TTK Prestige Limited (517506) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to TTK Prestige Limited Q1 FY '27 Earnings Conference Call hosted by 360 ONE Capital Markets Private Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Archit Shah from 360 ONE Capital Markets Private Limited. Thank you, and over to you, sir.

Thank you, Tanya. Hello, everyone, and welcome to TTK Prestige Limited Q1 FY '27 Earnings Call. From the management side today, we have Mr. Venkatesh Vijayaraghavan, Managing Director and CEO; Mr. K. Shankaran, Adviser to the Board; and Mr. R. Saranyan, Whole Time Director and Chief Financial Officer. I would now like to hand over the call to the management for the opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.

Good evening. This is Saran Saranyan here. I welcome you all for TTK Prestige earnings call for Q1. Before I hand over the proceedings to our Managing Director, Mr. Venkatesh, I just want to remind the participants about the safe harbor clause. The discussion and the presentations today may contain certain statements which are futuristic in nature. Such statements represent the intentions of the management and the efforts being put in by them to realize certain goals. The success in realizing these goals depends on various factors, both internal and external. Therefore, the investors are requested to make their own independent judgments by considering all relevant factors before taking any investment decision. Thank you. Over to you, Venkatesh.

Good afternoon. This is Venkatesh here. As we get into the quarter call, let me take you through our view on the general economy and then specifics of our industry and company. This quarter, again, we did face issues around the global uncertainties of Middle East political tensions and also higher energy prices as a follow-out of that. Also in terms of higher commodity pricing in a large number of industry segments as well. Overall, the quarter continues to be across the industry seems to be a little bit of uncertainty driven by global uncertainties, increased regional divergences that are happening, and that seems to be having a bearing as we look at some of our costs and supply chain-related areas as well. Exports continues to be a little muted because of this in terms of supply chain disruptions. I'm sure that's not specific to our industry, but that's across the country as well and in other areas as well. The Indian rupee weakening has its impact, and I think that's something that needs to be watched out for. Amongst this, I think we would say and personally and also from a view of overall, I do believe that the country is certainly going through a little bit of turbulence from a global volatility, but is standing out in terms of its resilience and its ability to be able to sort of respond to some of these changes. I think that sort of augurs well for industry people, and that we believe would probably continue to be a cornerstone for many industries and for us as well as we move forward. Specific to the industry, the quarter has been a good quarter for the industry. On the follow-up of what happened in Q4, Q1 has been a very robust quarter, which has seen a significant demand generation for the industry, and this has been across channels, across categories. It sort of has brought back a robust demand generation curve to the industry, and I hope this augurs well for the future as well. There have been challenges on the cost side, mounting pressures on commodity pricing and therefore, input pricing, particularly in kitchenware and also across some of the commodities in appliances as well. These mounting pressures are significant and would be impacting some of the cost structures. At large, I think the industry is passing on the cost increase to the consumers, and that's something that we've seen in the past, and I think that would sort of continue. The impact of that on volumes is to be seen. But the current quarter, if you were to go by, seems to be very robust on demand, partially driven by a situation where people have sort of upgraded their kitchen, gone for accelerated purchase of cookware in particular and appliances in particular. As appliances start getting sold more, I think the smartification of the kitchen continue to be one agenda that is strongly happening, followed by premiumization as well. That's from an industry perspective. Specific to the company, I think we've had a very good quarter. We've been able to capitalize on the opportunity of demand generated. We do believe that we've been able to do justice to fulfilling the demand. The work that we've done over the last two years in terms of process transformations, product transformation, also in terms of increasing our internal capabilities is holding us in good stead in meeting this demand surge very efficiently, and that's probably reflecting in the numbers as we speak for the quarter. Overall, the quarter has been a very good quarter, a very balanced quarter across categories, including cookers, cookware, appliances. Some part of appliances have been a little bit of a muted growth, but that's quite natural given the way the categories are placed. But at large, the growth has been significantly high. As a company, we've also seen that some of the benefits of the cost initiatives that we have driven in the last few quarters consciously are starting to yield results. We do believe the scale of which will continue to happen. On one side, while we have pressures on the cost because of input margins, we're sort of holding them to be able to work against them by our own internal cost initiatives across functions and also be able to meet the demand with a robust supply chain transformation, and that's probably leading us to the growth as well. We do hope that this would continue. While we do believe that this is not a sustainable consistent demand, the demand would probably settle at a slightly higher level than before in our view, and that, I think, would augur well for us and for the industry as well. With that, I'll probably open up the conversation given that the numbers are available with everybody to read. We would probably take up the questions and answer some of the financial numbers also through the questions as well. Over to you. Thank you. [qa]

