Buy TTK Prestige; target of Rs 6300: ICICI Direct
ICICI Direct is bullish on TTK Prestige recommended buy rating on the stock with a target price of Rs 6300 in its research report dated June 26, 2020.
June 27, 2020 / 12:13 PM IST
ICICI Direct's research report on TTK Prestige
TTK Prestige reported weak results due to Covid-19 disruptions impacting primary billing in the second half of March. Revenue de-grew 13.8% YoY to Rs 383.5 crore (I-direct estimate: Rs 397.6 crore). The company lost sales worth Rs 70.0 crore due to inability to dispatch orders. Gross margins for the quarter improved 150 bps YoY to 43.6% on account of benign RM prices. However, unabsorbed fixed expenses and higher marketing spends, led to EBITDA margin contraction of 530 bps YoY to 9.2%, with absolute EBITDA declining 45.2% YoY to Rs 35.2 crore. PAT fell 52.4% YoY to Rs 20.9 crore. The management commentary on the outlook was upbeat with a surge in demand visible for kitchen appliances, post relaxations in lockdowns.
TTK continues to be virtually debt free and has substantial free cash worth Rs 365.0 crore. With earnings in the short-term expected to be negatively impacted, the company, through its strong promoter pedigree and brand patronage, is expected to tide over the current situation better than smaller peers. We build in revenue, earnings CAGR of 6%, 13%, respectively, in FY20-22E. We reiterate our BUY rating on the stock with a revised target price of Rs 6300 (37.0x FY22E EPS).
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