BAV Assignment

Valuation – TTK Prestige Ltd

Group – 7
Ashish Saxena (G17013)
Amit Kumar (G17062)
Gautam Das (G17076)
Kumar Vivek (G17082)
Shekhar Suman (G17101)
About The Company

• TTK is the flagship company of the TT Krishnamachari

Group, which has interest in healthcare and consumer
products. The company was set up in 1955 as a private
limited company, which went public in 2000.
• The company through its brand ‘Prestige’ is among the
leading brands in the kitchen appliance space in India,
especially in the pressure cooker and non-stick cookware
category.
• The company has a well-diversified product profile, with
c.55–60% of revenues from pressure cookers and non-stick
cookware products and the remaining from gas stoves and
kitchen electrical appliances.
About The Company

• The promoters holding in the company stood at 70.39%,

while Institutions and Non-Institutions held 19.62% and
9.99% respectively.
• TTK Prestige’s Prestige Clean Home division has
launched India's first domestic electric mop and a new
range of water purifiers. The new range of water
purifiers have been designed to combine the best of
Indian tradition with modern technology.
• It has acquired the business of Horwood Housewares
Limited, Bristol, UK which is the ultimate operating
subsidiary (Horwood) in April, 2016.
Sector Outlook

• Industry outlook - Drivers such as monsoon result in a major

impact on the economy & in turn consumer consumption.
Competition is with national & regional brands in organized sector
apart from unorganized players. However, consumer preference
has been shifting towards branded players given reliability &
quality.
• Firm outlook - The products offered by TTK are Kitchen appliances
and thus their business gets influenced by general state of the
economy and its impact on the households. Majority of the
revenue & market share is in South India. The product line
primarily consists of pressure cookers, cookware, Gas stoves &
domestic kitchen electrical appliances. The strategy of the firm is
to have upgraded differentiated products at several price points to
capture market share in the long run. Proactive innovation has
been identified as the key to sustain & stay ahead with
competition.
Sector Outlook

Driving factors of past performance

• Drought conditions resulted in dip in sales in the first two quarters &
sales slowly started increasing from 3rd quarter onwards.
• Demonetization in Nov 2016 resulted in reduction in liquidity &
contraction in demand. The impact was however limited to the
months of Nov & Dec.
Subjective future projections
• Company has entered in adjacent product category & provides home
appliances such as cleaning solutions, irons, lanterns, water filter etc.
• Growth in the past decade has been on account of tapping urban
markets however rural households will be the driver going ahead
given government’s policy to provide LPG connections and
electrification of rural area.
Product Range

Source : http://www.ttkprestige.com/products/product-evolution
Product Evolution

2001 - Gas 2016:

1949 - Stoves & Clean
Pressure Electrical Home
Cookers Appliances Solutions

1994 - 2015:
Non-Stick Pressure
Cookware Cookware
(Clip On)

Source : http://www.ttkprestige.com/products/product-evolution
 Past Performances
• Revenue growth largely driven by Volume growth with
operating margin reducing slightly
• The improved Product mix has been instrumental in the
revenue growth. High end products have performed better
than mass products
• The Company is relying high on new product categories of
“Clearing Solutions” and acquisition of “Horwood” to drive
growth in coming years
Valuation Methods

• Methodology - Discounted Cash Flow

• Sales Growth - Weighted Average Method of growth of
different Product categories
• Forecasting - Percentage of sales method
• Annual Statement - Standalone values have been taken for
2015, 2016 and 2017
• Forecasting - Cash flows are being forecasted from 2018 to
2022.
 Free Cash Flow-2017
• Revenues - Operating Revenues are considered
• Expenses - Following Items from P&L are considered
• Raw Material
• Stock in Trade
• Wages and Salaries
• Manufacturing Expense
• Administrative
• Selling and distribution
• Depreciation
Tax Rate

•
Working Capital

• Current Asset
• Inventories
• Sundry Debtors
• Other Current Assets

• Current Liabilities
• Accounts Payable
• Provisions
• Other Current Liabilities
Forecasting Cash Flows

• Assuming Conservative Sales Growth of 15% for the initial 3 years of

forecast and then 10% for the next two years.

• The values has been taken based on Director's positive growth

expectations based on good monsoon and a rising middle class as
well as research reports of various research houses.
Forecasting Expenses

Expense Head Basis

% of Sales
Raw Material

Stock in Trade % of Sales

Wages and Salaries

Inflation Rate

% of Sales
Manufacturing Expense

Administrative % of Sales

Selling and distribution % of Sales

Depreciation % of Fixed Asset

Forecasting Working Capital Changes

Expense Head Basis

Inventory % of Sales

Sundry Creditors % of Sales

Other Current assets % of sales

% of Sales
Account Payables

Provisions Same as Last Year

Other Current Liabilities % of Sales

Current Tax Liability Same as last year

Yearly Revenue Growth Trend

Yearly Revenue Growth Trend

310000 16.00%

15.00%
260000
14.00%

13.00%
210000
12.00%

160000 11.00%

10.00%
110000
9.00%

8.00%
60000
7.00%

10000 6.00%
1 2 3 4 5 6
Total operating income Growth Rate
Revenue and Profit
2015 2016 2017

Revenue 1393.386 1534.72 1610.38

PAT 92.3174 114.82 143

EPS 79.3 98.63 122.81

Source : Annual Reports 2014-15, 2015-16, 2016-17

Results

• Book value per share obtained by our calculations is equal to Rs

910.

• Based on this value, each share of TTK Prestige is valued at 7.32

times its book value as on 9th March, 2018.

• The share is currently priced at 46 times its EPS in 2017 and 35

times its 2019 projected earnings.
Summary

• The projections are sensitive to sales forecasts made on the basis

of Director’s Report, Macroeconomic data and the overall industry
growth. Any deviation from these figures, whether above or below
can have significant effect on the valuation.

• Company has very high Inventory Turnover Ratio with low Creditor
Turnover ratio. While this leads to high Working Capital
requirements, it also signals lack of confidence amongst suppliers
to sell materials on credit as well as lack of bargaining power of
the company among debtors.

• While company enjoys leadership position in sales and distribution

of its kitchenware products, completion in its electronic appliances
category is intensifying with the entry of many low cost variants.
This may lead to reduction in margins for the company.
Summary

• Capacity Utilization of the company is taken as 60% based on 2016

report of research firm Motilal Oswal. No capital Expenditure
expenses has been taken as a result during the forecast period.
However, to ensure terminal growth, a net investment is taken for
which calculation has been shown in the excel file attached with this
report.
• Terminal Growth Rate is considered taking inflation and GDP growth
rate into account.
• Investing only to maintain the existing condition of Plant &
Machinery by making up for depreciation.