TTK Prestige: Rules India’s kitchen

TTK Prestige

Initiating Coverage | Sector: Consumer

TTK Prestige

BSE Sensex

28,622

S&P CNX

8,686

CMP: INR3,637

TP: INR5,000 (+37%)

Buy

Rules India’s kitchen

Set for growth revival

Stock Info

Bloomberg

Equity Shares (m)

M.Cap. (INR b)/(USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val (INRm)/Vol‘000

Free float (%)

TTKPT IN

11.7

42.6/0.7

4,830/2,700

9/-23/1

82/23

29.6

Financial Snapshot (INR b)

2015E 2016E

Y/E March

Sales

EBITDA

EPS (INR)

EPS Gr. (%)

BV/Sh. INR

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

13.7

1.6

1.0

84.1

-8.1

562.9

15.8

23.2

43.3

36.2

16.9

2.1

1.4

118.1

40.5

648.2

19.5

28.7

30.8

26.6

2017E

20.9

2.9

2.0

167.5

41.8

768.9

23.6

34.3

21.7

19.4

Prestige is India’s brand leader in the kitchenware and appliances categories and

commands a ~37% market share in pressure cooker category, 31% market share in

the cookware category and ~10% market share in the appliances category.

Having expanded fixed assets by 8x over last 5 years, TTKPT has ample room to

improve capacity utilization (58% in pressure cookers and 42% in nonstick

cookware). Substitution of imports with own manufacturing, revival of domestic

demand as well as export strategy to drive utilization rate higher.

With an aim to overcome predatory pricing by e-commerce players and avoid

channel conflicts, TTKPT plans to directly tie up with e-commerce players to

maintain price discipline. This will ensure traditional channels are not impacted.

We believe the de-growth phase is behind for the company, and with

discretionary spends revival as well as ramp-up of export opportunity, TTK will

post a robust 23% revenue CAGR over FY15-17.

We expect higher capacity utilization to drive significant operating leverage for

TTKPT with margins expanding 240bp over FY15-17, driving 41% PAT CAGR.

The stock trades at 30.8x and 21.7x FY16/17 EPS. We initiate coverage with a Buy

rating valuing the stock at 30x FY17 EPS, with PT of INR5,000.

Prestige is India’s number-1 kitchenware brand

Prestige

is the brand leader for kitchenware and appliances categories in India.

TTKPT commands ~37% market share in pressure cooker category, 31% market

share in the cookware category and ~10% market share in the appliances

category, with an overall market share of 14% in the INR90b Indian kitchenware

market. Strong advertisement spends of 7% of sales as against just 3-4% of sales

for Hawkins and continuous product portfolio expansion (from just pressure

cookers to complete range of kitchen products), geographic expansion into Non-

South markets which now constitute 45% of sales have made

Prestige

the brand

leader. This has ensured that once similarly sized, TTKPT has now grown to be 3x

the size of Hawkins, reflecting continuous market share gains. We believe, with

the right investments in brand and product extensions, TTKPT is best placed to

capture the strong growth potential of the Indian kitchenware market.

Shareholding Pattern (%)

As on

Promoter

DII

FII

Others

Dec-14 Sep-14 Dec-13

70.4

4.5

18.2

7.0

70.4

3.1

20.3

6.2

70.0

1.4

22.1

6.4

Notes:

FII incl. depository receipts

Stock Performance (1-year)

Product portfolio expansion helps emerge as the leader in kitchenware

TTKPT has transformed itself from a mere outer-lid pressure cooker

manufacturer to a complete kitchen solution provider. In line with its vision of ‘a

Prestige

in every kitchen’, it has entered several new product categories –

nonstick cookware, kitchen electrical appliances and gas stoves. This has

enabled TTKPT to expand its addressable opportunity from just INR13b to

INR90b and reduce the share of pressure cookers in its overall sales from 59% in

FY06 to 37% in FY14. Also, its wide product portfolio has enabled TTKPT to

distinguish itself from its key competitor, Hawkins, which continues to be

focused on just the pressure cooker and cookware categories.

18 March 2015

TTK Prestige

Massive capacity expansion; sets right stage for growth

TTKPT has expanded its capacities across segments. It has incurred a capex of

INR3b over FY11-14, multiplying its net block by 8x from INR419m to

INR3,396m. Pressure cooker capacity was increased by 2x from 4.8m pieces to

9.6m pieces, while nonstick cookware capacity was increased by 6x from 2m

units to 12m units. With expansion and consequent higher utilization, revenue

from own manufacturing improved from 48% in FY13 to 57% in FY14. However,

there still remains ample room to improve capacity utilization (58% in pressure

cookers and 42% in nonstick cookware). TTKPT’s new Gujarat unit which has a

capacity to produce 7m pieces of non-stick cookware is currently utilizing

capacities to the extent of ~40%. The management plans to raise utilization by

substitution of outsourcing with own manufacturing for domestic business and

initiatives towards developing a strong export business. Our interaction with

management suggests that TTKPT is at an advanced stage of negotiation with

foreign OEMs and has been working on trial orders for them. Thus, we expect

export segment to meaningfully contribute from FY16.

Improvement in capacity utilization to drive margins higher

As the capacities are currently underutilized (58% capacity utilization in pressure

cookers and 42% in nonstick cookware) there are significant under-absorbed

fixed costs, dragging margins lower for these segments. As capacity utilization

improves, we expect margins to expand 240bp over FY15-17 from 11.6% to 14%

led by operating leverage. Further, with focus to ramp up value added segments

like Hard Ionized and Stainless Steel category of pressure cookers (25% of total

pressure cookers) and non-stick cookware (15% of total non-stick cookware), we

expect realization per cooker / cookware as well as margins in these categories

to improve going forward.

Plans direct tie-ups with e-commerce companies

In our interactions, the management has indicated that a number of e-

commerce firms have approached TTKPT for direct tie-ups to sell its products on

their platforms. TTKPT intends to manage its own page on e-commerce

platforms and ensure no predatory pricing. It is likely to take another six months

to one year to make complete transition to this new arrangement with e-

commerce firms, post which it can avoid channel conflicts faced in the past.

Valuation and view

We expect revenue to grow at a CAGR of 23% over FY15-17, led by 31% CAGR in

nonstick cookware business, 23% CAGR in pressure cooker business, and 17%

CAGR in appliances business. With operating leverage, we expect EBITDA to post

35% CAGR and PAT to post 41% CAGR over FY15-17. Led by better asset

utilization, we expect return ratios to improve (RoCE to improve from 23% to

34% and RoE to improve from 22% to 24%). Given minimal reinvestment needs,

annual free cash flow should improve to INR1.7b over FY15-17. The stock trades

at 30.8x FY16E and 21.7x FY17E EPS. We initiate coverage with a

Buy

rating with

a target price of INR5,000 valuing the stock at 30x FY17E EPS of INR167.5.