[Operator Instructions]. The first question is from the line of Parth Sodha From Trinetra Asset Manager.

My question is like the company has over INR 870 crores of free cash despite ongoing investments. Beyond the announced CapEx, how should investors think about capital allocation over the next two to three years?

Your voice is a little muted in the last part. Can you repeat the question, please?

Yes. The company now has over INR 870 crores of free cash despite ongoing investments. Beyond the announced CapEx, how should investors think about the capital allocation over the next two to three years?

One year back, we announced a total investment outlay of INR 500 crores, both on soft and hard expenditure. We have spent only one-third of it till now. Balance INR 300 crores-plus will be spent over the next two years. Of course, there will be cash acquisitions also. And in these days, this is better to keep some cash free with us. The allocation will be on the items already referred earlier for about INR 500 crores.

The next question is from the line of Sameer Gupta from Indiainfoline.

Congrats on a very good set of numbers. I'll probably ask two and maybe park the rest in follow-ups. One, there has been a steady commodity inflation across the board. One, what is the quantum of price hikes that you have taken in this quarter? How much of this 33% growth is coming from price hikes? How much of the current inflation that you are seeing is already expensed out in the 1Q? How much is remaining to be seen?

See, on the price hike, of course, we have done during this quarter, but impact is minimal during this quarter, primarily because though we did the price increase, the price in the market only during the fag end of this quarter. Out of this 34%, what you are seeing, it's only around 3% is actually the price hike, the rest for all the volume growth. That, again, across all the categories as well. Of course, there is some also due to the mix change because we are also seeing some of the value-added products getting sold better during this quarter. That is also one reason for that. What is the second question?

No, this is part of the first question only. One, then how much total price hikes have you taken like even if it's only 3% for this quarter, but overall, what is the price hike quantum? What is the kind of raw material inflation that you are facing?

This depends on product to product. It is anywhere between 5% to 8%. It may vary the price hikes, but it depends on the category, each category, it differs.

The RM inflation, sir, your basket overall?

The RM inflation is anywhere average is around 8%.

Second question is, sir, on the growth this quarter. There has also been some specific categories which might have seen higher demand, which is very specific to this quarter given the geopolitical issues and LPG issues. If you were to, let's say, strip out those like induction cooktops, that's the only one that comes to my mind, but there could be more. If we were to remove that, what would be the revenue growth this quarter? Or any kind of general color that you can give on this aspect?

While I don't want to be very specific on that. I think if you were to look at the numbers, unlike the last quarter where there was a disproportionate growth impact because of induction, this quarter, the growth has been significantly distributed across categories, induction cooktops, small domestic appliances, air dryers, cookware, cookers, it's been uniformly distributed across categories.

Then is it a case of channel upstocking before the impending price hikes because there has been a sharp acceleration in the growth trajectory. Normally, unless exceptional circumstances like more people spending more time at home like we saw in COVID, what should be the reason of such a sharp acceleration?

