TTK Prestige Kick-Starts India Inc’s June Quarter Results

India Inc’s June quarter earnings have kick-started with TTK Prestige, which is one of the leading players in kitchen appliances. The market had a muted reaction to the TTK Prestige June quarter numbers of 2012, which came out in the early morning before the markets resumed trading. In the early trades the markets reacted negatively but the stock attracted some buying as the day wore on. The stock is currently trading lower by 0.64 per cent at Rs 3,298.

Our readers and investors would recollect that we had done a detailed analysis of TTK Prestige (Vol 27, Issue No 14, dated 18^th June – 1^st July, 2012) when it was at Rs 3,021. Post our recommendation the stock headed northwards and based on the volatile market conditions we had advised our readers to book profit at Rs 3,384 per share – an appreciation of 12 per cent in the stock price over just 20 days. There was also news about the company entering into a strategic alliance with SCHOTT and this further helped the share price to move upwards.

The company has posted a decent set of June quarter numbers but it seems that the markets have already discounted the same. The net sales of the company grew by 30 per cent to Rs 302 crore while its net profit increased by 21 per cent to Rs 30.68 crore. Its major chunk of revenue and profit came in from its kitchen appliances’ segment. The property and investment segments are expected to generate full-fledged revenue approximately by the end of FY14.

Further, the earning per share (EPS) of the company for the June 2012 quarter stood at Rs 27.10 per share against Rs 22.38 per share in the similar quarter last year. If we annualize this EPS for the full year of 2012-13, then with its current market price of Rs 3,298 the stocks trades at an annualized price to earnings multiple (P/E) of around 30.5 times, which we believe is slightly on the higher side.

A couple of weeks earlier, TTK joined hands with the German specialty glass producer and technology company SCHOTT AG and launched a range of world-class, high-quality cooking appliances under the brand name of ‘Prestige Premia’. On the occasion of this launch the chairman of the TTK Group said, “In order to maintain the brand equity of being the market leader in the home appliances’ segment, we have adopted the strategy of harnessing global business enterprises.”  We believe this strategic business alliance would help TTK in the medium to long run. Its immediate impact in terms of sales would not be seen in the next couple of quarters.

The result announced by the company did not disappoint the streets nor did it spur a very encouraging performance. It was almost in line with the street’s expectations and hence we believe that on the back of volatility in the market the scrip could take some beating on the bourses in the near term. We believe that the stock should ideally trade at a P/E multiple of around 26-27 times. Hence, investors should enter into the scrip at the lower level and invest in a staggering manner in the counter to garner better returns over a longer term.