18 March 2015

TTK Prestige

Story in charts: Rules India’s kitchen

Exhibit 1: Significant portfolio expansion

Pressure Cookers & Pans

Gas Stoves

NonStick Cookware

Kitchen Electrical Appliances

Exhibit 2: Expanded opportunity size from INR13b to INR90b

Market size (INR b)

Small

Appliances,

Wet

Grinders, 5

Chimneys, 6

Rice

Cookers, 4

Induction

Cook

tops, 10

Pressure

cookers, 13

Non stick

cookware,

Mixer

grinders, 20

LPG gas

Stoves, 18

Source: MOSL, Company

Exhibit 3: Strong marketing investments

Ad spend to revenues (%)

4.2%

6.2%

Exhibit 4: Significant capacity expansion

Net Fixed Assets (INR m)

3,396

3,455

3,489

3,501

3.5%

2.6%

1.6%

1,507

419

1,681

Bajaj

Electricals

Havells

Hawkins

V-Guard

TTK Prestige

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: MOSL, Company

Exhibit 5: Robust cash generation

Free Cash Flow (INR m)

999

145

1,192

1,686

Exhibit 6: Strong return ratios

RoCE (%)

-911

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: MOSL, Company

18 March 2015

TTK Prestige

Prestige is India’s largest kitchenware brand

Key drivers: Advertising investments, portfolio expansion, distribution

Prestige is India’s best known brand for kitchenware and appliances. TTKPT commands

14% share of India’s INR90b kitchenware industry. It spends 7% of its sales on

advertising, much higher than a peer like Hawkins which spends 3-4% of its sales.

With product portfolio expansions, TTKPT has expanded its addressable opportunity

from INR13b to INR90b and reduced the share of pressure cookers from 59% of its

sales in FY06 to 37% in FY14.

It has expanded its distribution network to penetrate the western, northern and

eastern regions, and now derives 45% of its revenue from these markets.

Brand leader – number-1 in kitchenware

Prestige is India’s number-1 kitchenware brand

Prestige

is India’s brand leader for kitchenware and appliances. It commands 14%

share in the INR90b kitchenware industry. Innovative marketing, continuous

investments in advertising, and expansion of product portfolio from just pressure

cookers to complete range of kitchen products have ensured continuous market

share gains for

Prestige.

Along with brand promotion, product exchange schemes

have enhanced its brand loyalty. To project itself as a pan-India kitchenware player,

in FY14, TTKPT appointed Bollywood celebrity couple Abhishek Bachchan and

Aishwaria Rai Bachchan as its brand ambassadors. We believe, with the right

investments in brand and product extensions, TTKPT is best placed to capture the

strong growth potential of the highly fragmented Indian kitchenware market.

Exhibit 7: Bollywood celebrity couple Abhishek Bachchan and Aishwaria Rai Bachchan

are Prestige’s brand ambassadors

Source: Company, MOSL

18 March 2015

TTK Prestige

Highest advertisement spends amongst peers drives brand leadership

TTKPT has been continuously investing in brand building with the aim to enter new

markets and widen its product portfolio. Its advertisement spends average around

7% of sales. In contrast, Hawkins spends just 3-4% and Bajaj Electricals spends 1.3-

1.5%. Higher advertising spends over the years have helped TTKPT enter non-South

markets and to penetrate into newer product categories. Newly launched products

have received good market response despite tough competition from existing

players in those products. We believe TTKPT is on the right track to develop a

premium brand image and become the first choice for consumers looking for better

quality kitchenware. TTKPT continued its brand and marketing investments despite

slowdown in sales over last two years, which we believe should help TTKPT in

outperforming industry growth as discretionary spending revives.

Exhibit 8: TTKPT has the highest advertisement spends amongst peers

Ad spend to revenues (%)

4.2%

6.2%

3.5%

2.6%

1.6%

Bajaj Electricals

Havells

Hawkins

V-Guard

TTK Prestige

Source: Company, MOSL

Exhibit 9: TTKPT has been continuously investing in advertising and brand building

Advertising spend (INR m)

8.0%

7.4%

8.2%

7.0%

6.9%

6.5%

5.8%

794

6.2%

804

6.4%

885

6.6%

1,106

6.6%

1,383

Advertising spend (%)

714

528

224

FY07

241

FY08

329

FY09

354

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

18 March 2015

TTK Prestige

Fragmented category structure benefits industry leader

The kitchenware category (pressure cookers, cookware, stoves and small kitchen

electrical appliances) in India is highly fragmented, not only in terms of number of

manufacturers, but also in terms of product range. Unorganized players command a

significant portion of the category – about 50% of the pressure cooker and 60% of

the nonstick cookware segment is unorganized. Also, penetration levels are still low

– about 40% for pressure cookers, with rural penetration at 25%. TTKPT with its

strong

Prestige

brand would be a key beneficiary of the strong growth in

kitchenware. Its dominating position in various segments of kitchenware, wide array

of products across kitchen services, extensive distribution network, and continuous

new product launches should help drive strong growth for the company.

Exhibit 10: TTKPT commands strong market shares across kitchenware categories

categories

86 new SKUs, five new product categories

New range of induction cooktops

Introduced a host of new product categories including the

Apple

range of inner-lid

pressure cookers, microwave pressure cookers, range of induction cook tops and induction

compatible cookware range

67 new SKUs and product variants for the appliance segment

60 new SKUs covering pressure cookers, induction cook tops, mixer grinders, rice cookers,

gas stoves and other small electric appliances

110 new SKUs across pressure cookers, induction cook tops, mixer grinders, rice cookers,

gas stoves and other small electrical appliance segments

~70 new SKUs

Plans to introduce ~100 SKUs, and a range of products in the water purifier and kitchen

storeware segments

Source: Company, MOSL

18 March 2015

TTK Prestige

Exhibit 19: Key innovations at TTKPT

Source: Company, MOSL

International alliances to drive premiumization

To drive future growth, TTKPT is diversifying its portfolio by establishing alliances

with international brands in segments like tableware, storage management and

water filters. It has entered into business agreements with major international

kitchenware manufacturers, including World Kitchen, Meyer Corp, and Vestergaard

Frandsen. However, after the partnership with World Kitchen failed to garner

expected financial results in FY13, TTKPT decided to restrict the distribution alliance

to the storeware range under the

Snapware

brand. We expect water filters to be a

key product launch, with meaningful revenue contribution from FY17.

Exhibit 20: Alliances with global brands

Partner

Vestergaard

Frandsen

Schott AG

Brands/products

LifeStraw water filters

Prestige Premia range of glass top

gas stoves

A range of cookers and cookware

products under known brands such

as Anolon, Circulon, Faberware and

Bonjour

Comment

The water filter market in India is largely untapped (~5% penetration) and, thus,

offers immense potential. TTK is licensing the water filters, manufacturing them

in its Gujarat plant and will be marketing the products (co-brand)

The high-end gas stoves range is aimed at ‘premiumizing’ its brand and for

catering to the high-end segment of the market

The products are aimed at the premium segment; TTK has the distribution rights

for these products

Source: Company, MOSL

Meyer Corp

Expect water purifier to be a strong product for TTKPT

The water purifier market in India is underpenetrated (~5% penetration), which

presents immense growth potential. The industry is expected to grow rapidly in the

next few years, driven by rise in health awareness and increase in affordability.

