Initiating Coverage
October 18, 2013
Rating Matrix
TTK Prestige (TTKPRE)
Rating
:
Hold
Target
:
| 3140
Target Period
:
12-15 months
Potential Upside
:
-5 %
| 3295
Taking a breather…
6,500
4,000
6,250
3,750
TTK Prestige (TTKP), a part of the TTK group, is a dominant player in the
kitchen appliances space having a market share of 35% and 40% in the
pressure cookers and cookware segment, respectively. Over the last six
decades, TTKP has transitioned from being a mere pressure cooker
company to a complete kitchen solutions provider. The favourable shift in
demographics and constant product innovation has aided the company to
grow revenues and PAT at a CAGR of 30% and 50% during FY07-13.
However, the weak power situation in southern India (contributing 60% to
sales) and problems in Andhra Pradesh have led to dwindling of sales.
Also, with the resolution of problems at the competitor’s end, TTKP may
witness demand compression. We expect FY14 to remain broadly flattish
and expect revenue and PAT growth of 15.1% and 22.0%, respectively, in
FY15 owing to a revival in the southern markets. We have valued the
company at 22.0x FY15E earnings to arrive at a target price of | 3,140. We
initiate coverage on TTK Prestige with a HOLD rating.
Brand patronage + retail expansion + new launches = sustained growth
We expect TTKP to report 12.5% CAGR in revenues through leveraging
its strong brand legacy to launch various other related products and also
backed by retail expansion (Prestige Smart Kitchen) from the current 470
to 1,000 by FY18E. The improved power situation (especially southern
India) with peak deficits falling to single digits (4.5% - July 2013) from
17.1% in January 2008 gives further credence to the pick-up of falling
demand (electrical appliances) in southern India.
Macroeconomic pressure and competitive intensity to spoil party
The weak macroeconomic situation is likely to impact the discretionary
spends and, thereby, impact the revenue growth of TTKP. Also, with
issues at Hawkins’ facilities being resolved and normalcy resuming, the
demand for TTKP’s products would be negatively impacted.
Current environment makes us cautious; recommend HOLD
TTKP has witnessed a multi-fold increase in share price owing to its
strong fundamentals. While we remain positive about (a) revival in return
ratios; (b) reducing debt levels & (c) possibility of increased dividend
payouts, we remain apprehensive about the company’s ability to maintain
the historical growth rate. We initiate coverage on TTK Prestige with a
HOLD rating. We have valued the company at 22.0x FY15E EPS of | 142.6
to arrive at our target price of | 3,140.
6,000
3,500
Exhibit 1: Financial Performance
5,750
3,250
YoY Growth (%)
(YoY Growth)
FY12
FY13
FY14E
FY15E
Net Sales
44.5
EBITDA
36.8
23.1
9.9
15.1
18.8
(0.0)
Net Profit
35.4
23.0
17.4
2.4
22.0
Valuation Summary
FY12
FY13
FY14E
FY15E
PE (x)
32.9
28.1
28.2
23.1
Target PE (x)
31.4
26.8
26.8
22.0
EV/EBITDA (x)
22.1
18.8
18.5
14.7
Target EV/EBITDA (x)
23.0
19.5
19.3
15.3
Price/BV (x)
13.1
9.5
6.3
5.4
RoNW (%)
39.7
33.7
22.5
23.3
RoCE (%)
45.3
38.1
29.6
31.1
Stock Data
Bloomberg/Reuters code
TTKPT IN/ TTKL.BO
Sensex
20,883
Average volume
37,934
Market Capitalisation
3,841
EV
3,772
52 week H/L
4100 / 2870
Equity capital
| 11.7 crore
Face value
| 10
Promoter's stake (%)
71.9
Comparative return matrix (%)
Returns (%)
1m
3m
6m
TTK Prestige
(9.3)
1.5
12.4
12m
1.2
Hawkins Cookers
5.4
(15.5)
(17.3)
(1.4)
Butterfly Gandhimathi
(6.5)
(20.5)
(9.4)
(10.5)
Price movement
5,500
3,000
5,250
2,750
5,000
2,500
Oct-12
Jan-13
Apr-13
Price (R.H.S)
Jul-13
Oct-13
Nifty (L.H.S)
Analyst’s name
Bharat Chhoda
bharat.chhoda@icicisecurities.com
Dhvani Modi
dhvani.bavishi@icicisecurities.com
ICICI Securities Ltd | Retail Equity Research
| crore
FY11
FY12
FY13
FY14E
FY15E
Net Sales (| crore)
759.2
1,097.0
1,350.3
1,483.6
1,708.0
EBITDA (| crore)
125.3
171.4
203.7
203.7
250.6
PBT (| crore)
120.4
163.3
185.2
190.6
232.5
Net Profit (| crore)
83.8
113.4
133.1
136.3
166.2
EPS (|)
73.9
100.0
117.2
116.9
142.6
PE (x)
44.6
32.9
28.1
28.2
23.1
PBV (x)
19.5
13.1
9.5
6.3
5.4
EV/EBITDA (x)
29.4
22.1
18.8
18.5
14.7
ROCE (%)
43.7
39.7
33.7
22.5
23.3
RONW (%)
62.5
45.3
38.1
29.6
31.1
Source: Company, ICICIdirect.com Research
Shareholding pattern (Q1FY14)
Shareholder
Holding (%)
Promoters
71.9
Institutional Investors
20.3
General Public
7.8
FII & DII holding trend (%)
20
15
13.3
12.4
13.5
16.0
10
5
2.8
3.3
3.4
4.4
Q2FY13
Q3FY13
Q4FY13
Q1FY14
-
Company Background
TTK Prestige, a part of the TTK group, was incorporated in 1955. Over the
last almost six decades of operations, the company has got transformed
from a mere pressure cooker player to one of the country’s largest kitchen
appliances company. TTKP’s product portfolio comprises pressure
cookers, non-stick cookware, rice cookers, OTGs, kitchen hoods
(chimneys), hobs, LP gas stoves, coffee makers, kettles, sandwich
toasters and many other small electrical appliances. The company also
offers modular kitchen solutions with the widest range of options in terms
of design, choice of materials, accessories and hardware.
TTKP has been responsible for many innovations in the domestic kitchen
appliance segment. Some of its innovations include gasket release
system (GRS), gasket offset device (GOD) and double locking system, all
firsts in India. The company is also the first kitchenware company in the
country to receive the ISO 9001 Certification and the PED/CE Certification
from TUV, Germany. TTKP has been awarded the select “Super Brand”
validated by consumers and is also the most preferred brand in the
kitchenware segment.
TTKP exports its products to the US, Europe, South Africa, Kenya,
Australia, Singapore, Middle East, Sri Lanka and many other countries.
