TTK Prestige Ltd, the maker of kitchen appliances and cookware, is struggling to maintain profitability as increased competition erodes margins, especially in their bread-and-butter entry-level products. Additionally, consumer spending has shifted towards other discretionary items, making it challenging to boost sales.
Against this backdrop, a modest 2% year-on-year consolidated revenue growth to ₹623 crore in the March quarter (Q4FY24) isn’t surprising.
While online channels offer a glimmer of hope, traditional stores are underperforming. Even aggressive sales promotions failed to improve profitability. While TTK Prestige squeezed a little more efficiency out of production, operating leverage took a hit. As a result, Q4 Ebitda (earnings before interest, taxes, depreciation, and amortization) margin fell 74 basis points (bps) to 12.4%.
Following the results, Yes Securities has lowered its FY24-26E growth forecast to 9.5% revenue CAGR versus the earlier expectation of 11%. However, the brokerage remains “mildly positive” on the stock, “as company has performed relatively better than peers in the challenging environment and it will be the first one to bounce back once the demand trends improve.”
Amid stiff competition, TTK Prestige has managed to retain its market share in most key areas. For the year as a whole, its Ebitda margin contracted by 157 bps to 11.3% in FY24, with revenues declining by 3.6% to ₹2,678 crore. “However, there was revival in H2FY24 with 3.6% revenue growth YoY. We believe it indicates higher growth in FY25,” said a report by ICICI Securities.
The revamp of the ‘Judge’ brand, targeted at the mass market, might offer some relief in FY25. Nevertheless, weak demand, particularly in the mid-range segment, is a worry.
Also, its multi-brand strategy is a work-in-progress. The company expects demand trends to improve in the coming quarters, citing a long-awaited shift in consumer spending towards kitchenware and the positive back-ended impact of strong real estate sales on kitchen appliance demand. With this shift in demand, the kitchen appliances manufacturer anticipates mid-teen growth.
Moreover, it expects exports to improve in FY25, and is eyeing the developed European economies, aiming to diversify export portfolio. This is already showing promise, with TTK Prestige successfully adding two new European clients in Q4FY24.
Looking ahead, investments in the modernization of manufacturing plants might eventually lead to long-term savings. Its ability to adapt and innovate will determine the rate of future success.
For now, investors may wait for meaningful signs of improvement in demand before placing their bets. Currently, the shares trade at 34 times one-year forward price-to-earnings multiple, according to Bloomberg data, and are down 16% from their 52-week highs of ₹832.70 seen on 6 September.