TTKPT has entered into an alliance with Vestergaard Frandsen, a Switzerland-based

manufacturer of non-electric water purifiers, to enter the water purifier market in

India as a natural extension of its product line. TTKPT plans to introduce an entry-

level water purifier at ~INR2,000 to penetrate this segment. The share of non-

electric water purifiers currently stands at ~20%, and this would be the core target

segment for TTKPT. We expect meaningful revenue contribution from FY17.

18 March 2015

TTK Prestige

Strong distribution network

Reaching last mile via vast distribution network

TTKPT sells its products through multiple distribution channels, supported by a large

network of dealers. This has enabled TTKPT to reach new markets and more

consumers. It markets its products through authorized direct dealers, authorized

redistributors, large format stores (like Big Bazar, Star Bazar), institutions (large

corporate houses that place bulk orders for gifting), multi-level marketing chains,

and franchise retail outlets –

Prestige Smart Kitchen.

This also provides it higher

bargaining power and eliminates the risk of dependence on any one channel.

Increasing urbanization and rising incomes would spur consumer demand from tier-

II and tier-III markets, which can only be met by an extensive distribution network

and strong brand presence. With pan-India presence and a vast distribution network

of ~23,000 direct dealers, TTKPT is well positioned to tap these opportunities.

Exhibit 21: TTKPT has strong presence across distribution channels

Traditional Trade

Authorized Direct Dealers

Authorized Re-distributors

Sub Dealers

Modern Trade

Hypermarkets

Super markets

Shop in Shop

Own Retail

Institutions

BPCL

HPCL

Corporate and Govt.

Source: Company, MOSL

Prestige Smart Kitchens CSD

Exhibit 22: Revenue mix from various channels

Institutions, 7%

PSKs, 15%

Modern

Retail, 15%

Traditional

Trade, 63%

Source: Company, MOSL

Emerged from a South India player to a pan India player

TTKPT was traditionally a South India focused player, deriving most of its revenue

from this market. To expand its addressable market, TTKPT has leveraged its brand

and expanded distribution network in the last few years to penetrate the western,

northern and eastern regions. It derives 45% of its revenue from non-South markets.

Prestige Smart Kitchen – marketing tool turned into distribution model

TTKPT launched its exclusive retail outlets,

Prestige Smart Kitchen

(PSK) in early 2003

as part of its marketing strategy. Its foray into non-traditional products such as

nonstick cookware, gas stoves and kitchen electrical appliances initially failed to

generate interest among dealers, who were apprehensive about the acceptance of

TTKPT’s new products in the market, given the presence of other brands. To market

18 March 2015

TTK Prestige

these products and reach out to consumers, it opened retail stores under the

franchisee model. These stores met with a high degree of success and attracted a

large number of consumers, which eventually encouraged dealers to ask for TTKPT’s

new products. What began as a marketing tool has now evolved into a distribution

model, with 561

Prestige Smart Kitchen

outlets contributing 15% of its sales.

Asset-light model eliminates risk

Prestige Smart Kitchen

(PSK) stores follow an asset light model, with the franchisee

bearing all establishment and running costs, limiting TTKPT’s investment

requirements. Further, store expansions bear negligible risk, as the stores are under

the franchisee model - product transfers to these outlets are treated as a normal

sale to a dealer and the company has no liability, thereafter. Additionally, PSK stores

act as a useful marketing tool, helping to increase brand visibility.

Benefits of the PSK model:-

PSK showcases the entire Prestige product range from pressure cookers to

induction cook-tops and electrical appliances whereas a normal dealer would

have space constraint and investment issues in stocking up the whole range. At

times, he is also limited by the profile of customers he caters to. Consequently,

PSKs help push the brand as a ‘total kitchen solutions provider’ for the entire

customer base.

The retail presence helps the company reach customers directly thus limiting

the distribution channel costs, enhancing margins further and providing better

bargaining power for itself. It also eliminates the risk of dependency on any one

particular channel.

There are several geographies wherein households have the ability and

willingness to buy branded kitchenware, but do not have brand awareness and

access to distribution network of such products. The network of PSKs penetrates

such geographies and enables Prestige to grab a bigger share of the pie when

consumers shift from unorganized to organized buying of kitchenware.

Expanding retail network to support new product launches

~70% of PSK stores are in South India. TTKPT plans to take the total number of

outlets under PSK to 800 over the next three years. The increasing number of PSK

stores provides a robust platform for launching new product categories (such as

water purifiers) and helps in gaining brand visibility.

Exhibit 23: Strong expansion in Prestige Smart Kitchen stores

Prestige Smart Kitchens (nos)

536

279

356

433

580

650

725

180

173

196

228

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15E FY16E FY17E

Source: Company, MOSL

18 March 2015

TTK Prestige

Exhibit 24: Prestige Smart Kitchen store mix (%)

Non-South,

31%

South,

69%

Source: Company, MOSL

Superior supply chain management

Our channel checks suggest that TTKPT’s supply chain management is superior

compared with Hawkins. Dealers in North India suggest that proximity to the

wholesale distributor and product availability at their stores is one of the biggest

factors driving penetration of TTKPT’s products in a market previously dominated by

Hawkins. TTKPT follows a hub-and-spoke supply chain model, with 23 warehouses

across India and a large number of wholesale distributors across cities to cater to

the demand for stock from all three distribution channels – retail supermarkets,

traditional dealers, and franchisee shops.

Creating replacement demand through exchange schemes

TTKPT derives ~20% of its sales through exchange schemes and other promotions.

This has led to creation of substantial replacement demand for its pressure cookers,

nonstick cookware and gas stoves, which otherwise have high durability with

product life of 8-9 years. The kitchen electrical appliances have a much shorter life

of 2-3 years, fostering a natural replacement market. Consumers are always

attracted to branded products being sold at discounted prices. Besides, higher

income levels have also led consumers to shift to products with better features and

greater brand value. TTK runs the ‘Exchange Anything for Anything’ scheme where

consumers can bring in any old product and exchange it for any new Prestige

product of their choice, which has been a big success. Strong brand positioning

coupled with such schemes will enable TTKPT to achieve higher sales.

18 March 2015

TTK Prestige

Significantly outperformed competition

Has grown to 3x the size of Hawkins over the last decade

Ten years ago, TTKPT and Hawkins were of similar size. TTKPT has since grown to be 3x

the size of Hawkins in terms of revenue and PAT.

We believe TTKPT’s superior strategy of aggressive product launches and distribution

expansion has driven its outperformance over Hawkins.

TTKPT’s aggressive strategy has driven outperformance against competition

While TTKPT and Hawkins were similarly sized businesses ten years ago, TTKPT has

consistently outperformed Hawkins on all parameters. The net result is that TTKPT’s

revenue and PAT are 3x those of Hawkins.

