ICICI Direct recommended hold rating on TTK Prestige with a target price of Rs 6900 in its research report dated May 30, 2019.
ICICI Direct's research report on TTK Prestige
TTK Prestige reported moderate revenue growth of 6.8% YoY to Rs 444.9 crore on account of weak online sales due to a change in FDI policy and challenging demand environment in rural areas. Domestic sales grew 7% YoY to Rs 434 crore while exports grew 10% YoY to Rs 11 crore. Gross margins declined 180 bps YoY to 42.1% owing to unfavourable product mix. However, lower employee and other expenses led to EBITDA margin expansion of 50 bps YoY to 14.4%. Higher other income (up 35% YoY to Rs 7.9 crore) boosted PAT growth (up 18% YoY to Rs 44.0 crore).
The management remains upbeat about the long term growth outlook and expects to double its revenues (15% CAGR) over the next five years, capitalising on both organic and inorganic opportunities. The key growth levers include a) enhancing production capacity b) government initiatives such as Ujjwala Yojana scheme to perk up revenue contribution from rural areas and c) scaling up its latest cleaning solution business. TTK Prestige has virtually debt free status, cash rich B/S, generating RoCE of ~22%. We model in revenue and PAT CAGR of 14% and 19%, respectively, in FY19-21E. On account of recent stock price appreciation (12% since our last result update), it is currently quoting at 36.2x P/E on FY21E EPS. Therefore, we maintain HOLD rating and value it at Rs 6900 i.e. 35x P/E on FY21E EPS.
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