Stock pick of the week: Stagger your investments in TTK Prestige

TTK Prestige reported weak numbers during the third quarter of 2019-20. For instance, its revenues fell 1% y-o-y due to higher base in the last year (was up by 21%). Overall economic slowdown and rural demand weakness also impacted its third quarter sales. Things were not rosy at the bottom line level either. Its profit before tax fell by 7% while the after tax profit was 7% owing to the fall in tax rates.

Like other segments, kitchen appliance sales will also plummet during Corona scare days and therefore, be ready for weak sales during the fourth quarter of 2019-20 and the first quarter of 2020-21.

However, analysts say that the negative impact is expected to be short term. Since TTK Prestige is an all India operator with a well diversified product basket and sufficient capacity, it should be able to bounce back soon.


Analysts’ views
Buy 7
Hold 1
Sell 3

Analysts are also getting bullish on this counter because of the aggressive steps taken to increase its sales and market share. The ongoing reorientation in its rural and distribution strategy is one of them. To increase its reach in rural areas, the company plans to add many more SKUs (stock-keeping units) in rural areas. As of now, it has only around 10 SKUs in rural areas as compared to around 700 in urban areas.

TTK Prestige’s focus on non-traditional distribution channels has also started yielding fruit. For example, around 15% of its sales now comes from e-commerce platforms. The company is also broad basing its client portfolio to increase sales from modern retail chains.

It is also launching innovative products to gain market share in the coming years. For example, it has launched a new product branded as ‘Svachh’. Due to its innovative design, this product claims to address the problem of froth spilling in traditional cookers. Once this new technology is patented, the company plans to incorporate it in all pressure cookers. Since TTK Prestige has substantial free cash flows, it is also looking at market share gains through inorganic routes.

Due to significant underperformance in the recent past, its valuation has reached reasonable levels. However, it is better you stagger your buys. Since the market turmoil is still continuing, you must be able to buy this counter at still lower levels.

TTK Prestige compared with ET Consumer Durable and Sensex. Stock price and index values normalised to a base of 100. Source: ETIG and Bloomberg.


Selection Methodology
We pick up the stock that has shown maximum increase in “consensus analyst rating” during the last one month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (ie 5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement in consensus analyst rating indicates that the analysts are getting more bullish on the stock. To make sure that we pick only companies with decent analyst coverage, this search will be restricted to stocks with at least 10 analysts covering it. You can see similar consensus analyst rating changes during the last one week in ETW 50 table.