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Friday, August 26, 2005
Wednesday, August 24, 2005
Tuesday, August 23, 2005
TTK Prestige: a new RETAIL kid on the block
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 |
|
|
|
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.
Navneet Publications - Sharekhan
Navneet Publications (India)
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs405
Current market price: Rs284
Publishing powerhouse
Key points
- Navneet Publications (India) (Navneet) is the leader in supplementary and reference book markets in Gujarat and Maharashtra with a share of 60% in each market.
- Navneet is all set to reap the benefits of the change in the syllabus in Gujarat (currently underway) and the same to begin in Maharashtra from FY2007, where it is overdue for two years.
- As a result of the changes in the syllabus the revenue from the company's publication business will grow at a compounded annual growth rate (CAGR) of 24% over the next three years from Rs167.52 crore in FY2005 to Rs315.25 crore in FY2008.
- In June 2005 Navneet—through its wholly-owned subsidiary in Spain—acquired the publishing business and brand of Grafalco, a Spain-based children's book company, for 459,000 euros.
- Navneet Edutainment, a wholly-owned subsidiary in the business of educational CD ROMs, would be merged with Navneet. Navneet would continue with the existing product portfolio of the edutainment business.
- The company's top line will improve at a CAGR of 17% from Rs274.54 crore in FY2005 to Rs434.28 crore in FY2005 and its bottom line will grow at a CAGR of 24% from Rs30.92 crore in FY2005 to Rs59.00 crore in FY2008.
- At the current market price of Rs284 Navneet's stock trades at a price/earnings ratio (PER) of 11x FY2007 (9x FY2008) and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 7.12x FY2007 (6.05x FY2008). We recommend a Buy on Navneet with a price target of Rs405
Monday, August 22, 2005
FCS Software Solutions: Avoid
Source : Hindu Business Line
INVESTORS can avoid the initial public offering being made by FCS Software Solutions at Rs 50 per share. Since the overall software services business is booming, FCS Software's focus on application maintenance, e-learning and product engineering services will continue to offer opportunities for revenue growth. However, being a small player in a sector where even the medium sized players are finding thegoing tough, represents a significant risk.
In the absence of niche focus and committed revenue streams, vendor consolidation, scale-up difficultiesand pricing pressure at the lowerend of the software value chain will be the key challenges.
FCS Software is makingthis IPO to finance the creation of IT infrastructure to house 300 new developers and meet working capital requirements. Of the project cost of Rs 19.9 crore, Rs 17.5 crore is to be met through this offer. Of the total revenues of Rs 85 crore for 2004-05, IT consulting has been the key contributor with 55 per cent, and e-learning and product engineering, the other two segments,
chipping in with 25 per cent and 20 per cent respectively.
The operating margin at 13.5 per cent appears to be in line with that clocked by other small-sized companies. But sustaining and enhancing these margins in the face of stiff competition, pricing pressures in the application maintenance business and vendor consolidation, especially among the Fortune 500 companies, will be a key challenge. If one adds the yearly wage hikes ranging from 13-15 per cent and
industry-wide attrition, the risks associated with being a small player are quite high.
To top it all, the lower end of the application management business, accounting for over 50 per cent of the company's revenues, is getting commoditised. Since the frontline software companies are focussed on achieving significant productivity improvements in application maintenance work through automation and offshoring, smaller firms will remain exposed to the risk of getting marginalised in the medium term.
Though e-learning and product engineering will be relatively high growth areas in the coming years, intense competition from large and medium-sized companies and the lack of long-term contracts can resultin margin pressures in the near term.
In this backdrop, though the price-earnings multiple works out to 7.5 times its 2004-05 per share earnings on an expanded equity base, the risks outweigh the scope for attractive returns in the medium term.
Investors can give this offer a go by.
The minimum lot for application is 100 equity shares. The offer price of Rs 50 is payable in two instalments, of Rs 25 each on application and allotment. The issue opens on August 22 and closes on 26. The leadmanager is Allianz Securities.
Saturday, August 20, 2005
Sharekhan - Kirloskar Brothers
Kirloskar Brothers
Cluster: Apple Green
Recommendation: Buy
Price target: Rs600
Current market price: Rs517
Revising price target
Taking into consideration the increased visibility of the company's earnings, its strong order inflow and the overall positive outlook for its business, we have revised our price target to Rs600 per share post split.
Wednesday, August 17, 2005
Stockmarkets: Count of death? - Equitymaster
1, 2, 3, 4.....13, 14, and 15! No, these are not the number of scams unearthed in Indian politics in the past eight months (there might be many more!). Instead, these are the number of weeks in the recent past when the Indian equity markets have risen incessantly. In terms of months, while the gains have not been consistent since he markets went on a northbound trajectory since the mid of 2003, the tone has been overly bullish. And the movement has been rather fast.
While many factors seem to have changed in the field of equity investing over the years, two factors that remain the same, and would continue to cling to sentiment on the stock markets are greed and fear. These factors have played crook on investments made by small investors in the past and, we fear, the way Indian markets are moving up, greed and fear may cause heartbreaks once more.
Wait! We are not here to spoil the party (or the hangover!) that is making rounds in the Indian equity markets, we are only reiterating our cautious stance. We completely concur with the long-term growth story of the Indian economy and on the fact the India has finally 'appeared' on the global scale. However, our concern relates to the fact that we (in the equity markets) seem to be moving rather too fast. And thus, the chances to trip are high.