Exhibit 25: Snapshot of relative performance of TTKPT and Hawkins

10 Year Period

Revenue growth

EBITDA growth

PAT growth

Market Cap growth

5 Year Period

Revenue growth

EBITDA growth

PAT growth

Market Cap growth

TTK Prestige

25%

30%

65%

72%

TTK Prestige

26%

35%

38%

103%

Hawkins

16%

26%

47%

62%

Hawkins

13%

14%

15%

65%

Difference

17%

11%

Difference

13%

21%

23%

38%

Source: Company, MOSL

Exhibit 26: TTKPT’s revenues have expanded to 3x Hawkins

TTKP revenues (INR b)

Hawkins revenues (INR b)

TTK/Hawkins revenues (x)

3.0

2.3

1.1

1.3

1.1

1.4

1.6

1.7

1.8

7.6

3.3

3.7

4.2

4.5

11.0

3.2

13.6

2.8

12.9

5.1

3.3

4.0

1.3

1.2

1.1

1.3

1.0

1.0 1.4

1.1

1.8

1.2

2.2

1.4

2.8

1.7

2.0

2.4

2.9

1.0

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Source: Company, MOSL

Exhibit 27: TTKPT’s PAT has expanded to 3x that of Hawkins

TTKP PAT (INR b)

Hawkins PAT (INR b)

TTK/Hawkins revenues (x)

3.8

2.6 1.1

1.7

1.4 0.8

1.0

0.5

0.0 0.0 0.1 0.1 0.2 0.2

0.0 0.0 0.0 0.1 0.1 0.2 0.4 0.3

1.3

1.5

1.2

1.8

3.9

1.3

2.9

1.1

1.0 0.8

0.0 0.0 0.0

0.0 0.0

0.3 0.3 0.4

(0.3)

(0.0) FY03

(0.1)

FY00 FY01 FY02 (0.1) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Source: Company, MOSL

18 March 2015

TTK Prestige

Superior multi-product / multi-geography strategy-driven outperformance

We believe TTKPT’s superior strategy of aggressive product launches and

distribution is responsible for driving its outperformance over Hawkins. While TTKPT

expanded its presence from outer-lid pressure cookers to inner-lid pressure cookers

to tap the North and West India markets, Hawkins continued to focus on just the

inner-lid market for pressure cookers.

Similarly, as TTKPT expanded into high growth appliances categories, Hawkins chose

to ignore that market. Further, TTKPT identified the right industry trends like those

relating to induction cooktops and carved a portfolio of induction-based cooktops

and cookware, making it the market leader in the newly emerged induction market

category. Also, while TTKPT expanded to North and West India, eating into Hawkins’

stronghold, Hawkins chose to ignore TTKPT’s stronghold – the South market.

While TTKPT has emerged as a pan-India player, with even revenues from South and

non-South markets, Hawkins remains a North/West India player, with minimal

revenue from South India. Further, unlike Hawkins, TTKPT has invested aggressively

in marketing and supplemented its distribution with exclusive brand outlets (PSK

stores). TTKPT has thus been continuously gaining market share over Hawkins.

Exhibit 28: While Hawkins continues to be focused on cookers and cookware…

Source: Company, MOSL

Exhibit 29: …TTKPT has developed a strong and exhaustive product portfolio

Source: Company, MOSL

18 March 2015

TTK Prestige

Capacity in place for next growth phase

Commenced INR3b capex over FY11-14, with higher utilization potential

TTKPT has incurred a capex of INR3b over FY11-14, expanding its net block by 8x from

INR419m to INR3,396m.

It has ample room to improve capacity utilization (58% in pressure cookers and 42% in

nonstick cookware). The management plans to ramp up utilization through exports.

As capacity utilization improves, we expect better fixed cost absorption for the new

plant, driving higher margins for TTKPT.

Massive capacity expansion; sets right stage for growth

TTKPT posted strong 26% revenue CAGR over FY09-14, led by new product

introductions in nonstick cookware and appliances. Most of the new introductions

were through outsourcing to Chinese and local vendors. In FY12, over 50% of sales

came from outsourced products and imports. This exposed TTKPT to currency

fluctuations, difficult and long working capital cycles, and lower margins in some

cases. To overcome these concerns, TTKPT has expanded its capacities across

segments. It has incurred a capex of INR3b over FY11-14, expanding its net block by

8x from INR419m to INR3,396m. Pressure cooker capacity was increased by 2x from

4.8m pieces to 9.6m pieces, while nonstick cookware capacity was increased by 6x

from 2m units to 12m units. TTKPT has expanded its manufacturing capacities at its

Coimbatore (Tamil Nadu) and Roorkee (Uttarakhand) plants, while also

commissioning its greenfield capacities in Gujarat.

Exhibit 30: Net fixed assets have grown ~8x over FY11-14

Net Fixed Assets (INR m)

3,396

3,455

3,489

3,501

1,507

419

1,681

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 31: Capacity expansions largely in pressure cookers and nonstick cookware

Product segment

Cookware

Pressure cooker

Induction-based

products

Others

Manufacturing capacity

Capacity has been increased to 12m pieces/annum from 2m pieces/annum; to

be manufactured indigenously

Manufacturing capacity expanded to 9.6m pieces per annum from 4.8m pieces;

to be manufactured in-house

Mix of in-house manufacturing and imports. Current capacity stands at 1m

pieces per annum

Water purifier production plant in Gujarat

Source: Company, MOSL

18 March 2015

TTK Prestige

Higher manufactured proportion to drive utilization higher

With expansion and consequent higher utilization, revenue from own manufacturing

improved from 48% in FY13 to 57% in FY14. However, there remains ample room to

improve capacity utilization (which stood at 58% in pressure cookers and 42% in

nonstick cookware in FY14). The management plans to improve utilization by

substitution of outsourcing with own manufacturing for domestic business and

developing an export business.

Successfully tapping of export markets can step up utilization significantly

TTKPT is in advanced talks with European OEMs to manufacture products for them

under a white-labeling arrangement at margins similar to domestic margins. Our

interaction with management suggests that TTKPT is at an advanced stage of

negotiation with foreign OEMs and has been working on trial orders for them. Thus,

we expect export segment to meaningfully contribute from FY16.

Exhibit 32: Ample room to improve utilization

Pieces (m)

Pressure Cookers

Non Stick Cookware

FY11

4.8

2.0

FY14 Expansion (x)

9.6

12.0

2.0

6.0

FY14 Sales Utilization (%)

5.5

5.0

58%

42%

Source: Company, MOSL

Exhibit 33: Manufactured proportion vs outsourcing proportion

Manufactured proportion (%)

Pressure Cookers

Non Stick Cookware

Gas Stove

Kitchen Electrical Appliances

Others

Grand Total

FY13

100%

33%

16%

48%

FY14

100%

74%

23%

57%

Revenue

proportion (%)

38%

17%

13%

30%

100%

Capacity

utilization (%)

58%

42%

Source: Company, MOSL

Will continue to follow outsourcing model for appliances

TTKPT sources its gas stoves and kitchen electrical appliances from third parties and

would continue to do so to maintain its focus on manufacturing of pressure cookers

and cookware. While gas stoves are being sourced from dedicated small and

medium scale enterprises in North India under TTKPT’s strict supervision, 60% of its

kitchen electrical appliances requirement is being sourced from China (20% cheaper

than in-house manufacturing). This strategy would enable TTKPT to grow faster

without investing too much in building capacities.

