TTK Prestige sees 25% sales growth, Rs 90cr capex in FY13

Nachiket Kelkar
Moneycontrol.com

TTK Prestige expects its sales will grow around 25% this year, helped by continued demand for its Prestige pressure cookers and other kitchen appliances.

There has been some slowdown in the growth rate in the domestic market and the company is concerned by the below normal monsoon so far. However, the company's exports have been strong. It is targeting over Rs 50 crore in exports this year, up from Rs 34 crore last year, K Shankaran, director, corporate affairs, told moneycontrol.com in an interaction.

"Our export is compensating for some slowdown in the domestic market seen by the industry," he said.

TTK Prestige has pegged a capital expenditure of Rs 80-90 crore this year, which is a part of its capacity expansion plan it began in 2010.

"We had totally embarked on a Rs 300 crore capex plan since 2010. We have spent up to now Rs 210 crore, another Rs 80-90 crore will be spent this year, which will complete our capital expenditure plan for the time being," Shankaran said.

The capex will be for expanding its capacity across India. TTK Prestige has already added capacity in Uttarakhand and Coimbatore and it is building fresh capacity in Gujarat, he said.

By the end of this financial year, the company will have a capacity to make in excess of 8 million pressure cookers. By Jan 2013, TTK's cookware capacity will go up to 12 million pieces.

TTK Prestige had earlier this week reported a 21% year-on-year rise in net profit at Rs 31 crore, while net sales rose 30% to Rs 303 crore.

"What is driving earnings growth is that we have made enormous investment in our brands in last several years and we have given a whole range of products under the Prestige brand. From pressure cooker, which was 100% of the company ten years back, we have expanded the base to cover appliances, both electrical and non-electrical," Shankaran said.

A growing shift of the industry from un-branded to branded goods is also helping the company grow faster, he said.

Its EBITDA (earnings before interest, taxes, depreciation and amortization) rose 33% to Rs 48 crore, but operating profit margin was at 15.8%, a 14 basis point decline year-on-year.

"We remain positive on the growth prospects of the company but believe that operating profit margin may be under pressure due to rupee depreciation and increased contribution from lower margin products," said Arun Baid, analyst at IDBI Capital.

He expects TTK will continue to witness strong growth and will have minimal impact of the slowdown in economy due to its product portfolio, which caters to the basic needs of the mass market.

A report by Crisil Independent Research also said that the Q1 results have strengthened its confidence in TTK's growth prospects.

TTK Prestige has marketing tie-ups with several global companies like Meyer and World Kitchen and it also exports to several countries. It is also entering the water purifier segment in a business collaboration arrangement with Switzerland-based Vestergaard Frandsen.

The water purifiers will be sold by TTK Prestige in India and will include the LifeStraw technology of Vestergaard.

The Rs 1,600 crore water purifier market in India is dominated by players like Eureka Forbes, Kent, Hindustan Unilever (Pureit) and Tata Chemicals (Swach).  Consumer appliances maker Bajaj Electricals has also entered this market with its range of water purifiers.  Despite being a late entrant, TTK remains unfazed.

"The market has a vast potential. It is not a saturated market, but a growing market. We wanted to be there with a proper technology and proper support, because we don't have enough technology on those matters. The partners will give us their technology and then come with their experience and then try to match the competition if not beat it," he said.

Apart from forging tie-ups for growth, TTK is also looking at acquisitions in markets like Europe.

"These things are part of our long-term vision.  We have imported plants from Europe, because Europe is where we are able to get some of the plants at moderate pricing, similarly there are also brands available. We are not averse to global expansion, but we will do it after all the possible due diligence," Shankaran said.

He said the company was generating around Rs 100 crore in free cash each year so the company wouldn't need to borrow much in case of acquisitions of around Rs 300 crore. It has a debt of Rs 70 currently, with a debt equity ration of 0.2:1.

TTK Prestige also runs Prestige Smart Kitchen stores on a franchisee basis. It added 20 stores in the first quarter and has 370 outlets right now. It hopes to have at least 450 stores by the end of the year.

TTK Prestige shares closed down 0.4% at Rs 3,285.35 on NSE. The stock is up 11.6% so far this financial year.

IDBI Capital has a "hold" rating on TTK Prestige with a target price of Rs 3,277 on the stock.

nachiket.kelkar@network18online.com