3 August 2016
1QFY17 Results Update | Sector: Consumer
TTK Prestige
BSE SENSEX
27,698
S&P CNX
8,545
CMP: INR5,159 TP: INR4,782 (-7%)
Downgrade to Neutral
Results below estimates; muted outlook for FY17
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Bloomberg
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
TTKPT IN
11.7
59.9 / 0.9
5,540/3,521
8/7/34
38
29.6
Financials & Valuations (INR b)
Y/E Mar
2016 2017E
Sales
15.3
17.9
EBITDA
1.8
2.4
NP
1.2
1.5
EPS (INR)
100.7 129.3
EPS Gr. (%)
29.6
28.3
BV/Sh. INR
620.3 697.9
RoE (%)
17.2
19.6
RoCE (%)
17.3
19.0
P/E (x)
51.2
39.9
P/BV (x)
8.3
7.4
2018E
20.2
3.0
1.9
159.4
23.3
798.8
21.3
20.3
32.4
6.5
Estimate change
TP change
Rating change
Note: FY17 annual and quarterly financials are consolidated for Horwood
Consolidated Quarterly Performance (INR Million)
Revenue growth contributed by Horwood
:
TTK Prestige (TTKPT) reported
overall revenues of INR3.8b (est. of INR4.4b), marking 11.3% YoY growth.
Horwood contributed INR350m of sales, excluding which growth was flat in the
domestic business. EBITDA margins expanded 130bp to 12.4% in 1QFY17 (est.
of 12.5%), led by gross margin expansion of 190bp, but partly offset of an
increase in employee costs. EBITDA grew 25% YoY to INR472m, while adj. PAT
grew 11% YoY to INR272m (est. of INR352m) in 1QFY17 due to exceptional
expense of INR82m.
Competition from low-cost players and drought conditions hurt sentiment:
In
1QFY17, cooker revenues de-grew 2% to INR1,280m, cookware de-grew 9%
YoY to INR580m, while appliances grew 8% YoY to INR1,610m. Volume growth
in the domestic business was 5% YoY, while value growth was 1.1% YoY due to
an increase in sales of low-cost models in the cooker, cookware and induction
cooktops segments. The company faced high competition from low-cost
players, mainly from north and east.
Horwood to drive growth and EBITDA margins expansion:
Horwood
contributed INR350m of revenues in the quarter, and is expected to add ~10%
to revenue growth in FY17. EBITDA margin of Horwood during the quarter was
11.5% due to one-off expenses; however, it is likely to be in northwards of
16%, going ahead. Management guided for ~15% revenue growth for FY17,
with 5% growth in the domestic business.
Valuation and view:
In view of sluggish consumer sentiment, we cut revenue and
PAT estimates by 9%/11% and 8%/10% for FY17/FY18, respectively. However,
in view of good monsoon, we expect growth momentum to gradually pick up
but at a slower pace. We expect revenue CAGR of 15% and PAT CAGR of 26%
over FY16-18E due to EBITDA margin expansion by 260bp to 14.6% in FY18. We
downgrade our rating to
Neutral
with a TP of INR4,782, 30x FY18E EPS.
Results
22 39825426
Niket Shah
(Niket.Shah@MotilalOswal.com); +91
below estimates
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +91 22 3982 5422
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

TTK Prestige
TTKPT reported overall revenue of INR3.8b (est. of INR4.4b) marking a 11.3%
YoY growth. Horwood contributed INR350m sales excluding which the growth
was flat in domestic business.
EBITDA margins expanded 130bp to 12.4% in 1QFY17 (est. of 12.5%) led by gross
margin expansion of 190bp, but partly offset of increase in employee costs.
EBITDA grew by 25% YoY to INR472m while adj. PAT grew 11% YoY—to
INR272m in 1QFY17 (est. of INR352m) due to exceptional expense of INR82m.
The exceptional items included a sum of INR58.3m being the cost in relation to
acquisition and a sum of INR23.8m towards ex-gratia payments made to retired
employees.
Exhibit 2: EBITDA trend
Growth (YoY, %)
16.7
10.2
11.3
7.5
410
462
6.4
EBITDA (INR m)
12.2
12.1
11.9
11.1
12.5
Margin (%)
13.0
11.0
12.4
Exhibit 1: Revenue trend
Revenues (INR m)
9.8
10.5
3.9
5.0
2,862
3,404
3,837
3,364 3,820
1.2
4,210 4,478 3,077 3,790
455
184
378
526
581
338
472
Source: MOSL, Company
Source: MOSL, Company
Exhibit 3: PAT trend
PAT (INR m)
Growth (YoY, %)
131.2
2.8
-7.7
-4.8
-64.3
-7.4
21.7
32.6
10.8
265
280
281
94
246
340
372
216
272
Source: MOSL, Company
Competition from low cost competitors and drought conditions hampered
consumer sentiment
Cooker revenue de-grew by 2% during 1QFY17 to INR1,280m, cookware de-grew
by 9% YoY to INR580m while appliances grew 8% YoY to INR1610m.
The volume growth in domestic business during the quarter was 5% YoY while
value growth was 1.1% due to increase in sales of low cost models in cooker,
cookware and induction cooktops.
The company faced high competition from low cost competitors mainly from
North and East.
From a region perspective, the South market outperformed the Non South
market which was highly impacted by drought conditions.
3 August 2016
2

