services factor in the Q3 miss and build in a more gradual recovery going forward, which is resulting in 6%/8%/6% downgrade in their FY24/25/26 EPS estimates. With a low single digit decline expected in FY24 sales, TTK is likely to clock a 7% sales Cagr over FY20-24. Analysts of IIFL Capital Services forecast 9%/12% sales growth and Ebitda margin expansion of 90bps/100bps in FY25/26. In addition to improved demand sentiments, this would also require steady execution from TTK. Maintain ADD rating with a target price of ₹800.