Q4FY23 Review: TTK Prestige: Demand situation worsens

26 May 2023 , 12:21 PM

TTK Prestige (TTK) reported Q4FY23 results below our estimates with sales declining by 12% and Ebitda/PAT declining by 25%+. Even as overall demand is expected to remain weak in H1FY24, the company is working on several initiatives to revive its medium term growth outlook.

Large miss: 

TTK reported a net sales / Ebitda / PAT decline of 12.4%/26.5%/27.5% – these were 16%/29%/28% below analysts of IIFL Securities estimate. While all segments declined YoY – decline in cookers and cookware was higher at 20%/13% respectively. Lower gross margin and negative operating leverage resulted in a larger miss at Ebitda and PAT level. Sluggish demand, coupled with increased competitive intensity, higher discounting and shift in share of wallet towards other sub-categories such as hospitality, etc. were some of the factors that led to the weak sales performance.

Reiterate revenue and margin targets: 

While demand is expected to be subdued in H1FY24, management sounded confident of reaching its domestic revenue target of Rs35bn (implied Cagr of 17% over FY23- 25) driven by a more meaningful play in the economy end (via “Judge by Prestige” brand), launching innovative products to counter competition at premium end and entering adjacent categories with high growth potential. Management also reiterated its Ebitda margin guidance of 14.5-16%.

EPS downgrade of 12%/9%:

Analysts of IIFL Securities factor in a soft demand environment in H1FY24, which results in a ~7% cut in sales and a 12%/9% cut in EPS estimates for FY24/25, respectively. While valuation is reasonable at 28x FY25 EPS, demand recovery is expected by 2H and the stock lacks any near term triggers. Analysts of IIFL Securities forecast 11%/17%/17% sales/Ebitda/EPS Cagr over FY23-26. They maintain their ADD rating with a target price of Rs750.

Analysts of IIFL Securities downgrade their EPS estimates by 12%/9% to factor in the Q4 miss and maintain ADD rating on the stock with a target price of Rs750.