Improvement in capacity utilization to drive margins higher

With expansion in capacity, TTKPT’s dependence on imports/outsourced

manufacturing, particularly for pressure cookers and cookware, is likely to reduce.

This should boost margins for those product categories and insulate TTKPT from

foreign exchange volatility. As the capacities are currently underutilized (58%

capacity utilization in pressure cookers and 42% in nonstick cookware) there are

significant under-absorbed fixed costs, dragging margins lower for these segments.

As capacity utilization improves, we expect margins for these segments to expand,

thus improving overall EBITDA margins for the company.

18 March 2015

TTK Prestige

E-commerce impact / induction de-growth behind

Expect growth to recover

Predatory pricing by e-commerce players had caused channel conflicts for TTKPT,

leading to inventory correction by traditional retailers. To correct this, TTKPT plans to

directly tie up with e-commerce players and to maintain price discipline on their sites.

Growth in the induction range was impacted in the last two years due to change in

government policies on gas cylinders and power supply issues in South India. With

significant de-growth in induction, we believe the base is now favorable for growth.

Penetration of e-commerce impacted traditional retail business

With higher e-commerce penetration in India, and given the predatory trade

practices followed by some leading e-commerce players, sales for TTKPT’s

traditional retail channel have been impacted. The traditional retail channel

contributes ~65% of TTKPT’s revenue. Lower prices on the e-commerce channel set

a deflationary trend for distributor inventories. This led distributors to cut back on

channel inventories from the normal practice of holding two months of inventory to

holding as low as 15 days of inventory. This inventory correction in TTKPT’s largest

channel has impacted sales growth for the company over the last one year. Though

TTKPT does not sell directly to e-commerce firms, e-commerce firms procure

products from TTKPT’s distributors, by-passing the company.

Management plans to directly tie up with e-commerce companies

In our interactions, the management has indicated that a number of e-commerce

firms have approached TTKPT for direct tie-ups to sell its products on their

platforms. TTKPT intends to manage its own page on e-commerce platforms and

ensure no predatory pricing. It is likely to take another six months to one year to

make complete transition to this new arrangement with e-commerce firms, post

which it can avoid channel conflicts faced in the past.

Sales of induction-based products impacted by higher cap on LPG cylinders

TTKPT introduced induction-based appliances such as cooktops, cookers and

cookware in FY09. The contribution of this product segment to overall revenue

jumped to 42% in FY13 from 17% in FY09, with induction cooktops accounting for

the largest share (40-45%) in the segment. However, the sale of induction cooktops

and other bundled products (cookers and cookware) declined in FY14 owing to: (1)

severe power shortages in Tamil Nadu and Kerala, (2) relaxation of the cap on

subsidized LPG cylinders to twelve from six previously, and (3) excess channel

inventory due to a number of players entering the induction-based appliances

market. With significant de-growth over last two years, contribution from induction-

based products has declined to ~20% of revenue as against the peak of 42% in FY13.

However, TTKPT has outperformed industry peers and gained market share in this

category. We believe the base is now highly favorable, and any improvement in

consumer sentiment will propel growth in FY16.

Power shortage had impacted growth in South India

After acute shortages in FY13 and FY14, power supply is likely to improve in South

India after the connection of the southern electricity grids with the northern

electricity grids. Power shortage impacted TTKPT on both the demand and supply

sides. It disrupted manufacturing in TTKPT’s facilities in Hosur and affected the sale

of induction-based products. With power supply in southern states showing signs of

improvement, we expect demand for induction-based products to pick up.

18 March 2015

TTK Prestige

Earnings to post 41% CAGR over FY15-17

Drivers: Revival in discretionary demand, higher operating leverage

We expect revenue to grow at a CAGR of 23% over FY15-17, led by 31% CAGR in

nonstick cookware business, 23% CAGR in pressure cooker business, and 17% CAGR in

appliances business.

With operating leverage, we expect EBITDA to post 35% CAGR and PAT to post 41%

CAGR over FY15-17. Led by better asset utilization, we expect return ratios to improve.

For FY17, we estimate RoCE at 34% and RoE at 24%.

We expect operating cash flow to remain strong. Given minimal reinvestment needs,

annual free cash flow should improve to INR1.7b over FY15-17.

Despite strong payout (28%), we expect cash on books to rise from INR0.7b in FY15 to

INR2.6b in FY17, approximating 7% of the current market capitalization.

Expect revenue CAGR of 23% over FY15-17

We expect revenue to grow at a CAGR of 23% over FY15-17, led by 31% CAGR in

nonstick cookware business, 23% CAGR in pressure cooker business, and 17% CAGR

in appliances business. Revenue mix within segments is likely to be stable.

Exhibit 34: Revenue to post 23% CAGR over FY15-17

Revenues (INR m)

16,863

13,585

11,034

12,938

13,743

20,875

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 35: Revenue mix to remain largely stable

Pressure Cookers & Pans

NonStick Cookware

FY12

Gas Stoves

FY13

Kitchen Electrical Appliances

FY14

FY06

FY07

FY08

FY09

FY10

FY11

FY15E FY16E FY17E

Source: Company, MOSL

EBITDA to post 35% CAGR over FY15-17

We expect EBITDA to post 35% CAGR over FY15-17. Margins should expand 240bp

to 14%, driven by higher contribution from in-house manufacturing and operating

leverage benefits due to higher sales growth.

18 March 2015

TTK Prestige

Exhibit 36: EBITDA to clock 35% CAGR over FY15-17

EBITDA (INR m)

15.6%

15.0%

12.4%

2,037

1,602

1,594

11.6%

12.7%

Margins (%)

14.0%

2,923

1,720

2,142

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

PAT to post 41% CAGR over FY15-17

We expect PAT to grow at a CAGR of 41% over FY15-17 from INR1b to INR1.9b.

Exhibit 37: PAT (INR m)

PAT (INR m)

1,952

1,331

1,067

980

1,376

1,126

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: MOSL

Working capital cycle to improve

We expect working capital days to improve from 62 days to 47 days, led by lower

inventory days, which should decline from 75 days to 65 days.

Exhibit 38: Cash conversion cycle (days)

Receivables (days)

Payables (days)

FY12

FY13

FY14

Inventory (days)

Provisions (Days)

FY15E

FY16E

FY17E

Source: MOSL

Loans and Advances (Days)

Working Capital Days

Operating cash flows to remain strong; free cash flow robust

We expect operating cash flow to remain strong. Given minimal reinvestment

needs, annual free cash flow should improve to INR1.7b over FY15-17. Capex during

the period would only be minimal at INR250m per annum.