Our belief is there is a minimal impact of upstocking. We're not saying that upstocking is completely ruled out. There is. I think for the quantum of growth that we are seeing, upstocking is not the primary driver of growth. So that's one thing that's very clearly coming in from the consumption pattern. Upstocking has not happened significantly high. There will be a part of this that can be attributable to that. I think what we believe is that the current scenario where consumers have walked in to buy more of induction cooktops, they've also looked at the new set of cookware, the new set of appliances. This has been a vibrant industry where, one, competitive intensity is high. Second, a lot of people have started getting new products in. Third, Prestige after almost a very significant gap in the last 1.5 years, we introduced close to 400 to 450 SKUs. So what's happening essentially is I think the walk-ins and the searches have increased, and this has led to more buying combinations of cookware and appliances to the kitchen. I would tend to believe that this is a trigger, and one of the reasons that we believe this is happening is we do have partial visibility to the tertiary trends that are happening in the market through our own stores, and that's been robust enough. Our belief is that while I mentioned that it's not a sustainable growth, this is something that has been triggered out with consumer behavior. I think it's sort of a onetime effort that consumers have put in to refurbish their kitchens. What started as just the induction cooked out is probably spread across all categories. Having said that, we have not seen in some categories which are not necessarily impulsive in nature, those categories have not necessarily seen significant growth. To that extent, I think this is something that has happened from a consumer-driven perspective rather than upstocking in our mind.

[Operator Instructions]. The next question is from the line of Praneeth from SJ Investments.

A I would like to ask a question in terms of, you mentioned that there is lot more product available, there will be a lot of sales, but what the company is exactly doing to get higher footfall and higher visibility because when we see something, the visibility has suddenly increased, right? So, what are the examples the company has been putting to get that?

No, your voice is muffled. Your voice is little muffled. We are not able to hear it properly.

I was asking referring to an answer from the previous participant that you mentioned that there's a lot more visibility of new products. The consumers are increasing the amount of wallet spend they do at Prestige. That's the reason most of the growth. Could you explain what caused this increase in visibility or increase in footfall into our stores or something like that? Is it the higher number of stores? I wanted to understand what suddenly changed in the last quarter over last year that the visibility increased and all of that because we've been increasing for the last one year, 1.5 years, right? What changed in this quarter specifically?

I think I would not see this as a one quarter blip. I would see it as a consistent effort that's gaining visibility given the quantum of growth right now. Two things that have been very clear from a company perspective, we've strengthened our counter shares across the large outlets, where we were probably having a diluted presence in the past, either because of portfolio gaps or because of our own distribution gaps that has got strengthened. We've increased our reach for a lot of categories, while cooker has been a well-penetrated distributed category, we've actually reached -- increased our reach of all subcategories in cookware and appliances using a cooker channel as well. I think from a company perspective, that's the second one that we're seeing incremental reach that is sort of getting demonstrated as we move forward. The third, of course, like we said, is the impact -- is the full-fledged impact of the portfolio being made available across all these stores. Launching new products and getting them to be distributed across the length and breadth of the distribution chain takes a little bit of a time. I think that's something that's now fallen into place as well. Internally, we do believe that our distribution initiatives have significantly borne fruit, while we continue to be demonstrating robust growth in e-commerce and modern trade as well. I think our omnichannel focus with a very specific ramp-up across general trade has sort of helped us sustain this growth, and combine that with the demand generation that's happened, it's probably come to the benefit of the company.

But for the full year, where do you think you'll end up at in terms of volume and value growth?

We don't want to give any forward guidance on that. We are confident of robust growth, but I think I would leave it at that at this point of time.

Would we continue the current trend of this quarter? Or would it be a little lower?

No. I think directionally, I would tend to believe that for the industry and for us, it would be lower, but I don't want to give any specific numbers.

It should be better than last year.

Definitely better than last year.

In terms of the competitive intensity in the market, so what are we exactly doing? Are we focusing on price or just portfolio at this point of time in terms of competing in the market right now?

We are very clear. Our focus is very clearly on premiumizing our portfolio. We have sort of sharpshooted on a few core categories where we are either leaders or we are potential leaders. We tend to focus on those six categories, six to seven categories very clearly. Premiumization is the way forward that we are looking at from this perspective. Premiumization demonstrated by product portfolio, a new design-led or new feature-led premiumization laddering and pushing Prestige, the brand power of brand Prestige in the whole game. Pricing is not our -- we are not looking at pricing as a very strategic lever from either a discounting perspective or scheme involvement perspective at this point of time.

So a good metric to track is probably the growth in volume growth is the value growth also because we're premiumizing over the next few years.

Yes.

Yes. We would tend to believe that directionally, our value growth should be higher than our volume growth over a period of time.

