TTK Prestige scrip captures near-term demand potential
Analysts say the company is poised to benefit from increased demand for home cooked food during pandemic
Shares of kitchenware and appliance firm, TTK Prestige Ltd have been resilient so far, trading just about 1% lower from its pre-covid highs seen in January on NSE. Valuations are not cheap, though. Currently, the TTK Prestige stock trades at nearly 37 times estimated earnings for financial year 2022, based on Bloomberg data.
Analysts say the company is poised to benefit from increased demand for home cooked food during the pandemic. This trend bodes well for demand for kitchen appliances. By the September quarter, TTK Prestige’s revenues had seen a reasonable uptick, increasing by almost 3% year-on-year. Note that revenues had declined by a whopping 52% during the June quarter when the impact of the curbs was more pronounced.
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As such, growth rates in Q2 could well have been better if it wasn’t for supply disruptions. The supply issues have eased since then and analysts expect the second half of financial year 2021 (H2FY21) to pan out better. “With supply side issues mostly resolved and encouraging festive trends, we expect revenue trajectory to improve materially in H2FY21E," said analysts from ICICI Direct Research in a report on 28 December.
TTK Prestige has said that October saw about 15% growth. This is not bad considering the high base, as Diwali was in October in 2019. In a conference call last month, the management said it took price hikes of about 4.5-6% in some categories in November. The impact on demand, if any, needs to be watched here.
ICICI Direct points out, “We build in revenue and earnings compound annual growth rate of 9% and 14%, respectively, in FY20-23E, with higher RoIC of about 30% in FY23E. TTK Prestige continues to be virtually debt free and has substantial free cash worth about ₹470 crore." RoIC is short for return on invested capital.
Analysts from Anand Rathi Share and Stock Brokers Ltd said in a report last month, “With its robust manufacturing capacity, a diversified product range and all-India operations, TTK is favourably placed in Indian kitchen appliances."
Still, TTK Prestige stock’s valuations suggest investors are capturing the near-term demand potential adequately. On the flip side, a delay in macro recovery or slower-than-expected growth in revenues would be key risks, going ahead.
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