TTK Prestige
Amongst the new product launches, Mops was launched in 3 markets and was
received well. However, the management highlighted that it will get a clear
picture on offtake at retail end by October 2016.
Exhibit 4: Revenues (INR m)
Segments
1QFY15
2QFY15
Cookers
1,350
1,480
Cookware
560
740
Appliances
1,400
1,550
Others
130
140
Total
3,440
3,910
3QFY15
1,400
780
1,590
160
3,930
4QFY15
1,060
550
1,190
130
2,930
1QFY16
1,310
640
1,490
130
3,570
2QFY16
1,610
760
1,800
130
4,300
3QFY16
1,550
850
2,020
150
4,570
4QFY16
1,100
490
1,390
160
3,140
1QFY17
1280
580
1610
160
3,630
Source: Company, MOSL
Exhibit 5: Revenues growth (YoY)
Segments
1QFY15
2QFY15
13%
7%
Cookers
Cookware
17%
32%
1%
3%
Appliances
Others
44%
56%
10%
11%
Total
3QFY15
5%
10%
-2%
45%
4%
4QFY15
2%
6%
5%
44%
5%
1QFY16
-3%
14%
6%
0%
4%
2QFY16
9%
3%
16%
-7%
10%
3QFY16
11%
9%
27%
-6%
16%
4QFY16
4%
-11%
17%
23%
7%
1QFY17
-2%
-9%
8%
23%
2%
Source: Company, MOSL
Exhibit 6: Revenue mix (%)
Segments
1QFY15
Cookers
39%
Cookware
16%
Appliances
41%
Others
4%
100%
Total
2QFY15
38%
19%
40%
4%
100%
3QFY15
36%
20%
40%
4%
100%
4QFY15
36%
19%
41%
4%
100%
1QFY16
37%
18%
42%
4%
100%
2QFY16
37%
18%
42%
3%
100%
3QFY16
34%
19%
44%
3%
100%
4QFY16
35%
16%
44%
5%
100%
1QFY17
35%
16%
44%
4%
100%
Source: Company, MOSL
Horwood to drive growth and EBITDA margins expansion
Horwood contributed INR350m revenue during the quarter and is expected to
add ~10% to revenue growth for FY17.
The margins during the quarter were 11.5% due to one-off expenses however
going ahead it is expected to be in northwards of 16% EBITDA margins.
The management guided for ~15% revenue growth for the FY17 with 5% growth
in domestic business.
With regards to depreciation of pound the management highlighted that since
most of the cookware products are imported into UK, the impact will be similar
for all the companies.
3 August 2016
3

TTK Prestige
Valuation and view
We value TTKPT at 30x FY18E EPS of INR159 and arrive at a price target of
INR4,782 and we believe our target multiple is justified, given the following:
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 (~60% currently). We believe substitution of imports
with own manufacturing, expected revival of domestic demand as well as
successful tapping of OEM exports strategy will drive utilization rate higher.
With an aim to overcome predatory pricing by e-commerce players and avoid
channel conflicts, TTKPT is in process of direct tie up with e-commerce players to
maintain price discipline. This will ensure channel conflicts are avoided.
In view of sluggish consumer sentiment we cut revenue and PAT estimates by
9%/11% and 8%/10% for FY17/FY18 respectively. However, in view of good
monsoon we expect the growth momentum to gradually pick going ahead but at
slower pace.
We expect revenue CAGR of 15% and PAT CAGR of 26% over FY16-18E due to
EBITDA margin expansion by 260bp to 14.6% in FY18.
We downgrade rating to Neutral with TP of INR4,782—30x FY18E EPS.
Exhibit 8: Price to book (one year forward)
12.5
10.0
34.5
33.8
7.5
5.0
6.9
5.0
3.8
6.8
P/B (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
Exhibit 7: Price to earnings (one year forward)
60
45
30
15
0
21.8
19.3
P/E (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
2.5
0.0
Source: MOSL, Company
Source: MOSL, Company
3 August 2016
4