Would the volume growth be in line with, let's say, our inflation numbers? Or would it be more or higher than that?

It would definitely be higher than inflation numbers, but I wouldn't want to give like specific guidance, but directionally, it would be higher than inflation numbers.

When you're premiumizing, can you expect a higher margin than in the past, probably we peaked around like 14%, 15%. Is it possible in few quarters, could we exceed that because we are increasing our premium portfolio?

No. I think I wouldn't want to answer that specific direction. We continue to invest in what we believe would be future accretive. Our focus currently is not so much on the profitability bands as much as on stabilizing the business, premiumizing the portfolio. Of course, the portfolio gets this view from a profitability perspective. Our overarching principle is to invest in the right direction. Like Mr. Shankaran said, we continue to invest in another 1.5 years, two years of investment that we do foresee that will happen.

Last question regarding our U.K. subsidiary. What's our exact plans with that? Do we have any plans of growing or do we probably want to close down operations? Where are we at right now?

No, they are doing their best in the current condition, what U.K. and Europe it is in. They are expanding to other markets as well. They are doing their best to do whatever in the current condition. I can assure you that they are doing much better than many of their peers in U.K. At this point of time, there is no other thoughts at our end.

You see it based on how it goes. Right now, there's no decision on closing it down or growing it specifically?

No. They are doing their best. I think they are not taking away any resources from us. They are not -- we are not spending any management -- they are not taking away management time as well. This is being managed professionally -- professional team there. They are doing the best what they can do, and they will continue to do that.

With regards to our kitchen business, sir, in India, like how are we planning on -- do we want to scale it substantially or will it grow at its own organic pace? Do you want to put further investment into it and grow it?

We will come back on this specific a little later.

The next question is from the line of Aniruddha Joshi from ICICI Securities.

Just in terms of market share, where TTK would have ended the June quarter, will it be a significant market share gain? What will be the indicative industry growth in June quarter? Also as far as July is concerned, whether a similar trend has continued or you have seen some slowdown in the revenue growth, which was visible in, let's say, March to June kind of period? That's question number one. Secondly, now with steep increase in commodity prices, price hikes have also happened. So has that resulted in a way, some impact on affordability and the continued price hike may hurt the volume at least at the bottom end of pyramid in H2. Will that be a right assumption to make? These are the two questions.

Our market shares have steadily increased. We do believe that this quarter also, we would have gained market share in specific segments. To that extent, I think it's been a robust quarter for us with gains from market share. We do believe that overall, the industry has been robust. The extent of industry growth is something that I can't comment on at this point of time, but it has been robust. In our view, it has been equally robust or -- so to that extent, industry has seen a positive growth like in quarter 4, it's seen a positive growth in quarter 1 as well. We continue to gain market shares in very targeted segments, and we are consciously driving market share is one of the cornerstones for us to make sure that we gain a fair share of the market as well. So that's broadly what I would say from a share perspective. The segments that we operate in -- from Prestige perspective, the segment that we operate in, we are seeing significant market share gains as a brand. That's quite heartening for us to say. On the cost side, there have been significant bump ups like Mr. Saranyan had indicated. There is a 5% to 8% increase in the overall cost pricing that we would see, which is getting passed on to consumers in a phased manner. Some of the segments are able to absorb it. Some of the segment based past historic trends may not absorb it. But at an overall level, we believe that the industry is absorbing this and it might have a slight impact on volume short term, but it should even out over a period of time because this -- a large part of the industry growth is being driven by premiumization today and by upgradation of categories today. So to that extent, I think that should not dampen the volume growth at the segments that we are operating in. Having said that, we don't operate in deep cut price points, which may be the real mass market or the rural markets in a view. Prestige as a brand does not significantly operate in those markets. We operate in those markets at a slightly higher premium. So there, probably some of the players might face pressure when they start passing on the benefits to consumers. Now that's an independent segment. Our view is that, that segment probably will go through a little bit of volume pressure going forward. We are not playing aggressively in that segment.

This trend has continued even in the July month also?

No forward-looking from that perspective, but demands have been robust. Demands have been robust than usual has been robust.