18 March 2015

TTK Prestige

Exhibit 39: Operating cash flow to remain strong

Operating Cash Flow (INR m)

1,976

1,473

1,005

637

-911

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

912

1,143

145

Exhibit 40: Robust free cash generation

Free Cash Flow (INR m)

999

1,192

1,686

Source: Company, MOSL

Return ratios to improve

Led by better asset utilization, we expect return ratios to improve. For FY17, we

estimate RoCE at 34% and RoE at 24%.

Exhibit 41: RoCE (%)

RoCE (%)

Exhibit 42: RoE (%)

RoE (%)

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Dividend payout at 28%; strong cash accretion on books

We expect TTKPT to maintain its strong dividend track record, with ~28% payout.

Despite strong payout, we expect cash on books to rise from INR0.7b in FY15 to

INR2.6b in FY17, approximating 7% of the current market capitalization.

Exhibit 43: Dividend payout (%)

Dividend Payout (%)

223

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

326

FY13

296

FY14

699

FY15E

FY16E

FY17E

Exhibit 44: Cash on books (%)

Cash on books (INR m)

% of Mcap

1,480

2,620

Source: Company, MOSL

18 March 2015

TTK Prestige

Initiating coverage with a Buy rating

Target price of INR5,000 implies 37% upside

We believe the de-growth phase is behind for TTKPT, with discretionary spends revival

and ramp-up of export opportunity, TTK will post 23% Revenue CAGR over FY15-17.

We expect higher capacity utilization to drive significant operating leverage for TTKPT

with margins expanding 240bp over FY15-17, driving 41% PAT CAGR.

The stock trades at 30.8x and 21.7x FY16/17 EPS. We initiate coverage with a Buy

rating valuing the stock at 30x FY17 EPS, with PT of INR5,000.

Exhibit 46: P/B (x)

5 Yrs Avg(x)

Exhibit 45: P/E (x)

28.3

26.4

P/E (x)

P/B (x)

5 Yrs Avg(x)

6.9

4.7

Source: Company, MOSL

Exhibit 47: Assumptions

Assumptions

Pressure Cookers & Pans

NonStick Cookware

Gas Stoves

Kitchen Electrical Appliances

Total Revenues (INR m)

Pressure Cookers & Pans

NonStick Cookware

Gas Stoves

Kitchen Electrical Appliances

Total Revenue Growth (%)

Pressure Cookers & Pans

NonStick Cookware

Gas Stoves

Kitchen Electrical Appliances

Total Revenue Mix (%)

FY12

4,132

2,247

1,108

3,494

11,034

30%

46%

37%

81%

45%

37%

20%

10%

32%

100%

FY13

5,106

2,449

1,279

4,490

13,585

24%

15%

28%

23%

38%

18%

33%

100%

FY14

4,940

2,270

1,669

3,907

12,938

-3%

-7%

30%

-13%

-5%

38%

18%

13%

30%

100%

FY15E

5,343

2,696

1,802

3,633

13,743

19%

-7%

39%

20%

13%

26%

100%

FY16E

FY17E

6,563

8,063

3,519

4,594

2,073

2,487

4,416

5,419

16,863

20,875

23%

31%

15%

20%

22%

23%

24%

39%

21%

22%

12%

26%

100%

Source: Company, MOSL

18 March 2015

TTK Prestige

Risks and concerns

Threat from predatory trade practices by e-commerce firms:

TTKPT has been

impacted by predatory trade practices adopted by e-commerce firms which has

resulted in inventory de-stocking by its traditional retailing channels. Management

plans to directly tie-up with e-commerce firms to ensure parity in online and offline

prices and thus avoid channel conflicts. However, any delay in forging these

agreements with e-commerce firms can impact near term growth for TTKPT.

Volatility in raw material prices:

TTKPT’s primary raw materials are aluminum and

steel – commodities whose prices are linked to global commodity prices. Although

the company has been able to pass on the increase in raw material prices to

consumers in the past owing to a strong brand, any failure to do so in the future can

adversely impact operating margins.

Foreign exchange movement:

TTKPT imports raw materials and traded products

which exposes it to foreign exchange volatility risk. Sharp INR depreciation coupled

with the company’s inability to pass on any increase in the cost of imports to

consumers may negatively impact margins in the near term.

18 March 2015

TTK Prestige

Management

Mr TT Jagannathan, Chairman

Mr Jagannathan serves as Chairman of TTK Prestige. He is a gold medalist from IIT

Chennai and Masters in Operations Research from Cornell University, US. He has

been on the board for more than 35 years now. He has two sons who are also

involved in managing group companies.

Mr TT Raghunathan, Vice Chairman

Mr Raghunathan serves as Executive Chairman of TTK Prestige. He is a Commerce

graduate. He has been on the board since 1995, has vast industrial experience and

has been actively involved in the management of various group companies.

Mr S Ravichandran, Managing Director

Mr Ravichandran serves as Managing Director and Executive Director of TTK Prestige

and has been on the board for over 10 years. He has degree in Mechanical

Engineering from IIT Chennai and is an IIM Ahmedabad graduate.

Mr Ajay Thakore, Non-Executive Director

Mr Thakore serves as Non-Executive Independent Director of TTK Prestige. He is a

Chartered Accountant, and practices as an Advocate and Tax Consultant. He has

been on the board since 1974.

Mr R Srinivasan, Non-Executive Independent Director

Mr Srinivasan is BE (Hons) by qualification. He has vast industrial experience and is a

Management Consultant. He has been on the board of TTK Prestige since 2000. He is

also on the boards of Cholamandalam MS General Insurance, Kirloskar Oil Engines,

and Sundaram Fasteners.

Mr K Shankaran, Director and Whole-Time Secretary

Mr Shankaran is a Cost & Management Accountant and Company Secretary, and has

been Whole-Time Secretary of the company since 1990. He was inducted into the

board in 1993. He is also on the boards of TTK Healthcare, Prestige Housewares, TTK

Healthcare TPA, TTK Services, and Manttra Inc, US.

18 March 2015

TTK Prestige

Industry overview

Demographics changes, rising incomes to create demand for appliances

The home appliances market in India will see a significant growth due to lower

penetration, increasing incomes, and growing urbanization. Also the need for

comfort and convenience in urban households as both partners work and thus the

perception of appliances will change from luxury to necessity which will lead to a

rapid growth for the home appliance market.

Another major growth driver of appliance market will be the growing middle class in

India. According to a McKinsey Global Institute (MGI) 2010 report, India’s fast

growing cities will drive a near fourfold increase in the country’s per capita income

between 2008 and 2030. Also, the number of middle class households (earning

between INR2 lakh and INR10 lakh a year) will increase more than fourfold

nationwide from 32 million to 147 million in 2030. With the rising disposable income

(per capita disposable income of the urban segment is expected to grow at a CAGR

of 6.4% between 2008 and 2030), consumer’s discretionary expenditure is also likely

to increase significantly. Going forward, rising disposable income would provide

more room for expenditure in discretionary items. According to PwC-Ficci, the

discretionary spend as a proportion of total spend is expected to improve by ~10%

by the end of 2019-20.