Products manufactured by the company meet every relevant global
standard such as CE, GS, UL, etc.
The company currently has manufacturing facilities in Hosur,
Coimbatore and Roorkee and distributes from sales branches located
across the country to cater to the needs of specific markets. TTKP boasts
of a strong distribution network. Apart from its exclusive brand outlets of
470 Prestige kitchen stores, the company’s products are available in over
50,000 outlets. The company has a total employee strength of 2,000
employees and a dedicated sales staff of 1,000.
Exhibit 2: TTKP's sales mix
2,000
62
(| crore)
1,500
45
28
1,000
500
-
27
449
50
494
349
101
225
128
245
141
272
568
163
326
21
104
87 61
241
193
81
154
317
413
511
557
624
FY10
FY11
FY12
FY13
FY14E
FY15E
Pressure Cookers
Cookware
Stoves
Electrical Appliances (Kitchen)
Others
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Exhibit 3: TTK Prestige's journey thus far...
The company set up the second
manufacturing unit in Hosur
TTK Prestige was incorporated
1959
1955
1981
The company set up its first
manufacturing unit in Bangalore
Launch of inner lid pressure cookers; set
up new capacities in Uttarakhand &
Coimbatore
2002 - 03
Period of turbulence
2006
The company launched stainless steel
pressure cookers, non-stick cookware
1990
1990 - 94
1990s
Remained a single product (only
aluminum pressure cookers) company
with dominance in South India
Started focusing on increasing exports;
launch of Manttra Brand
Largest capacity expansion initiative to
back vision of 'A prestige in every
kitchen '
Microwave cookers meet great success
in export markets
2006 - 10
Transformed into a kitchen solution
provider; introduced induction tops,
microwave pressure cookers
2011
2012
2013
Turover crossed | 1,100 crore; alliances
with global high end brands
Source: Company, ICICIdirect.com Research
Exhibit 4: TTKP’s varied product range
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
Investment Rationale
Changing Indian demographics: Big boon for consumption sector
India has witnessed a demographic shift with per capita income (current
prices) increasing at 11.7% YoY to | 68,747 (FY13). With increasing
preference for branded products, the organised segment has witnessed
healthy growth in the recent past. The demographic advantage continues
to remain owing to a relatively low median age (~25 years), higher
number of working women and increased urbanisation.
Exhibit 5: Rising middle class
Indian demographics have worked in favour of various
consumption players. With rising aspirations and incomes,
the preference for branded products has been on the rise
(households in million)
350
300
23
8
250
2
200
31
148
85
150
100
186
180
2008
2020E
151
50
0
Lower Class
Middle Class
2030E
Upper Class
Source: McKinsey Global Institute (MGI), ICICIdirect.com Research; Classes are based on income levels with the
‘Lower’ class representing income of <| 200,000 per annum; ‘Middle’ class between | 200,000 and | 1,000,000
per annum ; and ‘Upper’ class >| 1,000,000 per annum
The burgeoning Indian middle class is a promising segment for consumer
oriented companies like TTKP. With rising incomes, these families will
demand sophisticated products and services. A report by McKinsey
Global Institute (MGI) expects the number of urban middle class
households to increase to 91 million by 2030E, from 22 million in 2008.
Exhibit 6: Increasing working population in India
Exhibit 7: Increasing female work participation rate
100
60
40
20
25.6
25
19.7
20
68
66
63
(%)
(%)
80
30
32
34
38
15
22.3
12.1
10
0
5
2005
2015E
Working Population
2025E
Dependents
Source: MGI, ICICIdirect.com Research; Working population: 15-64 years
0
1971
1981
1991
2001
Source: Census Data, ICICIdirect.com Research
TTKP continuously strives to ease the kitchen and cooking experience. A
higher number of working women will fuel demand for TTKP’s products
as the time spent in the kitchen by an Indian women will come down.
Therefore, the need for convenient and state-of-the-art products will go
up. With increasing income in the hands of women, the aspiration to own
branded kitchenware will also increase.
ICICI Securities Ltd | Retail Equity Research
Page 4
The MGI report indicates that the urbanisation rate in India could touch
40% by 2030E, thereby creating demand for a whole lot of modern
amenities. With increased urbanisation, basic facilities like availability of
electricity and LPG connection will further go up, which will be yet
another trigger for TTKP’s products’ demand.
A report by MGI expects urbanisation to touch 40% by
Exhibit 8: Urbanisation rate in India likely to touch 40% by 2030E
2030E. This will mean more job creation and also lead to
increased demand for sophisticated products, thereby
40
1600
45
fuelling demand for players in the organised space
36
30
28
26
27
800
(%)
(in million)
1200
18
400
9
0
0
1991
2001
2008
Total Population
2030E
Urbanisation Rate (RHS)
Source: MGI, ICICIdirect.com Research
Another factor working in favour of consumption companies is the
increasing number of nuclear families. The average size of Indian
households has dipped from 5.3 in 2001 to 4.9 in 2011. The total number
of households in India has increased from 187 million in 2001 to 247
million in 2011, representing a CAGR of 2.8%. With increasing number of
households the demand for kitchenware is also increasing.
With the increase in the number of nuclear families and
working women (and hence lower time in the kitchen) the
Exhibit 9: Decreasing size of Indian households
demand for convenience based products is on the rise
30
25
6
5.5
5.5
5.3
5.3
4.9
15
24.7
10
5
10.0
11.9
1971
1981
14.8
5
(nos)
(in crore)
20
18.7
4
-
Number of households
1991
2001
2011
Average household size (RHS)
Source: Census Data, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 5
Dominant player in market with high potential
TTK Prestige’s market share
Particulars
Market Share (%)
Pressure cookers
35
Cookware
40
Cooktops
25
TTKP has a dominant presence in a highly fragmented industry. The
unorganised segment in the domestic pressure cooker and cookware
markets accounts for 40% and 50% of the total market, respectively. The
company’s market share in the pressure cooker segment stands at ~35%
while that in cookware and cooktops stands at ~40% and ~25%,
respectively. Considering the changing demographics, increased number
of working women and low penetration levels in each categories, these
segments are likely to continue to grow over the next few years.
According to a Council of International Education and Research (CIER)
report, domestic pressure cooker volumes are likely to grow at a CAGR of
6% during FY12-20E. Similarly, a report by Technavio Research indicates
that the induction cooktops market in India is likely to grow at a CAGR of
35.4% from $150.8 million in 2012 to $506.9 million in 2016.