TTK Prestige
Story in charts: Rules India’s kitchen
Exhibit 9: Significant portfolio expansion
Horwood
Kitchen Electrical Appliances
NonStick Cookware
9
10
15
59
13
11
15
56
14
10
16
55
17
10
15
53
20
12
17
47
25
10
20
41
31
10
20
36
Cleaning appliances
Gas Stoves
Pressure Cookers & Pans
33
9
18
37
30
13
17
37
28
12
19
37
30
13
18
36
Exhibit 10: Strong marketing investments
Ad spend to revenues (%)
6.2%
4.2%
3.5%
27
11
15
31
28
11
16
31
2.6%
1.6%
Bajaj
Electricals
Source: MOSL, Company
Havells
Hawkins
V-Guard TTK Prestige
Source: MOSL, Company
Exhibit 11: Higher penetration through Prestige Smart
Kitchens
Prestige Smart Kitchens (nos)
536 580 539
650
725
Exhibit 12: Significant capacity expansion
Net Fixed Assets (INR m)
5,293 5,202
3,396 3,365 3,323
1,507 1,681
419
FY11
FY12
FY13
FY14
FY15
FY16 FY17E FY18E
Source: MOSL, Company
80
228
180 173 196
279
356
433
Source: MOSL, Company
Exhibit 13: Robust cash generation
Operating Cash Flow (INR m)
1,786
1,846
Exhibit 14: Strong return ratios
RoCE (%)
41
34
1,005
637
912
721
971
20
15
17
19
20
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
Source: MOSL, Company
Source: MOSL, Company
3 August 2016
5

TTK Prestige
Assumption Sheet
Exhibit 15: Key assumptions
Assumptions
Pressure Cookers & Pans
NonStick Cookware
Gas Stoves
Kitchen Electrical Appliances
Cleaning appliances
Horwood
Total Revenues (INR m)
Pressure Cookers & Pans
NonStick Cookware
Gas Stoves
Kitchen Electrical Appliances
Cleaning appliances
Horwood
Total Revenue Growth (%)
Pressure Cookers & Pans
NonStick Cookware
Gas Stoves
Kitchen Electrical Appliances
Cleaning appliances
Horwood
Total Revenue Mix (%)
FY12
4,132
2,247
1,108
3,494
FY13
5,106
2,449
1,279
4,490
FY14
4,940
2,270
1,669
3,907
FY15
5,440
2,660
1,750
3,900
FY16
5,570
2,750
2,040
4,639
FY17E
5,511
2,721
2,142
5,201
300
1,785
17,858
-1%
-1%
5%
12%
FY18E
5,960
3,027
2,356
6,101
450
2,142
20,240
8%
11%
10%
17%
50%
20%
29%
15%
12%
30%
2%
11%
100%
11,034
30%
46%
37%
81%
13,585
24%
9%
15%
28%
12,938
-3%
-7%
30%
-13%
13,883
10%
17%
5%
0%
15,251
5%
5%
17%
17%
45%
37%
20%
10%
32%
23%
38%
18%
9%
33%
-5%
38%
18%
13%
30%
7%
39%
19%
13%
28%
10%
37%
18%
13%
30%
100%
100%
100%
100%
100%
31%
15%
12%
29%
2%
10%
100%
17%
13%
Source: MOSL, Company
3 August 2016
6

TTK Prestige
Financials and Valuations
Standalone - Income Statement
Y/E March
Net Sales
Change (%)
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
Change (%)
Margin (%)
FY12
11,034
44.5
1,720
15.6
62
1,658
64
31
1,625
0
1,625
463
36
30.7
1,126
1,126
33.8
10.2
FY13
13,585
23.1
2,037
15.0
90
1,947
143
47
1,852
0
1,852
488
33
28.1
1,331
1,331
18.2
9.8
FY14
12,938
-4.8
1,602
12.4
148
1,455
85
79
1,448
-70
1,518
295
104
26.3
1,118
1,067
-19.8
8.2
FY15
13,883
7.3
1,492
10.7
190
1,302
45
51
1,309
-24
1,333
351
59
30.7
923
906
-15.0
6.5
FY16
15,251
9.9
1,825
12.0
209
1,616
18
96
1,693
37
1,656
476
32
30.7
1,148
1,174
29.6
7.7
(INR Million)
FY17E
17,858
17.1
2,429
13.6
279
2,149
79
101
2,171
82
2,089
639
0
30.6
1,450
1,507
28.3
8.4
FY18E
20,240
13.3
2,955
14.6
342
2,613
48
111
2,676
0
2,676
819
0
30.6
1,857
1,857
23.3
9.2
Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
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
E: MOSL Estimates
FY12
113
2,738
2,851
68
597
3,516
2,029
522
1,507
794
4
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
0
4,825
2,355
1,432
326
712
2,706
2,202
504
2,119
5,201
FY14
117
5,728
5,845
205
269
6,319
4,125
729
3,396
243
90
4,988
2,668
1,491
296
533
2,399
2,036
363
2,589
6,319
FY15
117
6,343
6,460
260
0
6,720
4,297
931
3,365
264
35
5,294
2,747
1,593
295
659
2,239
1,869
370
3,055
6,720
FY16
117
7,113
7,230
292
0
7,521
4,464
1,141
3,323
31
680
5,933
3,247
1,753
312
621
2,446
2,289
157
3,487
7,521
(INR Million)
FY17E
117
8,018
8,134
292
1,050
9,476
6,714
1,420
5,293
179
680
6,446
3,425
1,957
126
937
3,122
2,446
676
3,323
9,476
FY18E
117
9,193
9,310
292
150
9,751
6,964
1,762
5,202
202
680
7,276
3,882
2,218
69
1,107
3,609
2,773
836
3,667
9,751
3 August 2016
7

