>TTK PRESTIGE LIMITED (LKP SHARES)

INVESTMENT RATIONALE

• TTK Prestige Ltd, India's largest manufacturer of kitchen appliances has made a successful transformation from being a reliable consumer brand to an aspirational brand and the Rs4bn company now derives 75% of its revenues from products launched during the past four years. The company employs close to 900 people and has manufacturing facilities in Hosur and Coimbatore with its new unit at Uttarakhand to begin operations by the end of the current fiscal.

• Pressure Cookers now form 53% of its revenues; non-stick cookware and gas stoves account for 25% of its revenues and more than 20% of its revenues come from Kitchen Electrical Appliances like mixer grinders, hobs, electric chimneys and induction cook tops.

• Prestige Smart Kitchen outlets based on the 100% franchise model now has 202 outlets and contributes 18% of its revenues. Its second retail initiative - Prestige Kitchen Boutiques now has 9 outlets offering a wide range of modular kitchens.

• TTK Prestige presently operates at a capacity utilization of 57% and we believe that increased capacity utilization and geographical expansion beyond southern parts of the country would enable the company to grow its top-line at a CAGR of 19% over the next two years.

• Having exited the loss making US business and with a virtual debt-free status this fiscal we expect bottomline to start looking very healthy on the back of free cash generation.

• TTK Prestige is jointly developing its real estate of ~7 acres in Bangalore into a residential cum commercial complex which when completed in FY'12 should fetch Rs1.4bn to the company.

• TTK Prestige being an innovative company constantly developing new products we have factored an ad-spend of more than 8% of revenues in our forecasts.

• We forecast EBIDTA margins to stay well above 11% this fiscal and the next despite the same almost touching 13% during the first quarter of this fiscal.

OUTLOOK & VALUATION

• With the repeated cut in excise duties on branded pressure cookers we believe that TTK Prestige with its clear strategy of providing total kitchen solutions would stay ahead of the curve and maintain its first mover advantage in this growing consumer durable space.

• With an ROCE of 41% and attractive valuations of 6xFY'11E we remain optimistic on the prospects for TTK Prestige and re-iterate our BUY CALL on the stock with an 18 month price target of Rs400.

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