Exhibit 10: Indian pressure cooker segment volume growth
7
5.8
6
Exhibit 11: Indian cooktops market to grow to $506.9 million by 2016E
600
6.0
5.4
500
4
($ million)
(%)
5
3.4
2.6
3
2
400
300
1
100
0
0
FY91-97
FY97-02
FY02-07
FY07-12
506.9
200
150.8
2012
FY12-20E
Source: CIER, ICICIdirect.com Research
2016E
Source: Technavio Research, ICICIdirect.com Research
We believe TTKP will be one of the biggest beneficiaries of the continued
growth in the domestic kitchenware segment. The strong historical
patronage of the Prestige brand, continuous innovations and the recent
capacity addition (increasing of the pressure cooker and cookware
capacity to 5 million and 12 million pieces, respectively) all work in favour
of the company. We expect the company’s revenues to grow at a CAGR
of 17.7% during FY13-15E.
Exhibit 12: TTKP's topline growth trajectory
60
50.3
16.0
401
FY07
FY08
FY09
Net Sales
FY10
1,493
50
40
30
15.1
23.1
20
10
508
326
-
281
500
1,358
22.2
26.9
1,103
1,000
26.6
764
(| crore)
1,500
1,719
44.5
(%)
2,000
9.9
FY11
FY12
FY13
FY14E
FY15E
Sales growth (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
Capacity additions, alliances, retail expansion+ new product launches =
Growth
TTKP has incurred a capex of | 300 crore to expand
capacities. As these expansions are complete and new
plants are being commissioned, we expect the company’s
revenues to increase at a CAGR of 17.7% during FY13-15E
Planned capex to fuel revenues and aid in maintaining leadership
Over the last three years, the company has undertaken a capex of | 300
crore to expand its existing capacities. Considering the immense potential
in the domestic kitchenware segment, TTKP has undertaken a capacity
expansion drive to (a) capitalise on the strong growth opportunities in the
domestic kitchen segment and (b) maintain its leadership position across
segments.
Exhibit 13: Capacity expansion
14
12.0
12
(in million pieces)
10
8.0
8
6
4.8
4
2.0
2
Pressure Cookers
FY11
Cookware
FY14E
Source: Company, ICICIdirect.com Research
Global alliances
With the aim of continuously innovating and providing the
best in kitchenware, TTKP has entered into alliances with
various global players. In 2012, the company entered into
three such alliances across various segments
To produce quality kitchen appliances, TTKP has followed a strategy of
joining hands with the best in the game. The company has entered into
various tie-ups with global players, which will not only aid in increasing
revenues but also help better its knowledge in the Indian kitchenware
space. TTKP has scouted for suitable partners, which will create synergies
with the existing product portfolio. In 2011-12, the company entered into
three such alliances, out of which it has decided to part ways with one.
JV with World Kitchen: Access to tableware
In May 2012, TTKP entered into a JV agreement with US based World
Kitchen (India) to distribute its brands Corelle (glass dinnerware),
Corningware (glass ceramic), Vision (glass cookware), Pyrex (glass
bakeware) & Snapware (storage ware). However, the company decided to
call off this agreement as it did not achieve the desired financial outcome.
Tie up with German glassmaker Schott: Targeting premium gas stove market
TTKP had entered into yet another joint venture agreement in May 2012
with a Germany based glass maker to launch a high range of cooking
appliances. Through this tie-up, the company has launched glass based
gas tables and induction cooktops, which can withstand high level
thermal shocks and mechanical impacts.
Tie up with US based Meyer
TTKP has entered into a joint venture with US based cookware company
Meyer to market its high-end cookware (both aluminium and stainless
steel based) in India (June 2012). This tie-up would give TTKP access to
brands such as Anolon, Circulon, Farberware, KitchenAid, SilverStone
and Bonjour.
ICICI Securities Ltd | Retail Equity Research
Page 7
Expanding retail reach
With a focus on strengthening the brand, TTKP plans to aggressively
expand its exclusive retail outlets – Prestige Smart Kitchen (PSK). The
company plans to add 100-150 stores each year to its existing network of
470 stores. TTKP plans to reach 1000 stores by FY18. We believe that an
asset light – franchisee based model (to expand its retail presence) will
not only aid the company to increase the pace of revenue growth but also
help TTKP to maintain a healthy balance sheet as it will not have funds
blocked (as the case would be, had the company decided to expand retail
presence through company owned stores).
Exhibit 14: PSK outlet stocking products from Prestige house
Exhibit 15: PSK outlet ramp up target by FY15E
1200
1000
1000
(numbers)
800
600
470
400
200
0
FY13
FY18E
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
New product launches: Additional kicker
TTKP has been a pioneer in the kitchen appliances and kitchenware
segment. The company has many firsts to its credit. TTKP’s product
innovation and the vision to have a Prestige in every kitchen have led to
addition of several SKUs over the years.
The continuous product development and innovation has
Exhibit 16: TTKP's product launch history
aided TTKP in maintaining its leadership position and also
Year
TTKP's new initiatives
aided revenue growth. With more and more innovations
FY04
50 new product variants, new delux range of pressure cookers in aluminum
Hard anodised, stainless steel pressure cookers
and launches, the company is likely to continue to benefit
from these launches
FY05
Introduced 50 new variants, Omega range of non-stick cookware
FY06
54 new variants, pressure kadai, duplex gas tables
Modular kitchen, handi pressure cookers in different materials
Prestige Nakshatra (inner lid range), barbeques
FY07
89 new product launches across seven categories
Selective modular kitchens
FY08
86 SKUs and 5 new categories
FY09
Induction cooktops
FY10
Microwave pressure cookers, induction compatible pressure cookers and cookware
2 Prestige kitchen boutiques offering a wide range of modular kitchens
Apple range of inner lid pressure cookers, fresh range of induction cooktops
FY11
67 new SKUs
FY12
60 new SKUs
FY13
World Kitchen and Meyer products
Prestige Premia
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
Pressure cooker segment to grow at a CAGR of 10.6% during FY13-15E
TTKP’s largest segment, the pressure cooker segment, is likely to grow at
a CAGR of 10.6% during FY13-15E. The expanded facilities are now fully
operational and the company is likely to benefit from the same. The
pressure cooker segment has grown consistently (volume CAGR – 20.3%
realisation CAGR – 0.5% during FY07-13) on the back of constant
innovation. The company has launched innovative products like inner-lid
pressure cookers, induction compatible pressure cookers, microwave
cookers, etc. Despite an expanding base, the company’s pressure cooker
sales have been increasing as TTKP endeavours to push products
through promotions, bundling of pressure cookers with induction
cooktops, etc. We expect pressure cooker volumes to grow at 9.5%
CAGR in FY13-15E.
