After a robust quarter, near-term outlook appears uncertain due to the impact of the second wave of covid-19. Also, higher raw material costs may pose a risk to margin performance and that's worth monitoring, going ahead
MUMBAI: Shares of TTK Prestige Ltd’s touched a new 52-week on Wednesday on the National Stock Exchange. In fact, the stock has jumped more than 10% since the kitchenware and appliance firm released better-than-expected March quarter financial results (Q4FY21) on Tuesday.
The company has said this was the best ever Q4 for in terms of revenues and profits. Standalone revenues rose as much as 45% year-on-year to almost Rs555 crore. Revenues from appliances, which contributed 48% of total revenues during the quarter, were up 34% year-on-year. Cookers contributed 31% of revenues, climbing 49%. Further, cookware contributed 16% of revenues and increased by 67%.
Analysts from ICICI Securities Ltd, in a report on 26 May, said, “Market share gains from smaller /unorganized players, strong growth in rural markets and favorable base were key drivers of growth."
TTK’s gross margins expanded 206 basis points versus last year’s March quarter to 45.6%. One basis point is one-hundredth of a percentage point. Gross margin expansion was on account of significant price hikes (5%-19% depending on product categories) and favourable product/channel mix, point out analysts from JM Financial Institutional Securities Ltd.
Further, earnings before interest, tax, depreciation and amortisation (Ebitda) margins expanded a whopping 940 basis points year-on-year to 18.5%, helped by operating leverage and cost saving initiatives. Employee costs and other expenses declined as a percentage of revenues versus the same period last year. Overall, TTK’s Ebitda has increased to Rs102 crore from Rs35 crore in the March 2020 quarter, representing a stellar 195% increase. According to JM Financial’s calculations, Ebitda grew at 26% on a two-year compound annual growth rate (CAGR) basis.
To be sure, after a robust quarter, near-term outlook appears uncertain due to the impact of the second wave of covid-19. According to TTK, “Being in the home and kitchen appliance domain, the stress caused by lockdown in domestic kitchens, the need for improving kitchens and replacing appliances is likely to support the demand for such products."
Meanwhile, higher raw material costs may pose a risk to margin performance and that's worth monitoring, going ahead. ICICI Securities’ analysts said, “Prices of key raw materials are up 20-40% year-on-year and in order to pass on additional costs, the company has raised prices by 10-18%."
JM Financial analysts said in a report on 25 May, “TTK believes prices have peaked out and hence ruled out incremental price hikes. We raise our FY22/23 estimates by 3%/8% to reflect significant price increase, though off-set by weak 1QFY22 momentum. We continue to value TTK at 35 times Mar’23 earnings per share to arrive at Mar’22 target price of Rs8,400 and await a better entry point." TTK stock currently trades at around Rs8300 per share.
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