TTK Prestige: a new RETAIL kid on the block
BSE Code 517506 Rs 113
Equity Rs 11.3 Res 32 crs, Book Value Rs 41, Sales Rs 189 crs, EPS Rs 8.83 adjusted to write offs, PEx05 13
BACK GROUNDTTK Prestige Ltd. a TTK Group company was incorporated in Oct 1955 and commenced the manufacture of pressure cookers in 1959 with technical support from Prestige Group, UK. It became a deemed public company in Jun.'88. Its name was changed to the present one in Jun.'94. It established facilities at Bangalore to manufacture a wide range of domestic and industrial appliances.
"Prestige" is India's leading kitchen appliances brand that symbolizes safety and reliability. The company is consolidating its existing strengths and is launching newer product categories and markets that it had not ventured into before.
With state-of-the-art facilities, the company has successfully launched its pressure cooker under the Manttra brand name in the US market, thus becoming one of the first organized Indian corporate entities to sell pressure cookers in the US under Indian-owned brand names.
The company entered into a tie-up with the world-renowned Braun , Germany, for marketing its products in India.
Readymade kitchens have taken the world by storm. Scrupulously designed to fulfil individual needs and adapt to available space, modular kitchens that have become the common way of life. Standardized modules, pre-fabricated in a varied range of materials, colours and finishes graciously fit the bill of fare to suit the modern kitchen. With the convenience and comfort of ready modules, one can avail of modern facilities and maintain a consistency in décor that defines one's personal statement of style. This has placed the modern housewife and working woman on the threshold of hand convenience where all one needs to do is order for one and before you blink your eye the ready kitchen is fitted into your house.
The basic modules are characterized by standardized units for the floor and wall, deep units to accommodate electrical appliances and gas trolleys, and a wide choice of accessories in the form of wire baskets, carousels, adjustable shelves and pull-out units.
Materials used are just as varied. You could choose from natural or lacquered wood, combinations of wood and laminate, laminate and granite, or even aluminium and marble, or just flow freely with the tide of ingenious material at hand and explore your creative flair for a custom built one.
No matter what the size and the shape of the kitchen, the two basic preferences have always been wood and laminate for the cabinets and shutters, along with sturdy material like marbles or granite for the worktops. All other options are generally designed around these.
Advantages of a modular kitchen are
They look good.
Optimize space.
Are made of durable material.
Selection of different materials for different uses is a difficult decision to make which is easily solved by a modular kitchen.
A modular kitchen takes care of things like exhaust hoods/chimneys which otherwise is ignored.
Replacement/repairs are easy.
Kitchen work/equipment/utensils get proper definition, role and place to function.
Person gets motivated to work in such kitchens.
Almost all over the world, in most homes, both husband and wife go out to work either out of necessity or out of choice and as such time spent in the kitchen is minimal giving rise to a demand for a well designed and convenient kitchen. Modular kitchens can very well fulfill this demand. With modular kitchens gaining popularity more manufacturers will jump into the field and the increased competition will result in prices becoming more affordable.
MANAGEMENT:
The Board of Directors is headed by Executive Chairman Mr.TT JAGANNATHAN
| Name | Designation |
| T T Jagannathan | Executive Chairman |
| S Ravichandran | Managing Director |
| T T Raghunathan | Vice Chairman |
| Ajay I Thakore | Director |
| Latha Jagannathan | Director |
| Vandana R Walvekar | Director |
| R Rajagopalachari | Director |
| R Srinivasan | Director |
| K Shankaran | Director & Company Secretary |
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FINANCIAL HIGHLIGHTS
(Rs. crores)
| Particulars | 200503 | 200403 | 200303 |
| Sales | 189.37 | 138.54 | 104.82 |
| Other Income | 0.25 | 6.35 | -0.21 |
| PBIDT | 12.19 | 11.59 | -6.11 |
| Interest | 6.36 | 9.21 | 9.54 |
| PBDT | 5.83 | 2.38 | -15.65 |
| Depreciation | 1.87 | 1.83 | 1.77 |
| PBT | 3.96 | 0.55 | -17.42 |
| Tax | 0.04 | 0.04 | - |
| Deferred Tax | --- | 0.3 | -5.95 |
| PAT | 3.81 | 0.21 | -11.47 |
| Equity Capital | 11.33 | 11.33 | 11.33 |
| Book Value Rs. | 41.00 | 35.10 | 34.40 |
| Earnings Per Share Rs. | 3.40 | 0.2 | ----- |
Comments on Financial Performance:
The company has turned around from loss of Rs.11.47 crores to profits of Rs. 3.81 crores. Reduction of excise duty from 16% to 8% and pick up in the disposable income spurred the demand of the company's products and helped to turnaround in FY 05. However effective 1st April 2005, since company has come under VAT regime the effective reduction from 16% to 4% will add both to the top line as well as bottom line.