We expect the pressure cooker segment to grow at a
CAGR of 10.6% during FY13-15E, led by volume growth of
9.5%
Exhibit 17: Volumes to grow at CAGR of 9.5% during FY13-15E…
Volumes to grow at CAGR of
9.5% during FY13-15E
(pieces in million)
6
5
5.5
4
6.0
929
940
4.5
3.7
3
2
960
6.6
(| per piece)
7
Exhibit 18: …with realisations likely to increase at CAGR of 1.0%
2.8
922
940
931
920
900
880
860
852
852
FY10
FY11
840
1
820
800
FY10
FY11
FY12
FY13
FY14E
FY15E
Source: Company, ICICIdirect.com Research
The share of pressure cookers in the overall product mix
has dropped from 46.8% in FY10 to 37.1% in FY13. We
expect this to come down further to 35.8% by FY15E
FY12
FY13
FY14E
FY15E
Source: Company, ICICIdirect.com Research
TTKP had started operations primarily as a pressure cooker manufacturer.
However, over the years, the share of pressure cookers in the product
mix has been declining. In absolute terms, sales of pressure cookers have
more than tripled from | 163.4 crore in FY07 to | 510.7 crore in FY13.
However, with the launch of various other products, the share of pressure
cookers has been gradually dipping. A well diversified product portfolio
aids the company to de-risk its business model and reduce dependence
on a particular product.
(%)
Exhibit 19: TTKP's reducing dependence on pressure cooker segment
100
90
80
70
60
50
40
30
20
10
-
4.2
3.4
2.5
3.3
3.3
3.6
20.2
25.0
31.3
32.6
32.6
32.6
11.9
10.5
17.0
20.0
9.0
9.3
9.3
9.3
20.1
17.8
18.0
18.7
46.8
41.1
37.0
37.1
36.8
35.8
FY10
FY11
FY12
FY13
FY14E
FY15E
Pressure Cookers
Cookware
Stoves
Electrical Appliances (Kitchen)
Others
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 9
Cookware segment: Sailing high on rising aspirations
The Indian kitchen has got transformed from functional to fashionable.
Indian women are increasingly becoming brand conscious and the same
is extending to the kitchen as well. TTKP has received a healthy response
to its cookware with sales growing at 33.4% CAGR during FY07-13 (albeit
on a small base). During this period, volumes grew at a CAGR of 27.0%
while realisations increased 5.0%. Going forward, we expect the segment
to grow at a CAGR of 15.3%, led by 12.0% volume growth and 3.0%
realisation growth during FY13-15E.
The cookware segment is expected to grow at a CAGR of
15.3% during FY13-15E. We expect volumes to touch 6.2
million pieces, growing at a CAGR of 12.0% in FY13-15E
Exhibit 20: Volumes to grow at CAGR of 12.0% during FY13-15E…
(pieces in million)
600
Volumes to grow at CAGR of
12.0% during FY13-15E
6
5
5.1
4
3
6.2
5.4
5.0
3.5
450
435
444
FY10
FY11
FY12
495
504
525
FY13
FY14E
FY15E
400
300
200
2
1
500
(| per piece)
7
Exhibit 21: …with realisations growing at CAGR of 3.0%
1.9
100
-
FY10
FY11
FY12
FY13
FY14E
FY15E
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
The rising penetration of LPG has worked in favour of the
company by fuelling demand for better quality vessels and
gas stoves. The share of households using LPG as a fuel for
cooking has increased from 18% in 2001 to 29% in 2011
LPG penetration in India is also on the rise. Total customers catered to
has increased from 11 million in 1985 to 135 million currently. Similarly,
LPG sales have jumped from 1241 thousand metric tonnes (TMT) in 198586 to 13,912 TMT in 2010-11. With rising penetration of LPG, demand for
modern cookware is likely to increase. Share of LPG in total fuels used in
domestic households has increased from 18% in 2001 to 29% in 2011
(census data). This ratio is significantly higher (~80%+) in urban areas.
Exhibit 22: Household dependence on various cooking fuels (2001)
Exhibit 23: Household dependence on various cooking fuels (2011)
10%
48%
9%
10%
52%
8%
2%
2%
7%
3%
18%
Firewood
Coal, Lignite, Charcoal
Electricity
Crop
1% residue
Kerosene
Biogas
Source: Census Data, ICICIdirect.com Research
29%
1%
Cowdung cake
LPG
Others
Firewood
Coal, Lignite, Charcoal
Electricity
Crop residue
Kerosene
Biogas
Cowdung cake
LPG
Others
Source: Census Data, ICICIdirect.com Research
Also, with the increasing sales of induction cooktops, sales of induction
friendly cookware have also aided the strong performance of this
segment.
ICICI Securities Ltd | Retail Equity Research
Page 10
Electrical appliances segment: Induction cooktops key contributor
TTKP has a large product portfolio under the appliances segment. Its
electrical appliances portfolio comprises coffee makers, blenders, juicers,
mixers, electric kettles, toasters, grinders, etc. This segment has grown
from a small size of | 71.0 crore in FY09 to | 449.0 crore in FY13, growing
at a CAGR of 58.6% during the period. The share in the overall product
mix has increased from 17% in FY09 to 33% in FY13. We expect TTKP to
grow the appliance segment revenues at a CAGR of 12.5% to | 568.0
crore by FY15E.
The electrical appliances segment is expected to grow at a
CAGR of 12.5% during FY13-15E to | 568.0 crore
Exhibit 24: Electrical appliances segment to grow at CAGR of 12.5% during FY13-15E
568
600
500
400
(| crore)
494
449
349
300
193
200
100
104
71
FY09
FY10
FY11
FY12
FY13
FY14E
FY15E
Source: Company, ICICIdirect.com Research
The largest contributor to the electrical appliances segment has been
induction cooktops. TTKP commenced sales of induction cooktops in
FY09 with a sale of 17,000 units. Over the years, the company has grown
the sales to 1.2 million pieces as on FY13. The reduced availability of LPG
has led to higher demand for induction cooktops. As indicated by the
management, induction cooktops are also a cost effective option as
compared to non-subsidised cylinders. The cost of running an induction
cooktop is one-third less than a non-subsidised cylinder while it is 25%
more than a subsidised cylinder. Going forward, as the power supply
situation in India improves, the sale of induction cooktops and other
electrical appliances will further go up. We expect the segment to grow at
a CAGR of 23.1% during FY13-15E, led by volume growth of 19.0%.
The induction cooktops segment accounts for ~50% of the
electrical appliances segment. The induction cooktops
segment has witnessed healthy growth in the past. We
expect it to grow at a CAGR of 23.1% during FY13-15E
Exhibit 25: Induction cooktops volumes to grow at CAGR of 19.0%...
