TTK PRESTIGE - RESULTS FOR - Q2 FY 2013 - QTR/E SEP, 2012 - NET SALES UP 10.6%YoY; NET PROFIT DOWN10%YoY - ANNUAL REPORT FY 12 SUMMARY - LONG TERM OUT LOOK PROMISING

TTK PRESTIGE LIMITED

RESULTS FOR Q2 FY 2013

Q/E SEP,2012

TTK PRESTIGE has declared its results for the 2^nd quarter ending sep, 2012.

High Lights

Net Sales for the 2^nd q/e Sep,2012 stand at Rs.335.55 Cr; up by 10.91% QoQ (  Q1 FY 13 :  Rs.302.53 Cr); and up by 10.57% YoY (Q2 FY 12 : Rs.303.48 Cr).

Total Expenditure for the 2^nd q/e Sep,2012 stand at Rs.288.03 Cr; up by 12.18% QoQ (  Q1 FY 13 :  Rs.256.75Cr); and up by 12.97% YoY (Q2 FY 12 : Rs.254.97 Cr);

Profit before Intt, Dep. & Taxes for the 2^nd q/e Sep,2012 stand at Rs.47.52 Cr; up by 3.8% QoQ (  Q1 FY 13 :  Rs.45.78Cr); but down by  -2.04%  YoY (Q2 FY 12: Rs.48.51Cr).

Net Profit  for the 2^nd q/e Sep,2012 stand at Rs.30.28Cr; down by -1.3%QoQ (Q1 FY13 :Rs.30.68Cr); and down also by -10.18% YoY (Q2 FY 12 : Rs.33.71Cr).

Diluted EPS for the 2^nd q/e Sep,2012 stand at Rs.    26.75; compared to Rs.27.1 in previous qtr (Q1 FY13) and Rs.29.78 in corresponding Qtr of last year (Q2 FY 12). All costs  have increased during the current Qtr (Purchase of Materials, stock in trade, and other expenses). This has contributed to slight reduction in Profits. The company is in a Good Industry sector, which is growing well. Its long term outlook is very promising. Its past growth record is highly impressive.

The CURRENT MP of the share stands around Rs. 3237 on a face value of Rs.10.

52 week high/low price : 3998.90/2161.00

The other items and their comparison can be seen in the table below :

TTK PRESTIGE	30-Sep-12	%Dif QoQ	30-Jun-12	%Dif YoY	30-Sep-11	31-Mar-12	31-Dec-11
Net Sales	33555	10.91	30253	10.57	30348	23248	33433
Total Expenditure	28803	12.18	25675	12.97	25497	20283	28346
Profit before Intt, Dep. & Taxes	4752	3.8	4578	-2.04	4851	2965	5087
Net Profit	3028	-1.3	3068	-10.18	3371	1974	3457
Diluted EPS	26.75	-1.29	27.1	-10.17	29.78	17.44	30.54
Net Sales	33555	10.91	30253	10.57	30348	23248	33433
Changes in inventories of FG, WIP & SIT	-4473	592.41	-646	575.68	-662	-963	-3919
Cost of materials	9503	19.69	7940	35.41	7018	5071	7417
Purchases of SIT	13921	39.22	9999	32.83	10480	9800	15351
Employee benefits	2101	4.16	2017	14.25	1839	1712	2144
Depreciation	215	5.39	204	66.67	129	195	193
Other expenses	7536	22.32	6161	12.6	6693	4468	7160
Total expenses	28803	12.18	25675	12.97	25497	20283	28346
Profit before tax	4493	2.44	4386	-6.86	4824	2908	4960
Tax Expenses	1465	11.15	1318	0.83	1453	934	1503
Net Profit	3028	-1.3	3068	-10.18	3371	1974	3457
Face Value(Rs )	10	0	10	0	10	10	10
Paid-up Equity	1132	0	1132	0	1132	1132	1132
Basic EPS	26.75	-1.29	27.1	-10.17	29.78	17.44	30.54
Public Shareholding (%)	25.08	0	25.08	0	25.08	25.08	25.08

ANNUAL REPORT SUMMARY FOR FY 2012

FINANCIAL RESULTS

Years :              2011-12 &  (2010-11) 

Sales (inclusive of excise duty)  Rs.1122.71Cr (Rs. 775.58Cr) 

Other income  : Rs.3.08cr (Rs. 4.27Cr) 

Profit before Extra-Ordinary item  :  Rs. 163.24 Cr (Rs. 120.94 Cr)

Profit/(Loss) before tax : Rs.  163.24Cr ( Rs. 120.35 Cr) 

Tax Provision  :Rs.49.88 Cr (Rs. 36.60 Cr); 

Net Profit  : Rs. 113.36Cr (Rs. 83.75 Cr) 

Transfer to General Reserve  : Rs.11.34 Cr (Rs. 8.38 Cr) 

Proposed Dividend (including tax)  : Rs.19.74Cr (Rs. 16.45Cr) 

Surplus carried to balance sheet  : Rs.82.28 Cr (Rs. 58.92 Cr)

REVIEW OF PERFORMANCE

• Sales grew by 44.75%    

• All time high absolute value growth - around Rs.347 crores 

• Profit before extra-ordinary items increased by 35%. 

• Profit after tax increased by about 35.35%. 

• Operating EBIDTA margin was 15.6% compared to 16.2 % in previous year.   Minor drop in margin was largely contributed by sharp rupee depreciation during  September/October 2011 which could not be passed on to the market in the short-term. 