Consider the facts, apart from the companies that have a long-history of being listed on the bourses, even those that are just appearing on the public scene and about whose fundamentals investors have no (or less) clues, are gaining substantially in this period of intense optimism. While some call it the 'IPO boom' and some call it 'the emergence of a new India Inc.,' we would like to caution investors from investing in these new kids on the block without having ideas about their performances in the past. To take a leaf from Benjamin Graham's thoughts, the abbreviation 'IPO' does not only stand for 'initial public offering.' More properly, and especially at these times, this might mean either of the following:
It's Probably Overpriced
Imaginary Profits Only
Insiders' Private Opportunity, or
Idiotic, Preposterous, and Outrageous
Finally, while the greed factor is much responsible for this merry-making on the bourses, even a small hint of fear taking over can end up in a contagion, hurting the sentiment of those for who believe that there is no stopping markets from going up, and up, and higher up! And that would be unfortunate for small investors who would have invested their hard-earned money as guided by the 'ever-optimist' forecasts.
Sunday, August 14, 2005
Hindu Businessline Recommendations
BUY >> GHCL, Orient Abrasives, Bajaj Auto
HOLD >>
Hindustan Construction, National Aluminium, Rajasthan Spinning
Saturday, August 13, 2005
Sharekhan Special - Logon to Logistics
Log on to logistics
We believe companies like Container Corporation of India, Gateway Distriparks and Balmer Lawrie, three dominant players in the CFS and ICD business, are potential beneficiaries of the growth in the containerised cargo business. We are initiating coverage on all three companies and their respective earnings and valuation details are given in the following exhibit.
STOCK IDEA
Balmer Lawrie & Company
Cluster: Cannonball
Recommendation: Buy
Price target: Rs481
Current market price: Rs400
Taking long strides
Balmer Lawrie is a public sector undertaking (PSU) with a history spanning over 75 years. It has a diverse business portfolio, which spans both manufacturing and service businesses. But it is the company's service business that accounts for the dominant share (of 62.0%) of its revenue. Improved financial health and the robust performance of the logistic SBU are the key triggers for the re-rating of the stock. Balmer Lawrie's consolidated earnings will grow at a strong CAGR of 36.2% between FY2005 and FY2007, with consolidated earnings per share (EPS) of Rs47.3 in FY2007E. Considering the company's improving return ratios and strong earnings growth prospects, the stock is trading cheap at a price/earnings ratio (PER) of 8.5x FY2007E.
Container Corporation of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,450
Current market price: Rs1,100
On fast track
Container Corporation of India (Concor) moves international containerised cargo from ports to its inland container terminals (ICDs) throughout India in wagons, which are transported via the rail network owned by the Indian Railways (IR). In the light of Concor's sustainable business model coupled with stable earnings growth and high earnings visibility, we believe the valuations are fairly attractive and provide decent upside from current levels.
Gateway Distriparks
Cluster: Cannonball
Recommendation: Buy
Price target: Rs240
Current market price: Rs190
Gateway to growth
Gateway Distriparks Ltd (GDL) is the largest private sector player in the business of port related logistic support and services. GDL's new facility (covering 50 acre of land) will commence operations in Q3FY2007 and will be fully operational in FY2008 (when JNPT is likely to commence its fourth terminal). The new facility could handle around 240,000TEUs per annum which will take GDL's TEU handling capacity to 560,000TEUs, ie 1.75x its FY2007 capacity. Hence with this kind of capacity in place GDL's growth trajectory is likely to maintain its upward momentum. We believe the stock's valuations are attractive and recommend a Buy on GDL with a price target of Rs240.
Sharekhan - Tata Tea
Tata Tea
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,040
Current market price: Rs789
Nicely brewed
- Tata Tea Ltd (TTL) is transforming itself from just a bulk tea player to a branded/packaged tea player.
- With various TTL brands acquiring strong recognition and respectable market share, we believe that the transformation strategy adopted by TTL is well on track.
- TTL is further derisking its business model by exiting/restructuring its bulk tea manufacturing portfolio.
- Though the transformation strategy is not reflected in the company's profit numbers, the company's profitability in the future will be driven by the better revenue mix, cost cutting and lower interest burden.
- The derisked business model makes us believe that the stock's current valuation is cheap compared to that of its peers in the branded fast moving consumer goods (FMCG) business.
- At the current market price of Rs789 the stock is trading at 13.2x its FY2007E earnings per share (EPS) and at 8.0x its FY2007E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We recommend a Buy on the stock with a price target of Rs1,040
Thursday, August 11, 2005
Sharekhan - Ultratech
UltraTech Cement
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs490
Current market price: Rs384
Ultra-profitable
Key points
- Cement prices in the country have risen in the past one year and are expected to remain buoyant owing to a rising demand, depleting surplus supply and slow-down in capacity addition.
- We expect UltraTech Cement Ltd (UCL), which has the highest leverage to cement prices, to benefit the most from the continued uptrend in cement prices.
- UCL's freight costs are high mainly due to the long lead distance for its cement markets. We believe that the synergies with Grasim would help it in reducing its freight costs and in improving its margins.
- UCL has lined up a capital expenditure (capex) plan of Rs1,003 crore over the next two years; this includes a Rs540-crore, 92-megawatt (MW) thermal power plant for captive use. This shall reduce its dependence on grid power and lower its power cost.
- The construction boom in the Middle-East has increased the export prices of cement and clinker by 59% year on year to US$43 FOB and US$35 FOB respectively. Since around one-third of UCL's capacity is located near the Gujarat port we expect the company to be the prime beneficiary of the buoyancy in the export market.
- Driven by the firm cement prices, increased utilisation levels and the company's transformation into an efficient cement producer UCL's net profit is expected to grow at a healthy compounded annual growth rate (CAGR) of 76% over FY2005-07.
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