FY 2005 profit excludes one-time non-recurring expense of Rs.5.02 crores without which the profits would have been Rs 8.83 crores.
Investment Rationale:
The company has just turned around and returns from such stocks are generally far superior to the market returns over medium to long term. The PE multiple is required above 20 in case of growth driven secular stories. TTK is in the process of building a largest retail story in India. Pentaloon has got advantage of early mover though its valuations are not reflected in the earnings whereas
TTK is successfully recouped its lost market share in last two years. TTK has braced aggressive plans for modular kitchens only in the current fiscal which will add to the top line substantially.
TTK has entered into retail segment with a smart kitchen retail format. TTK has opened 55 exclusive stores through franchise mode and the company plans to open 100 stores by March 2006. The company will be offering modular kitchens and complete kitchen solutions apart from its regular kitchen appliances like Pressure Cookers, Non-stick Cookware, Kitchen Electrical Appliances and Gas Stoves. With improved life style and disposable income, modular kitchen has become indispensable part of any modest kitchen. Even with modest investment of Rs 20 to 25 lac on the house by a middle and upper class segment the hobson's choice is now a modular kitchen. Even if one store is able to sell 5 modular kitchen a month it will add at least 60 to 70 crs to the top line which will take TTK in the fast lane of growth the real driver of the stock.
The changing lifestyle, double income family structures, rising income levels and preference for the safe and branded products will be sales drivers for the company. Its foray into retail will also drive future growth, as there is a good recall and high regard for its "prestige" brand, which signifies quality and safety.
TTK Prestige Ltd had launched the new range of products "Modular Kitchens" during the month of June 05 which are being sold through the Company's exclusive outlets "Prestige Smart Kitchens". The initial response is very encouraging. TTK is ready to explore its relationship with Wallmart and K Mart for modular kitchen is 07.
The company's US subsidiary Manttra Incorporation is growing at around 20% per annum. The "Mantrra" brand pressure cookers are sold through US major Retail chains like Wal-Mart, K-Mart, Fred Meyer, and Target etc.
The company is part of the TTK group that is a 76-year-old group. The group has build and operated some of the most trusted brands in the country like Prestige, Kiwi, Durex, Kohinoor, Brylcream, Eva etc. The promoters are holding 72.41% stake in the company that shows the confidence of the promoters in the company.
The company exports directly to UK, Europe, Middle East, Africa, Australia and SAARC countries. 86% sales are domestic while 14% is exports.
The company had been a consistent profit making and dividend paying company till FY 2003 when it had made loss for the first time in its history of 47 years. The company went into trouble due to increase in the excise duty from 8% to 16%, competition from the unorganized sector and higher staff costs, the company has restructured since then and started paying dividend from the current year.
Key Concerns:
The company is experiencing turnaround and runs a risk of not successfully completing the whole process of restructuring.
The company faces competition from the unorganized sector.
The liquidity of the stock on the markets is not very good.
The company operates in only kitchen appliances segment.
Recommendation:
The company has restructured and cleaned its balance sheet using the big bath behavior i.e providing for all the expected and some of the unexpected losses in the bad years so the future performance is better. Considering the business model of the company, we feel the earnings will increase manifold in the coming years.
TTK Prestige, whose main line of business is manufacturing and marketing of pressure cookers, is now entered into the modular kitchen segment. With the spurt in demand for high-end housing and interiors a significant chunk of future revenues could come from this line of business.
AFTER TTK Prestige's entry into the modular kitchen market last week, the latest entrant to join the fray is German major Hacker. The 196-million euro company has forged a tie-up with a local distributor and will sell its products through a newly formed company called Kanu Hacker Kitchens Pvt Ltd. And in keeping with the extreme price sensitivity of the Indian market, the company has decided to start its modular kitchen range at a lower price range, beginning with Rs 2 lakh. Mr Mukesh Kumar, Chairman and Managing Director of Kanu Hacker Kitchens, said that unlike its competitors, Hacker manufactures each and every accessory for a modular kitchen. TTK stand out with cost advantage here being an established player in the industry with 60 years's experience and brand loyalty consumers. At the same time Kanu Hacker will help this segment to expand at a much faster space. Aurora another Italian brand is roaring to enter India.
TTK has a US subsidiary Manta for its pressure cooker which has tie up with Wal-Mart, K-Mart, Fred Meyer, and Target etc the largest retail stores in US and going forward TTK is set to explore the export possibility of modular kitchens to them being existing patronage. However, TTK has enough space in India itself due to the changing test of Indian housewife's. It is also believed that TTK may expand the fleet of stores to more than 500 to 1000 in next three years and then probably look for the export market.
Though Pentaloon Retail has succeeded in targeting the right audience in right spot at the right time, we believe it is time to switch some your gains to this upcoming retail kid. Citibank has put a sell recommendation in Pentaloon Retail whereas we would suggest switch to TTK.