We believe the demand for appliances will be driven by rising disposable incomes.

Exhibit 48: Consuming class expected to expand from 50% currently to 85% over FY10-30

Deprived <0.9 Lakhs

Strivers 5-10 Lakhs

31%

Aspirers 0.9-2 Lakhs

Globals > 10 Lakhs

12%

34%

25%

40%

64%

50%

32%

26%

2020

15%

2030

Source: Company, MOSL

17%

29%

Seekers 2-5 Lakhs

2000

2010

18 March 2015

TTK Prestige

Small appliances set to grow at 15-18% annually

ASSOCHAM expects Indian consumer durable industry to grow to Rs 520bn (USD

8.40bn) by CY2015. The overall small appliances market is estimated at USD 1.2

billion, growing 15-18% a year. The premium segment is expected to grow at 30%

p.a. Penetration levels for consumer goods across categories remains low.

Exhibit 49: Consumer goods penetration levels (%)

Urban

Exhibit 50: Consumer goods penetration levels (%)

Rural

Source: Industry, MOSL

Key factors which will lead to double digit growth in small appliances market

include:

Rise in number of nuclear families with reduction in average household size

(Avg. household size has reduced from 5.6 in 1991 to 4.9 currently).

Rise in per capita income of middle class Indian households will lead to

consumer upgrading to branded products.

Higher growth (25

-30% pa) in under penetrated rural market will help drive

overall growth momentum.

Increasing affordability and improving educational level will lead to reducing

replacement cycle to 2-3 years for small appliances.

Exhibit 51: Small Industry market size (INR b)

Small appliances market size (INRb)

113

130

CY13

CY14

CY15

CY16

CY17

Source: Industry, MOSL

18 March 2015

TTK Prestige

Kitchen and Appliances industry

The total kitchen and appliances market is ~INR90b. TTK’s market share stands at

15%, while other prominent players include Bajaj, Philips, Hawkins, etc.

Exhibit 52: TTKPT caters to an opportunity size of INR90b

Market size (INR b)

Small

Appliances, 7.0

Wet Grinders, 5.0

Chimneys, 5.8

Rice Cookers, 4.0

Induction Cook

tops, 10.0

Mixer

grinders, 20.0

LPG gas

Stoves, 18.0

Source: Company, MOSL

Pressure

cookers, 13.2

Non stick

cookware, 7.2

Pressure Cooker industry

Over the years, the Indian kitchen appliances industry has experienced a rapid shift

in preference from unorganized to organized and branded players. Rising disposable

income, increasing urbanization and a shift from traditional joint families to nuclear

families have led to a strong industry growth.

Market size of the domestic cooker industry stands at INR13b in value terms.

In the overall market, organized segment accounts for 50%. Key players in

organized market include TTK, Hawkins, United, Pigeon, Butterfly, etc.

TTK enjoys a leadership position in Southern India, where it has 80% market

share. It has also notched up > 15% market share in the Northern market.

The penetration of cookers in urban / rural India stands at 85% and 25% resp.

Outer-lid cookers dominate market share in Southern and Western India, even

as inner-lid cookers are preferred in Northern and Eastern India.

In terms of pricing, the unorganized segment sells outer-lid cooker 20% cheaper

to organized players and inner-lid at 50%.

Cookware and appliances industry

The organized cookware industry has a market size of INR7b in value terms.

The market is split equally between organized and unorganized players. Here,

TTK has a 30% market share in the organized space, with Hawkins enjoying 10%.

TTK also enjoys a leadership position in Southern India, with 80% market share,

besides its 30% market share in Northern India. The market is fragmented with

other players like Nirlep, Butterfly, Pigeon etc.

The penetration of non-stick cookware in urban India stands at ~55% and in

rural areas at ~5%.

The unorganized market sells products 20% cheaper than organized players.

18 March 2015

TTK Prestige

Company overview

TTK is the flagship company of the TT Krishnamachari Group of companies which has

a presence in businesses like consumer durables, pharmaceuticals, healthcare and

biomedical devices. TTK Prestige Ltd was set up in 1955 as a private limited company

before it went public in 2000. The company through its brand ‘Prestige’ is among

the leading brands in the kitchen appliances space in India, especially in pressure

cookers and non-stick cookwares. It has four manufacturing facilities at Hosur,

Coimbatore (in Tamil Nadu) Roorkee (in Uttarakhand) and Gujarat.

Exhibit 53: TTK group

Today a Rs22 Billion group

30 product categories and services

16 manufacturing units

12000 employees •Exports to every

continent

Manufacturing commenced in 1950

Pioneered several categories in India

Pressure cookers, Gripe water, Maps,

Condoms, ball pens, Toys and Heart

Valves.

Started in 1928 as an indenting

agency

Founded by Mr. TT Krishnamachari

Pioneered organized distribution

Health care, Foods, Personal care

products, Writing instruments,

Ethical products

Cadbury’s, MaxFactor, Kiwi, Kraft,

Sunlight, Lifebuoy, Lux, Ponds,

Brylcreem, Kellogg's, Ovaltine,

Horlicks, Mcleans, Sheaffer’s,

Waterman’s & many more

Exhibit 54: Diversified group structure

TTK Prestige

Consumer durables -Listed

TTK Healthcare

Pharmaceuticals, Medical devices , Consumer

products and Foods -Listed

Condoms

TTK Protective

Devices

TTK Services

private

Cigna TTK Health

Insurance Company

Non-Resident services and KPO

Health Insurance JV with Cigna of USA

Source: Company, MOSL

18 March 2015

TTK Prestige

TTK Prestige commenced operations as a traditional pressure cooker manufacturer,

selling outer-lid aluminum pressure cookers, manufactured at facilities being only in

Bangalore and Hosur. It has since evolved into a ‘Total Kitchen Solutions’ company

offering a wide range of products spanning pressure cookers, non-stick cookware,

kitchen hoods (chimneys), hobs, gas stoves and several other electrical appliances.

Recently, TTK also forayed into modular kitchens wherein the company offers

kitchen designs and fittings based on customer requirements. Company has been at

the forefront by introducing several innovations like Gasket Release System (GRS),

Gasket Offset Device (GOD) and Double Locking System, all firsts in India. Its strategy

of introducing 100 new models across product lines every year has helped achieve

volume growth and garner higher market share. TTK has been awarded the “Super

Brand” validated by consumers.

Pressure cookers continue to be the major contributor to revenue, with 41% of sales

coming from this segment and 20% of the revenue from non-stick cookware, 25%

from kitchen electric appliances, 10% from gas stoves and the balance from other

products.