• EPS rose to Rs.100.13 from Rs.73.98  -  a growth of 35% 

• The ratio of Operating EBIDTA/ Operating Capital employed (excluding CWIP) in the Kitchen Segment was more than 60% notwithstanding substantial additions to asset base for future needs of production.

ALLIANCES

(i) concluded agreements with World Kitchen, USA which will enable it to enter the high-end Tableware/Cookware and Store-ware segments. The Company’s basket of products will henceforth include international brands such as Corelle, Corningware, Pyrex, Vision and Snapware. Except Corelle, all other products will carry the brand of Prestige also. The initial arrangement is one of distribution and after gaining sufficient experience and volumes, a manufacturing Joint Venture may be set up for decoration of Corelle  range of products and manufacture of Snapware range of store-ware products. The sale of  these products will commence during the first quarter of the financial year 2012-13. 

(ii) concluded a business collaboration agreement with Vestergaard  Frandson Group, Switzerland which will enable your Company to enter the fast growing domestic water filter segment. The products  will be made with the patented LifeStraw  technology of Vestergaard. The products will be assembled in India through your Company and  the Company will market and distribute the same across India. 

(iii)  Entered into agreements with Bialetti Industries Spa, Italy whereby the  Company has bought their pressure cooker and cookware manufacturing plants in Romania and Italy for installation in India. Some of the machineries have already been installed and commissioned and the balance will be installed and commissioned during the year 2012-13.

Pursuant to these arrangements Stainless Steel Pressure cookers are being outsourced by them from the Company. The Company has also entered into outsourcing arrangements with their Indian subsidiary. 

 The company’s product categories consist of Pressure Cookers, Non-stick Cookware, Gas  Stoves and Domestic Kitchen Electrical Appliances.  The market for Pressure Cookers is shared  amongst organized national branded players, regional players and unorganized players. Over the years, the share of the unorganized players has been gradually coming down as there has been a shift in the consumer preference to reliable branded players. The market for organized brands is estimated at more than 60% of the total market. The share of unorganized players is greater for Non-stick cookware as compared to pressure cookers. For the rest of the product categories, the market structure is fragmented and the share and the role of regional brands and unorganized players continue to be significant.  

Multinational Corporations are entering the domestic kitchen electrical appliances segment by acquiring regional brands. A couple of regional brands have been able to attract private equity investments at interesting valuations. Some State Governments have started providing select domestic electrical appliances like mixer-grinders, fans etc. free of cost to low income groups.  

While the free supplies by State Government will tend to commoditize the concerned product segment, the entry of multinationals and large domestic companies can lead to the growth of organized branded players. The real impact of all these on the growth of the organized sector can be felt only in the next couple of years.  

The Central Government has increased the excise duty on various products including  the Company’s products. The increase is between 1% and 2%. This will have a cascading effect and push up the end prices of the products. 

OPPORTUNITIES, THREATS AND COMPANY’S RESPONSE

The Company’s strategy is to continue to focus on Total Kitchen Solutions. 

 The Company’s vision is “A Prestige in Every Indian Kitchen.  

The Company’s key core values are “to provide Quality Consumer Products at affordable prices” and “Fairness in dealings with Every Stake Holder”. 

The strategy of focusing on Total Kitchen Solutions continues to create newer and newer opportunities every year to add new product categories and new customer base.  The Company has already taken steps to foray into Tableware and Cookware (both glass and  ceramic) segments, Kitchen Store ware and Domestic Water Filters the details of which are  given separately under the heading “Alliances”. 

The threat in domestic market continues from unorganized players and regional brands that compete with unviable low pricing strategies. The entry of larger players may shift the opportunities to organized branded players. The free distribution of certain products by State Governments is expected to create a decent replacement market in the years to come.

 The Company’s export strategy will be tactical balancing the needs of domestic market, comparative margins and optimum capacity utilization.  ‘Micro Chef’, the microwave pressure cooker range, mainly intended for the export market is attracting good interest in the export markets.  

The company concluded a long-term wage settlement with the Hosur Union with increased  productivity which is expected to neutralize the increase in absolute financial burden during the settlement period. 

 During the year under report , the Company introduced around 60 new products covering  Pressure Cookers, Induction Cook Tops, Mixer Grinders, Rice Cookers, Gas Stoves and other small electric appliances. 

The company continues to consolidate and expand Prestige Smart Kitchen retail network. It extended its coverage to another 26 towns. The net addition to the number of  stores was 77. The number of outlets as at 31.3.2012 was 356. The network now covers 21 States and 179 towns.

Properties & Investment

Pursuant to shifting of factory operations to other places, the  land at Dooravaninagar Bangalore became surplus and it was decided to develop the same instead of selling it outright. The company  has handed over the development to Rajmata Realtors (Salarpuria) for  developing an office cum residential complex. All necessary sanctions  and approvals have been received and the construction is progressing satisfactorily. The project is expected to be completed during the calendar year 2014. 

OUTLOOK

The company grew by 50% in 2010-11 and over and above that grew by 45% in 2011-12. Thus the base turnover has increased substantially in the last two years.  

The Company expects to maintain a decent rate of growth in the coming years mainly because  of the efforts of your Company in broad basing its product range and enlarging the consumer  base. 

CAPITAL EXPENDITURE & EXPANSION PLANS

The company has completed most of its capital expenditure investments in Uttarakhand, Coimbatore and Hosur units. All these expansions have started commercial production.  The  Company has  completed most of the formalities relating to the acquisition of land in  Gujarat and the construction of the factory has commenced. Most of the machines have arrived. The first phase of this project is expected to be in place before the end of the financial year  2012-13. 

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