2,400
Volumes to grow at CAGR of
19.0% during FY13-15E
1.7
1.4
1.2
1
0.9
-
0.1
0.4
FY10
FY11
2,302
2,000
(| per piece)
(pieces in million)
2
Exhibit 26: …while realisations are likely to grow 3.5% during FY13-15E
1,757
1,833
1,897
1,935
FY11
FY12
FY13
FY14E
2,032
1,600
1,200
800
400
-
FY12
FY13
FY14E
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
FY15E
FY10
FY15E
Source: Company, ICICIdirect.com Research
Page 11
The power supply situation in India is also improving. The base deficit has
come down from a peak of 14.6% in April 2010 to 2.7% in August 2013.
Similarly, the peak deficit has also come down from a peak of 17.1% in
January 2008 to 3.0% in August 2013. According to a sample study of
97,882 households in 2002, electricity was the main source of lighting for
53% of rural households compared to 36% in 1993. Also, the per capita
consumption of power has increased from 567 kWh in FY03 to 879 kWh in
FY12, representing a CAGR of 4.5%.
Exhibit 27: Reducing power deficit in India
Base Deficit
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-07
2013)
(%)
also reduced from 17.1% (January 2008) to 3.0% (August
Jan-08
2010) to 2.7% in August 2013 while the peak deficit has
18
16
14
12
10
8
6
4
2
Jul-07
The base deficit has come down from mid teens (April
Peak Deficit
Source: CEA, ICICIdirect.com Research
The per capita consumption of power has increased at a
Exhibit 28: All-India per capita consumption of electricity
CAGR of 4.5% during FY03-12
1000
717
734
2008-09
2004-05
672
2007-08
592
632
2005-06
567
2003-04
500
613
2002-03
(in kWh)
750
779
819
879
250
2011-12
(P)
2010-11
2009-10
2006-07
0
Source: CEA, ICICIdirect.com Research
With the increasing availability of power, the use of electrical appliances
can further increase. The target audience for TTKP continues to rise with
the rising penetration of electricity. Currently, the use of electricity in
cooking stands at 0.1% of the fuels used (Census 2011). As the share of
electricity used for cooking goes up, the use of electrical appliances is
slated to increase further.
ICICI Securities Ltd | Retail Equity Research
Page 12
Risks & Concerns
Volatility in input prices
TTKP’s key raw materials, steel and aluminium are both traded
internationally and their prices are highly dependant on the global
macroeconomic situation. Any significant move in prices can impact the
operating margin as the price hike would be passed on with a lag of about
three months.
(%)
Exhibit 29: Trends in raw material mix
100
90
80
70
60
50
40
30
20
10
-
71
66
29
33
FY07
FY08
53
59
57
56
62
62
62
48
42
43
44
38
38
38
FY09
FY10
FY11
FY12
FY13
FY14E
FY15E
Aliminium & Steel Costs
Others
Source: Company, ICICIdirect.com Research
Currency fluctuations to impact operating margin
TTKP imports some of its products directly from China, thereby exposing
it to currency fluctuation risks. While the company does take price hikes
to pass on the impact of the currency fluctuation, it may not always be
possible to pass on the impact to customers. Any adverse fluctuations
may thereby weigh on the operating margin. However, with the recently
concluded expansion, the company’s reliance on imports is likely to come
down, thereby mitigating a part of this risk.
Competitive pressure: Will the company be able to maintain its dominance?
Exhibit 30: Sales growth: Comparison between TTKP and Hawkins
60
50.3
44.5
50
(%)
40
30
20
26.9
26.8
23.1
22.2
26.9
10
FY07
16.0
17.6
18.3
18.3
16.9
10.1
FY08
FY09
FY10
FY11
FY12
Hawkins Cookwers
15.6
FY13
TTK Prestige
Source: Company, ICICIdirect.com Research
In the last three years, TTKP has grown faster than Hawkins Cookers
(Hawkins) as there were some issues at Hawkins’ manufacturing facilities.
With the issues being resolved and Hawkins’ sales picking up, TTKP’s
topline could take a hit. Though we have factored in lower growth rates in
ICICI Securities Ltd | Retail Equity Research
Page 13
our estimates, a higher-than-expected decline in revenues could impact
the bottomline. Also, in order to maintain its leadership position, TTKP
has adopted a strategy of taking minimal price hikes. If a price war is
triggered between its competitors, TTKP may be forced to keep prices
low, which may further dampen the operating margin and, thereby, the
profitability.
Improper utilisation of excess cash may impact return ratios
We expect cash flows to increase as the capex is over and the company
will now reap the benefits of the same. Additionally, inflows from the
allotment to Cartica Capital will help lower debt. While we expect the
company to increase dividend payout and use the cash prudently for the
right acquisitions, any inefficient utilisation of the cash would have a
significant bearing on the return ratios.
Overall slowdown in economy
The company’s product portfolio comes under the discretionary spends
segment. A slowdown in the economy, rising interest rates and increasing
inflation all have a direct bearing on discretionary spends. If there is a
prolonged period of slowdown and such a macroeconomic turmoil, the
company’s revenues could be significantly impacted.
ICICI Securities Ltd | Retail Equity Research
Page 14
Financials
Revenues to grow at CAGR of 12.5% in FY13-15E
Exhibit 31: We expect TTKP’s revenues to grow at a CAGR of 12.5% during FY13-15E
60
50.3
1,719
44.5
22.2
764
326
401
FY07
FY08
FY09
FY10
50
40
30
15.1
23.1
20
10
508
281
500
1,493
26.9
16.0
-
1,358
1,000
26.6
1,103
(| crore)
1,500
(%)
2,000
9.9
FY11
Net Sales
FY12
FY13
FY14E
FY15E
Sales growth (RHS)
Source: Company, ICICIdirect.com Research
Over the last six years, the company’s revenues have grown at a CAGR of
30.0% (during FY07-13). A large part of this growth (~23.0%) came on the
back of volume growth. Considering the current slowdown and the
expanding base, we expect the revenue CAGR to come down to 12.5%
during FY13-15E. During this period, we expect volumes to grow at a
CAGR of 11.5% while realisations are likely to grow at a CAGR of 0.9%.
The company has also undertaken a capacity expansion plan and these
incremental capacities are operational now. We expect revenue growth to
pick up once again, as and when the macroeconomic situation improves.
A revival in the southern markets will also be a key trigger for the
company’s revenue growth. Considering that this year (FY14) is a tough
one, we expect a lower topline growth of 9.9%.