Exhibit 55: Segment wise revenue mix

Others , 3

Pressure Cookers

& Pans, 36

Kitchen Electrical

Appliances , 31

Non Stick

Cookware, 20

Gas Stoves, 10

Source: Company, MOSL

18 March 2015

TTK Prestige

Exhibit 56: Key milestones

Year

1955

1959

1984

1990

1994

1995

1998

2000

2001

2003

2004

2005

2008

2009

2010

2011

2012

2013-14

Key Milestones

Incorporated as a private limited company

Commenced manufacturing of pressure cookers with technical collaboration from

Prestige Group (UK)

Launched Prestige pressure pan

Launched ready-to-eat snacks, Fryums, in India

Came out with an IPO

Changed name from TT Ltd to TTK Prestige Ltd

Launched its products under the brand name Manttra in the US market

Entered the UK and Australian markets

Launched Prestige omega non-stick cookware

Launched a new range of vacuum flasks with imported shells

Recast its debt portfolio by converting the majority of its borrowing into ECBs and FCNRB

loans aggregating to USD9.5m

Inaugurated an exclusive TTK Prestige showroom in Vijayawada

Obtained licence for Prestige brand for the use in the US; launched Prestige Nakshatra

(inner lid), pressure Handi, pressure kadai, duplex gas tables

Introduced a new range of induction cook tops

Launched Prestige Apple range of inner-lid cookers, Prestige Micro Chef microwave

cookers, inducted compatible base cookware

Voted as India’s most trusted kitchen appliance brand by the Brand Equity survey of

India’s most trusted brands 2010

Envisaged capacity expansion of 3,000m

Entered into business tie-ups with World Kitchen, Vastergaard Frandenson, Meyer and

Schott AG

Expanded the pressure cooker capacity from 4.8m units to 9.6m units and cookware

capacity from 2m units to 12m units.

Source: Company, MOSL

18 March 2015

TTK Prestige

Financials and valuations

Standalone - Income Statement

Y/E March

Gross Revenues

Less: Excise Duty

Net Sales

Change (%)

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income - Rec.

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

PAT Adj for EO items

FY10

5,168

5,079

26.6

4,306

84.8

774

15.2

738

714

-40

754

230

30.5

524

497

FY11

7,756

120

7,636

50.3

6,419

84.1

1,217

15.9

1,174

1,210

1,204

365

30.4

838

842

FY12

11,227

193

11,034

44.5

9,314

84.4

1,720

15.6

1,658

1,625

463

30.7

1,126

FY13

13,859

274

13,585

23.1

11,548

85.0

2,037

15.0

1,947

143

1,852

488

28.1

1,331

FY14

13,234

295

12,938

-4.8

11,336

87.6

1,602

12.4

148

1,455

1,448

-70

1,518

295

104

26.3

1,118

1,067

FY15E

13,966

223

13,743

6.2

12,149

88.4

1,594

11.6

191

1,403

1,420

440

31.0

980

FY16E

17,137

274

16,863

22.7

14,721

87.3

2,142

12.7

216

1,926

1,995

618

31.0

1,376

(INR Million)

FY17E

21,214

339

20,875

23.8

17,953

86.0

2,923

14.0

237

2,685

144

2,829

877

31.0

1,952

Standalone - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Deferred Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Provisions

Net Current Assets

Appl. of Funds

FY10

113

1,128

1,242

255

1,528

835

430

405

235

2,081

613

603

440

426

1,197

676

522

884

1,528

FY11

113

1,801

1,915

382

2,329

892

473

419

495

226

3,115

1,050

747

535

782

1,925

1,063

862

1,189

2,329

FY12

113

2,738

2,851

597

3,516

2,029

522

1,507

794

4,532

1,749

1,060

223

1,499

3,320

1,995

1,325

1,212

3,516

FY13

114

3,841

3,955

101

1,145

5,201

2,262

581

1,681

1,401

4,825

2,355

1,432

326

712

2,706

2,202

504

2,119

5,201

FY14

117

5,737

5,853

205

269

6,327

4,125

729

3,396

243

4,988

2,668

1,491

296

533

2,391

2,036

354

2,598

6,327

FY15E

117

6,444

6,560

205

6,765

4,375

920

3,455

137

5,732

2,824

1,581

699

628

2,649

2,259

390

3,083

6,765

FY16E

117

7,438

7,555

205

7,760

4,625

1,136

3,489

169

7,303

3,234

1,848

1,480

741

3,290

2,772

518

4,012

7,760

(INR Million)

FY17E

117

8,845

8,961

205

9,167

4,875

1,373

3,501

209

9,502

3,717

2,288

2,620

876

4,136

3,432

704

5,366

9,167

18 March 2015

TTK Prestige

Financials and valuations

Ratios

Y/E March

Basic (INR) *

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x) *

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Leverage Ratio (x)

Current Ratio

Debt/Equity

FY10

43.8

47.0

109.6

10.0

25.2

FY11

74.3

78.0

168.9

12.5

19.6

FY12

99.4

104.9

251.6

17.5

20.6

FY13

117.2

125.1

348.3

17.5

FY14

91.5

104.2

502.2

20.6

24.4

39.8

34.9

7.2

3.3

26.8

0.6

47.6

54.8

3.3

44.0

1.7

0.2

53.3

64.2

3.3

50.2

1.6

0.2

47.3

58.8

3.1

57.9

1.4

0.2

39.1

46.7

2.6

63.3

1.8

0.3

21.8

27.3

2.0

75.3

2.1

0.0

FY15E

84.1

100.5

562.9

20.6

27.8

43.3

36.2

6.5

3.1

26.6

0.6

15.8

23.2

2.0

75.0

2.2

0.0

FY16E

118.1

136.6

648.2

28.8

27.7

30.8

26.6

5.6

2.5

19.4

0.8

19.5

28.7

2.2

70.0

2.2

0.0

FY17E

167.5

187.9

768.9

41.1

27.9

21.7

19.4

4.7

1.9

13.8

1.1

23.6

34.3

2.3

65.0

2.3

0.0

Standalone - Cash Flow Statement

Y/E March

Net P/L Before Tax & EO Items

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

(inc)/dec in FA

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

FY10

714

231

-40

-29

-179

-12

-66

-257

331

109

440

FY11

1,204

351

-123

-318

-222

-502

-13

-132

-145

440

535

FY12

1,632

468

-647

-1,523

222

-1,277

575

-57

-164

353

-312

535

223

FY13

1,852

147

324

-760

-924

-891

365

-148

-197

100

223

323

FY14

1,518

148

471

-367

-705

-90

-733

1,053

-881

-86

-232

-147

-30

326

296

FY15E

1,420

191

440

-82

-144

-269

-54

-273

-596

403

296

699

FY16E

1,995

216

618

-149

-281

-30

-382

-412

780

699

1,480

(INR Million)

FY17E

2,829

237

877

-213

-290

-545

1,141

1,480

2,620

18 March 2015

TTK Prestige

NOTES

18 March 2015

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