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
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Working Capital Turnover (Days)
Leverage Ratio (x)
Debt/Equity
FY12
99.4
104.9
251.6
17.5
20.6
FY13
117.2
125.1
348.3
17.5
17.5
FY14
91.5
104.2
501.5
20.6
24.4
FY15
77.8
94.1
554.2
22.6
33.4
66.3
54.8
9.3
4.3
40.1
0.4
47.3
40.8
64.4
3.1
57.9
34
66
33
0.2
39.1
33.5
46.9
2.6
63.3
38
59
48
0.3
21.8
20.1
23.4
2.0
75.3
41
57
65
0.0
14.7
14.9
15.3
2.1
72.2
41
49
73
0.0
FY16
100.7
118.7
620.3
27.0
31.1
51.2
43.5
8.3
3.9
32.8
0.5
17.2
17.3
17.8
2.0
77.7
41
55
76
0.0
FY17E
129.3
153.3
697.9
41.1
37.6
39.9
33.7
7.4
3.4
25.1
0.8
19.6
19.0
19.9
1.9
70.0
39
50
65
0.1
FY18E
159.4
188.7
798.8
51.4
36.7
32.4
27.3
6.5
3.0
20.4
1.0
21.3
20.3
21.0
2.1
70.0
39
50
65
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
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
FY12
1,632
64
56
468
-647
637
-26
611
-1,523
222
24
-1,277
0
575
-57
-164
353
-312
535
223
FY13
1,852
90
147
324
-760
1,005
-33
973
-924
0
32
-892
0
365
-148
-197
19
100
223
323
FY14
1,518
148
85
471
-367
912
-62
850
-705
-90
62
-733
1,053
-881
-86
-232
-147
-30
326
296
FY15
1,333
190
45
373
-473
721
-47
675
-193
55
48
-90
0
-250
-64
-272
-586
-1
296
295
FY16
1,656
209
18
508
-405
971
0
971
66
-645
0
-579
0
0
-18
-357
-376
17
295
312
FY17E
2,171
279
79
639
-104
1,786
0
1,786
-2,398
0
0
-2,398
0
1,050
-79
-545
426
-186
312
126
(INR Million)
FY18E
2,676
342
48
819
-401
1,846
0
1,846
-274
0
0
-274
0
-900
-48
-682
-1,630
-58
126
69
3 August 2016
8

TTK Prestige
Corporate profile
Company description
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. It
commands 14% share in the INR90b kitchenware
industry. It derives 39% of sales coming pressure
cookers, 19% of the revenue from non-stick
cookware, 28% from kitchen electric appliances,
13% from gas stoves and the balance from other
products.
Exhibit 2: Shareholding pattern (%)
Jun-16
Promoter
DII
FII
Others
70.4
5.7
16.0
7.9
Mar-16
70.4
5.6
16.3
7.7
Jun-15
70.4
5.1
16.9
7.7
Source: Capitaline
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
Axis Mutual Fund Trustee Limited
Nalanda India Equity Fund Limited
Wellington Trust Co. National Association
T.Rowe Price International Discovery Fund
Napean Trading and Investment Co (P) Ltd
% Holding
5.3
3.5
2.4
2.4
1.2
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
T T Raghunathan
T T Jagannathan
Chandru Kalro
K Shankaran
Designation
Vice Chairman
Executive Chairman
Managing Director
Director & Company Secretary
Exhibit 5: Directors
Name
T T Raghunathan
T T Jagannathan
Chandru Kalro
T T Mukund
K Shankaran
Name
Arun K Thiagarajan*
Dileep Kumar Krishnaswamy*
Murali Neelakantan*
R Srinivasan*
Vandana R Walvekar*
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
S Viswanathan LLP
V Kalyanaraman
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
129.3
159.4
Consensus
forecast
132.9
169.0
Variation (%)
-2.7
-5.7
Source: Bloomberg
Source: Capitaline
3 August 2016
9

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