1,140
1,157
FY14E
FY15E
826
FY11
1,137
885
FY10
FY13
913
600
FY09
20
800
875
40
5.8
1,000
1,034
1,200
60
FY08
4.5
1,400
843
3.9
12.1
80
FY07
3.5
10.8
15.1
(|)
9.3
13.3
(%)
400
200
-
Volumes
FY15E
FY14E
FY13
FY12
FY11
FY10
FY09
FY08
FY07
0
Volume Growth (RHS)
Source: Company, ICICIdirect.com Research
-
Realisation per piece
FY12
(in million pieces)
16
14
12
10
8
6
4
2
Exhibit 33: Realisation growth likely to be flattish at 0.9%
30
25
20
15
10
5
0
-5
-10
(%)
Exhibit 32: Volumes to grow at CAGR of 11.5% during FY13-15E
Realisation Growth (RHS)
Source: Company, ICICIdirect.com Research
Realisations of the company have increased from | 843 per piece in FY07
to | 1,137 per piece in FY13, representing a CAGR of 5.1% during the
period. As stated above, going forward also, we expect growth to be
largely volume led and expect realisations to grow at a CAGR of 0.9%
during FY13-15E. We expect realisations to reach | 1,157 per piece by
FY15.
ICICI Securities Ltd | Retail Equity Research
Page 15
Operating margins to remain relatively subdued
Over the years, with the launch of products with high operating margin
and increased operating leverage, the company has managed to scale up
the operating margin from 9.4% in FY07 to 15.1% in FY13. TTKP’s
operating margin has stabilised in the 14.5–15.5% range. However, owing
to the significant depreciation of the rupee and lower sales offtake, the
operating margin has shrunk 200 bps to 13.2% in H1FY14. As a strategy
to gain market share and maintain its dominance, the company plans to
take price hikes only to the extent required. Hence, we do not expect any
significant up move in the operating margin in FY15 as well.
TTKP’s operating margin has stabilised in the 14.5-15.5%
Exhibit 34: EBITDA margin to remain under pressure owing to rupee depreciation, slow demand
range over the last few years. However, with the
operating margin has shrunk 200 bps to 13.2% in H1FY14
16.5
(| crore)
15.6
15.3
240
180
204
171
120
60
17
15.1
26
-
FY07
10.1
9.9
33
39
FY08
FY09
204
15
14.7
13
13.7
125
9.4
251
(%)
300
depreciation of the rupee and slower revenue growth, the
11
77
9
FY10
FY11
EBITDA
FY12
FY13
FY14E
FY15E
EBITDA Margin (RHS)
Source: Company, ICICIdirect.com Research
Lower interest outgo to aid PAT growth
TTKP had to resort to bank borrowings in FY12 and FY13 to fund its capex
of | 300 crore. Owing to that, PAT margins declined 110 bps, from 11.0%
in FY11 to 9.9% in FY13. As the capex is complete, we expect
depreciation costs to go up. However, with improving cash flows and the
money raised through the stake sale to Cartica Capital (| 106 crore), we
expect the company to retire the debt by FY15E. Owing to this, we expect
the company’s PAT to grow at a CAGR 11.8% (FY13-15E) to | 166.3 crore.
to come down. Hence, we expect the company to report a
Exhibit 35: PAT margin to expand 80 bps owing to lower interest expense
PAT of | 166.3 crore in FY15E
10.4
11.0
10.3
135
9.9
9.2
9.7
12
(| per share)
9
6.3
90
5.6
166
4.2
113
45
133
136
84
12
21
22
FY07
FY08
FY09
-
PAT
6
(%)
With reducing debt, the company’s interest outgo is likely
3
52
FY10
FY11
FY12
FY13
FY14E
FY15E
PAT Margin (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 16
Comfortably leveraged
TTKP virtually maintains a debt-free status barring years wherein it had a
capacity expansion plan. Owing to strong cash flow generation, the
company has managed to retire debt within a year or two. The company
outlaid a capex plan of | 300 crore in FY11 owing to which debt levels
increased to | 115 crore in FY13. We expect TTKP to repay the debt over
the next two years.
TTKP has maintained a virtually debt-free status. As and
Exhibit 36: Debt-equity ratio trend
when the company plans a capacity expansion it has to
flows, the company was able to retire the debt in a couple
100
of years
1.6
1.2
0.8
0.6
47
40
1.0
79
74
(| crore)
80
60
1.4
0.4
30
3
2
FY08
21
FY07
9
20
-
(x)
120
115
leverage itself. However, owing to strong internal cash
FY09
FY10
FY11
Debt
0.2
-
FY12
FY13
FY14E
FY15E
Debt / Equity (RHS)
Source: Company, ICICIdirect.com Research
Return ratios to pick up
In the past, TTKP has enjoyed healthy return ratios backed by healthy
asset turns. However, as operating margins remain range-bound and the
asset turnover is likely to come down from the peak of 9.8x in FY11 to
5.2x in FY15E we expect return ratios to stabilise in the 25–35% band. In
FY14, return ratios are likely to further dip owing to the allotment of three
lakh shares to Cartica Capital. As the newly set up capacities stabilise and
the asset turnover picks up in FY15E, we expect the company to report an
RoE and RoCE of 23.3% and 31.1%, respectively.
We expect return ratios to pick up in FY15E as the
Exhibit 37: Trends in return on equity and return on capital employed (%)
expanded capacities fully stabilise
70
58.1
60
62.5
45.3
50
(%)
30
18.7
20
10
38.1
34.0
40
42.2
25.0
30.0
21.4
43.7
39.7
29.6
31.1
22.5
23.3
FY14E
FY15E
33.7
26.4
FY07
FY08
FY09
ROE
FY10
FY11
FY12
FY13
ROCE
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 17
Dividend payout to increase as cash flow generation improves
The company is able to generate healthy cash flows each year. Barring
years in which TTKP has capex plans, it typically pays healthy dividends.
Considering that the capex has recently concluded, the dividend payout
of the company is likely to go up. We expect the dividend payout to
increase from 15% in FY13 to 30% in FY15E.
Dividend payout is likely to increase from 15% in FY13 to
Exhibit 38: Dividend payout trend
30% in FY15E owing to improved cash flows
15
15
4
-
FY07
6
74
62
11
43
46
4
62
97
100
14
17
FY11
FY12
20
15
50
20
27
FY13
FY14E
25
(%)
20
17
50
161
22
19
3
35
30
25
150
(| crore)
30
29
120
200
10
5
-
FY08
Dividend payout
FY09
FY10
Cash from operations
FY15E
Dividend Payout Ratio (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 18
Valuation
Over the last several years, the stock has performed well and the stock
price has jumped from | 150 in April 2006 to over | 3700 now. This multifold growth in the share price has taken place on the back of (a) a strong
growth trajectory exhibited by the company (topline CAGR of 30% during
FY07-13); (b) healthy operating margin expansion from 9.4% in FY07 to
15.1% in FY13; (c) robust PAT growth – CAGR of 49.8% during FY07-13
and (d) return ratios improvement – RoE expanded from 21.4% in FY07 to
33.7% in FY13. The price to earnings multiple of the company has also
expanded in line with the strong performance exhibited by the company.
