Complete business analysis of TTK Prestige with step by step process to select the company and the management for investing.
I will share the thorough business analysis for a company – TTK Prestige in a step by step process and how it is entirely different from my past business analysis of Fine Organics and PI Industries.
Please note that it is not a recommendation to invest in TTK Prestige or any other stock for that matter. I am not a SEBI registered broker to recommend any stock. Instead, I have chosen TTK Prestige to help my readers understand how one should analyse management. Still, I will not talk about the price information, and everything I am sharing here is already available in the public domain.
So now, without much ado, let’s begin.
Step 1: Reject a Business for Investing
From the past articles, I am sure you know that the first step is to reject a company for investment without too much effort.
There are more than 3000 companies trades on NSE and BSE. If you have to analyse each of them, it can take a very long time to revisit a stock investment. So if I can reject the wrong businesses to invest in, it can save me a lot of time and energy that I can spend on good companies.
So the first set of rules for business analysis is to reject a business using the financial ratios and investment checklist.
- ROCE of consistently above 15%
- Debt to Equity ratio of under 0.5
- Operating Profit Margin or OPM in at least double-digit.
- Consistent EPS Growth for 3,5 and 10 years.
- Promoter Holding depending on how large a company is.
- What is the Cash Flow to Net Profit Ratio?
However, I realised some businesses do compromise on the margin for growth.
Step 2: Sector Analysis or Opportunity Analysis
Once the business passes the basic financial parameters, it is an ok business to invest in.
Still, it is not a great business to invest in unless it can have a long runway for growth for the next few decades.
So, I try to understand the opportunity for a business for the customers.
For over six decades, TTK Prestige has been the market leader in kitchen appliances.
Further, we all remember the tagline of TTK Prestige:
Jo Biwi Se Kare Pyaar, Woh Prestige Se Kaise Kare Inkaar!
As a business opportunity, there is a lot to do. Indian kitchens are transforming, and TTK Prestige is part of it.
So the opportunity for the business to keep growing for the next decade is high.
Step 3: Management Pedigree
If you watch this interview of Mr TTK Jagannathan, you will be convinced about the company’s future.
Especially, see the video around the 5:48 mark where he invented GRS or Gasket Release System. But, instead of patenting it, he made it open for other manufacturers to adapt and prevent bursting.
Some companies do CSR, and then we have people like Mr TT Jagannathan who prefer to do the work silently. When you invest in such a company, there are very bleak chances that you will lose money.
Further, I invested in the company in April of 2020 amid the Covid19 fear. So there was a considerable margin of safety.
Step 4: Business Analysis of TTK Prestige
When you have excellent management, the business analysis becomes simple.
So I look for
- Pricing Power of Business
- Simple Business Model
- Sustainability of Growth
- Research and Innovation
- The Debt Factor
- Operational Efficiency
- Sector Leadership & Market Share
- Subsidiaries and Related Party Transactions
Anything and everything that can help me understand the working of a business.
Pricing Power of Business
People consider Hawkins and Stovekraft as direct competition to TTK Prestige. However, Hawkins is predominantly into Cookers and Cookwares, but TTK Prestige is a complete kitchen appliances company.
StoveKarft’s many products compete with TTK Prestige, but there is ample room for more than two players to flourish in the kitchen appliances segment.
Simple Business Model
Yes, there aren’t many subsidiary companies within TTK Prestige, making it relatively simple to understand.
Sustainability of Growth
There is enormous room for growth and innovation in the Indian kitchen appliances industry. We need Prestige products daily, and there is no denying it.
So I believe there is a considerable growth potential for the company.
However, recent financials, especially for the years 2020 and 2021, has little to no growth. However, these are not the ideal years to judge a companies potential.
Research and Innovation
The man leading the company, aka TT Jagannathan, wanted to be into academics. So he has the knack for doing research. The Gasket Release system or GRS is an excellent example of research and innovation.
Further, the company is always ahead in the technology curve and looking to expand and add more capacity.
The Debt Factor
There is no debt in the company now, so there is nothing to worry about.
Companies with an operating profit margin or OPM of above 20% are good enough for me to consider the investment.
However, TTK Prestige OPM is around 15%. The reason I am ok with it is because of the quality of the management. I am sure they will look to up the OPM in the future.
Sector Leadership & Market Share
TTK Prestige is a sector leader in kitchen appliances. Prestige as a brand has a high recall among homemakers. However, my wife always prefers a prestige product.
Subsidiaries / Related Party Transactions
I didn’t find anything alarming in the annual reports I analysed for related party transactions.
When I am investing in a company, I invest as if I want to do the business. But, when you have a partner like TT Jagannathan as a partner, your work is cut out.
When I did the business analysis of TTK prestige, I didn’t invest in the share price of TTK Prestige nor in the business of kitchen appliances. However, I have invested in the ability of TT Jagannathan to help homemakers with great products.
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