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TTK Prestige - Financial Performance & Stock Recommendation

By Kaustubh Ghotikar | 7/18/2011 12:00 AM Monday

If we look at the journey of TTK Prestige (Prestige) over the past two years, it can be seen that the scrip has come from being an average ‘buy’ recommendation to being a strong ‘buy’, and a must-have in one’s portfolio. Such is the change in perception of this scrip in the last two years.

And why not, when the broader market has gone nowhere. Had you invested in this scrip, it could have created that alpha for your portfolio. Just to put this in perspective, on a year-to-date basis, while the Sensex is down by about 10 per cent, this scrip is already up by 67 per cent. In fact, even if we go a year back to 2010 and calculate the returns, while the Sensex is up by a mere 6 per cent, this scrip is up by a massive 532 per cent.

While one has to accept the fact that the company’s performance has indeed improved quite sharply over the last two fiscals, at CMP of Rs 2719 and a trailing twelve month PE of 37x, does this company still make sense from an investment point of view? Does this scrip still have enough steam to give further upside to investors? To get to the end of this, we have taken up the analysis of TTK Prestige.

Company Background

TTK Prestige is one of the leading kitchen appliances companies in India. From being just a pressure cooker manufacturer, today Prestige is positioned as a total kitchen solutions provider, with a range of products — from non-stick cookware, kitchen electric appliances, gas stoves, hobs, kitchen chimneys to modular kitchens, etc. Pressure cookers are still a major contributor to the revenues, with 41 per cent of sales coming from this segment. 20 per cent of the revenue comes from non-stick cook-ware, 25 per cent from kitchen electric appliances, 10 per cent from gas stoves and the balance from other products. That apart, Prestige also has interest in real estate to the extent of its 6.5 acre surplus land at Doorvani Nagar, Bangalore, which is being developed into a residential-cum-commercial space with Rajmata Realtors, Salarpuria. The basic ground work to begin construction is already in place.

Differentiating Factors

Though Prestige might look like a usual company doing its business, it has silently created its differentiator, with its aggressive management taking strong initiatives, being a product innovator and building a strong brand. It is this strong brand recall that has helped it not only in achieving but also in sustaining a 35 per cent market share in the organised pressure cooker and cookware segment, which also has an equally strong competitor in Hawkins. No wonder then that the company has been able to grow consistently at a five-year CAGR of 27 per cent in topline and 64 per cent in bottomline. In view of the management initiatives, this growth looks sustain-able going forward.

Becoming Future Ready

It should be noted that the company has chalked out a massive Rs 200 crore capex plan from FY11 through FY13, where it will double its pressure cooker capacities, while quadrupling the non-stick cookware capacities. This would include capacity expansions at Roorkee and Coimbatore, while fresh capacities are also expected

 

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