TTKP is currently trading closer to its one year forward multiple average
(last five years) of 23.8x. Owing to the concerns on moderation of growth
rates in the backdrop of the weak macroeconomic environment and rising
competitive pressure we have valued the company at a multiple of 22.0x
FY15E EPS of | 142.6 to arrive at a target price of | 3,140.
Exhibit 39: One year forward P/E band chart
4,000
24.0x
20.0x
3,000
(|)
16.0x
2,000
12.0x
8.0x
1,000
Avg. Price
8.0x
12.0x
16.0x
20.0x
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Apr-10
Oct-10
-
24.0x
Source: Company, ICICIdirect.com Research
A comparison of various other companies in the consumption space also
reveals that companies having healthy return ratios and consistent growth
get rewarded with an average multiple of 27.8x FY15E earnings. In a
volatile market situation as well, investors are on the look out for
companies with stable growth, low/no leverage, healthy return ratios and
TTKP meets these criterions well.
Exhibit 40: Comparison of companies with similar return ratios (FY15E)
Company
Marico
Dabur
Titan
Page Industries
Asian Paints
Jubilant Foods
Average
Market Cap (| crore)
29,497
21,520
20,659
4,843
7,642
28,490
RoE (%)
36.4
34.3
33.8
54.8
31.2
23.6
35.7
P/E (x)
26.7
21.9
31.0
24.7
34.5
27.9
27.8
EV/EBITDA (x)
21.1
14.1
19.6
15.0
18.1
20.3
18.0
Revenue CAGR
(FY13-15E)
14.9
18.1
13.9
27.3
31.3
40.1
24.3
Source: Bloomberg, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 19
Over the past two to three years, the share price has not moved
significantly owing to the short-term overhangs of pressure on the
operating margin, compression of return ratios owing to the capex plans
and also slowdown in sales growth due to power problems in Southern
India. However, the company has overcome these challenges and is once
again poised for robust growth. With regard to the operating margin, the
management is confident of maintaining margins in the range of 14.5–
15.5% despite competitive pressure. However, we have been
conservative and expect the operating margin to remain at the lower end
of the guidance in FY15E. The return ratios of the company are slated to
move upwards, as the capex has concluded and the company plans to
retire the entire debt by FY15E. Lastly, with regard to the concentration of
revenues in the southern region, the company has gradually expanded its
presence to the rest of the country and now ~40% of the company’s
revenues come from non-southern markets (as compared to 25% earlier).
Till the overhang of slowdown remains, we expect multiples to remain
relatively subdued. The key monitorable will be the pick-up of demand
and fair utilisation of expanded capacities.
Exhibit 41: Peer comparison (FY13)
Particulars
Unit
EBITDA Margin
%
TTK Prestige
15.1
Hawkins Cookers
11.9
Butterfly Gandhimathi
9.8
PAT Margin
%
9.9
8.0
4.8
Return on Equity
%
33.7
64.1
18.1
Return on Capital Employed
%
38.1
79.4
24.1
P/E (TTM)
x
28.1
32.2
14.4
Market Cap
| crore
3840.7
952.4
511.1
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 20
Financial Tables
Exhibit 42: Profit & loss account
(| crore)
Net Sales
% Growth
Other Operating Income
Raw Materials
Manufacturing Expenses
Employee Expenses
Sell. & Distri. Expenses
Admin. Expenses
Total Exp.
% Growth
Operating Profit
Depreciation
Interest expense
Other Income
PBT
Tax
Net Profit
% Growth
Equity
Dividend %
EPS
FY10
505.2
26.9
2.7
264.6
13.1
39.3
38.0
75.5
430.6
18.9
77.4
3.6
3.5
1.1
71.43
23.0
48.5
134.3
11.3
99.9
46.3
FY11
759.2
50.3
4.4
409.8
15.6
53.0
47.2
112.7
638.2
48.2
125.3
4.3
4.4
4.3
120.94
36.6
84.3
59.7
11.3
124.9
73.9
FY12
1,097.0
44.5
6.5
617.9
21.3
73.0
69.8
149.9
932.0
46.0
171.4
6.2
6.4
4.5
163.26
49.9
113.4
35.4
11.3
149.8
100.0
FY13
1,350.3
23.1
8.2
776.6
35.5
83.6
85.2
173.9
1,154.8
23.9
203.7
9.0
14.3
4.7
185.21
52.1
133.1
17.4
11.4
174.8
117.2
FY14E
1,483.6
9.9
9.5
882.8
37.1
92.0
92.0
185.4
1,289.3
11.7
203.7
15.5
8.0
10.5
190.63
54.3
136.3
2.4
11.7
233.9
116.9
FY15E
1,708.0
15.1
10.9
999.9
44.4
106.2
104.2
213.5
1,468.2
13.9
250.6
25.9
4.3
12.0
232.51
66.3
166.2
22.0
11.7
427.9
142.6
FY11
11.3
180.1
2.2
3.3
197.0
41.9
49.5
22.6
105.0
74.7
53.5
77.9
0.3
311.5
228.5
83.0
197.0
FY12
11.3
273.9
78.1
1.3
5.0
6.8
376.5
150.8
79.4
0.0
174.9
106.0
22.8
37.8
0.5
342.0
195.6
146.4
376.5
FY13
11.4
384.1
63.7
51.4
5.0
10.1
525.7
168.1
140.1
0.0
235.5
143.2
32.6
69.7
1.5
482.5
265.0
217.5
525.7
FY14E
11.7
594.7
29.7
5.0
13.0
654.0
317.2
14.0
0.0
304.8
154.5
98.5
89.0
1.5
648.3
325.4
322.8
654.0
FY15E
11.7
702.6
8.5
5.0
16.0
743.8
312.7
8.4
0.0
336.9
177.8
162.9
119.6
1.5
798.6
376.0
422.7
743.8
Source: Company, ICICIdirect.com Research
Exhibit 43: Balance sheet
(| crore)
Equity Share Capital
Reserves & Surplus.
Secured Loans
Unsecured Loans
Other LT Liabilities
Deferrred Tax
Total Liabilities
Net Block
CWIP
Investments
Inventories
Sundry Debtors
Cash & Bank
Loans & Adv.
Other Current Assets
Current Assets
CL & Prov.
Net Current Assets
Total Assets
FY10
11.3
112.8
2.8
3.1
130.1
40.5
23.5
0.4
61.3
60.3
44.0
42.4
0.2
208.1
142.4
65.7
130.1
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 21
Exhibit 44: Cash flow statement
(| crore)
Net Profit Before Tax
Depreciation
Interest Expense
Direct Tax Paid
(Profit)/Loss on sale of Assets (net)
Interest / Dividend Income
CF before change in WC
Inc./Dec. in WC
CF from operations
Pur. of Fix Assets (net)
Purchase of Investments (net)
Others
CF from Investing
Inc./(Dec.) in Debt
Inc./(Dec.) in Net worth
Others
CF from Financing
Opening Cash balance
Closing Cash balance
FY10
71.4
3.6
1.1
(23.1)
(1.1)
51.9
9.7
61.7
(4.0)
1.1
(2.9)
(17.9)
(7.8)
(25.7)
10.9
44.0
FY11
120.4
4.4
0.8
(35.1)
(3.7)
86.6
(12.3)
74.3
(31.8)
(22.2)
3.7
(50.2)
(14.5)
(14.5)
44.0
53.5
FY12
163.3
6.4
6.4
(46.8)
(0.2)
(2.4)
126.6
(64.7)
61.9
(152.3)
22.2
2.4
(127.6)
57.5
(22.9)
34.6
53.9
22.8
FY13
185.2
9.0
14.7
(32.4)
(0.0)
(3.2)
173.2
(76.0)
97.3
(92.4)
3.5
(88.9)
35.9
(34.6)
1.3
22.9
32.5
FY14E
190.6
15.5
8.0
(54.3)
159.8
(39.4)
120.4
(37.3)
(37.3)
(85.4)
106.5
(38.2)
(17.1)
32.4
98.5
FY15E
232.5
25.9
4.3
(66.3)
196.4
(35.4)
161.0
(15.8)
(15.8)
(21.1)
(59.7)
(80.8)
98.5
162.9
Source: Company, ICICIdirect.com Research
Exhibit 45: Key ratios
FY10
FY11
FY12
FY13
FY14E
FY15E
Expenditure Break-up (%)
Raw Material Expenses
Manufacturing, Admin & Selling Exp.
Personnel Expenses
61.5
29.4
9.1
64.2
27.5
8.3
66.3
25.9
7.8
67.2
25.5
7.2
68.5
24.4
7.1
68.1
24.7
7.2
Profitability Ratios (%)
EBITDA Margin
PAT Margin
15.3
10.4
16.5
11.0
15.6
10.3
15.1
9.9
13.7
9.2
14.7
9.7
448.2
68.2
3,259.1
109.6
38.8
46.3
49.4
10.0
673.7
110.6
3,250.1
168.9
47.2
73.9
77.6
12.5
973.5
151.3
3,345.4
251.7
20.1
100.0
105.5
15.0
1,196.4
179.4
3,368.1
348.3
28.7
117.2
125.1
17.5
1,281.0
174.8
3,236.4
520.3
84.5
116.9
130.3
23.4
1,474.8
215.1
3,163.0
612.8
139.7
142.6
164.9
42.8
42.2
58.1
63.5
43.7
62.5
71.2
39.7
45.3
33.2
33.7
38.1
27.8
22.5
29.6
25.4
23.3
31.1
29.7
Per Share Data (|)
Revenue per share
EBITDA per share
EV per share
Book Value per share
Cash per share
EPS
Cash EPS
DPS
Return Ratios (%)
RoNW
RoCE
RoIC
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 22
Exhibit 46: Key ratios
Financial Health Ratios
Operating Cash flow (| crore)
Free Cash flow (| crore)
Capital Employed (| crore)
Debt to Equity (x)
Debt to Capital Employed (x)
Interest Coverage (x)
Debt to EBITDA (x)
FY10
61.7
59.3
127.0
0.0
0.0
21.2
0.0
FY11
74.3
22.4
193.7
0.0
0.0
27.3
0.0
FY12
61.9
(73.8)
364.7
0.3
0.2
25.8
0.5
FY13
97.3
(19.4)
510.6
0.3
0.2
13.7
0.6
FY14E
120.4
73.4
636.0
0.0
0.0
23.5
0.1
FY15E
161.0
135.4
722.8
0.0
0.0
52.6
0.0
0.7
1.0
0.1
3.9
1.0
0.7
1.0
0.2
3.9
1.0
0.7
1.0
0.2
2.9
1.3
0.7
1.0
0.1
2.6
1.3
0.7
1.0
0.1
2.3
1.1
0.7
1.0
0.1
2.3
1.0
(YoY Growth %)
Net Sales
EBITDA
Net Profit
26.9
97.0
134.3
50.3
62.0
59.7
44.5
36.8
35.4
23.1
18.8
17.4
9.9
(0.0)
2.4
15.1
23.0
22.0
Turnover Ratios
Working Capital / Sales (x)
Inventory turnover (days)
Debtor turnover (days)
Creditor turnover (days)
Current Ratio (x)
0.0
44.3
43.5
36.7
1.5
0.0
50.5
35.9
35.7
1.4
0.1
58.2
35.3
28.7
1.7
0.1
63.7
38.7
33.8
1.8
0.2
75.0
38.0
30.0
2.0
0.2
72.0
38.0
30.0
2.1
Free Cash Flow (| crore)
EBIT (post-tax)
Add: Depreciation
Less: Changes in working capital
Less: Capex
FCF
50.0
3.6
(9.7)
4.0
59.3
84.4
4.3
12.3
54.0
22.4
114.7
6.2
64.7
130.1
(73.8)
139.9
9.0
76.0
92.4
(19.4)
134.6
15.5
39.4
37.3
73.4
160.7
25.9
35.4
15.8
135.4
Valuation Ratios
Price to earnings ratio (x)
EV / EBITDA (x)
EV / Sales (x)
Dividend Yield (%)
Price / BV (x)
71.2
47.8
7.3
0.3
30.1
44.6
29.4
4.9
0.3
19.5
32.9
22.1
3.5
0.4
13.1
28.1
18.8
2.8
0.5
9.5
28.2
18.5
2.5
0.5
6.3
23.1
14.7
2.2
0.7
5.4
DuPont Analysis (x)
PAT / PBT
PBT / EBIT
EBIT / Net Sales
Net Sales / Total Assets
Total Assets / Networth
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 23
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: > 10%/ 15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ANALYST CERTIFICATION
We /I, Bharat Chhoda M.B.A.(FINANCE) Dhvani Modi M.B.A.(FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the
specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading
underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of
companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities
generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts
cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and
employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities
from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities
policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received
compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment
banking or other advisory services in a merger or specific transaction. It is confirmed that Bharat Chhoda M.B.A.(FINANCE) Dhvani Modi M.B.A.(FINANCE) research analysts and the authors of this report
have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities,
which include earnings from Investment Banking and other business.
ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the
research report.
It is confirmed that Bharat Chhoda M.B.A.(FINANCE) Dhvani Modi M.B.A.(FINANCE) research analysts and the authors of this report or any of their family members does not serve as an officer, director or
advisory board member of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use
of information contained in the report prior to the publication thereof.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.
ICICI Securities Ltd | Retail Equity Research
Page 24