Thank you for joining me. Good day and welcome to TTK Prestige Limited Q1 FY 2024 Earnings conference call hosted by Ambit Capital Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions before the presentation concludes. Should you need assistance during this conference call, please press star and zero or pound touchtone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, Mr. Dhruv Jain.
Hi. Hello, everyone. Welcome to TTK Prestige Q1 FY 2024 earnings call. From the management side, today we have with us Mr. Chandru Kalro, Managing Director, Mr. K. Shankaran, Whole Time Director, and Mr. R. Saranyan, Chief Financial Officer. Thank you, and over to you, sir, for your opening remarks.
Very good evening, everyone. This is Saranyan here. Before I hand over the call to Mr. Chandru Kalro for the opening remarks, I, on behalf of the management, welcome you all for TTK Prestige Q1 FY24 earnings call. I just want to remind all the participants of the safe harbor statement that this session today may contain certain statements from the management, which are futuristic in nature. Such statements reflect the intentions of the management and the efforts taken by them to realize certain goals. The success of 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, and hand over to Mr. Chandru Kalro.
Thank you, Saranyan. And good afternoon to everybody, and thank you for being here. My name is Chandru Kalro. I have with me Saranyan, who just spoke to you. He's the CFO, and Mr. Shankaran will be the Director of Corporate Affairs with me. And between the three of us, we will be taking all questions. A word about the quarter that just went by. While the numbers are not as good as the previous year, I think, by and large, we would say that we are not very disappointed because, as you know, discretionary consumption has been seen as slowed down for quite some time now. And as we had stated at the beginning of the year, we expect the first half of this year to be a little slow, and we expect that it should turn around in the second half of this year.
It's in that context that I would like you to see these numbers. The other thing that has been our focus in this period is to make sure that all our consumer-facing channels are on the growth path, and we have a very balanced channel portfolio without affecting any of the balance, given that the customer today is going to all these channels. The second thing that we have in focus was to make sure that the basic profitability and the basic brand premium that we are commanding does not get significantly eroded in spite of various competitive pressures on pricing and promotions during the quarter. As you know, raw material costs have been benign, and there has been a tendency by competition to pass on this and more, given that the discretionary consumption has been slowed down, and everybody wants a bigger share of the pie.
But unfortunately, as we expected, nobody got that bigger share. It was just that people started giving away more money, which we didn't want to do. So it was in that line that we achieved the top line that we achieved. And the next thing is, if you see our operating profit for the quarter, the problem has largely been because of the operating leverage being down. The raw material cost ratios have been better, better than last full year and better than last year's same quarter. I now open the floor to questions. Thank you.
Thank you very much. We'll now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, please wait for a moment while the questions are sent. Participants, you may press star and one to ask a question. The first question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah. So thanks for the opportunity. So two questions. One, can you indicate the performance of Judge brand in terms of any revenues or any market share it would have been at the bottom of the pyramid? That is question one. And secondly, there have been media news as well as, I guess, that we are in the process to launch a premium brand also at the top of the pyramid. So any update on that and any progress or timelines on that? Yeah. Thanks.
Thank you, Aniruddha. As you know, we announced the segmentation strategy through multiple brands, and Judge being the first one of them. Judge has already been in existence for the last few years. And what has changed now is the total rebranding, which now we call it Judge by Prestige on the logo itself. This quarter, we have been actually integrating this with the same system, which is what we wanted to do. Earlier, Judge brand had a separate sales force and a separate distribution, which we believe was actually restricted. And what we've now done is actually taking that and integrating it with the rest of the portfolio of the salespeople and to give it to the existing distribution of Prestige.
The other thing that we did was to actually streamline the portfolio between Prestige and Judge where there were overlaps, which we believe were not healthy given the segmentation strategy that we had. So largely, it's a work in progress. So these turnovers are actually flagged with last year in terms of the brand itself. But what has happened is the brand presence now is getting expanded as we speak. We believe that this process should take a couple of quarters before this can start yielding results as we want. The idea is that certain strategic categories like pressure cookers, cookware, and maybe even gas stoves, which we have Judge as an entry, not in all categories that Prestige operates, but largely in these three categories. And in the rest of the categories, we continue to focus with Prestige so that the pricing conflicts are not there.
As we go along, we will build a portfolio of products in Judge itself, which are not there in Prestige. For example, stainless steel dinner sets. For example, bottles and glass, which will now move entirely to Judge accessories for pressure cookers so that the brand has a separate product portfolio in addition to being specifically or tactically oriented to gain market share or certain growth indicators. It's largely a work in progress at this point in time. So your second question on the brand at the upper end, that we haven't yet started, though I think the contours of that architecture are being built as we speak. We won't be launching anything in the next couple of quarters. We probably will launch something in the last quarter if everything goes well and if the rest of the strategy falls in place.
Okay. Sure, sir. That's helpful. So just one more question. Obviously, we are seeing the opalware as well as ceramic, these kind of products are also becoming quite popular. So any strategy by TTK Prestige to enter these kind of products and any plans in that regard? Yeah. That's from my side. That was the last question.
Nothing in opalware as such. We are doing relatively little sets and not opalware. We believe that that is something that we don't have the core competence yet. So that's probably where it is. In terms of ceramics, no, we're not doing any ceramics. Tableware, in fact, we have not yet done a full-fledged strategy for tableware.
Okay, so any plans on that or nothing near future?
At this point in time, nothing that we can discuss at this point in time.
Okay. Sure, sir. Thank you.
Thank you.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Lokesh Maru from Nippon India Mutual Fund. P lease go ahead.
Hi. Thank you for taking my question. I wanted to check on just, obviously, the wedding season was relatively weak this quarter, so this expected some kind of slowdown for our product portfolio. But when we look at same thing, when we look at tableware, like Aniruddha mentioned, I mean, the leading brand there has actually pursued growth of, if not much, 5% single- digit. So I just wanted to understand, if we are also leaders in the kitchenware category, anything specific? And we are witnessing this regroup the last couple of quarters, which opalware portfolio is not really. So it's not fair to draw parallels, but just to understand, if there's anything specific which is hurting us from a growth point of view, that would really be helpful, any insight from that part.
I mean, I don't know whether we can draw a straight parallel with opalware itself because we're really talking about kitchen appliances and then tableware. These are two separate things. And typically, tableware habits probably are changing across because households are now probably looking at opalware as an addition to stainless steel and vice versa. The other thing is that the selling seasons for opalware and kitchen appliances are not necessarily the same. As I understand, my knowledge is not complete there, but typically, they start two or three months in advance for the value because there are a large number of designs that they need to produce for the season. And once they do that, they have to produce accordingly. So it's largely a pull-based selling that happens in the market, whereas in our case, the products are very stable.
We don't need so many designs. It's like almost underground itself. Parallel. That's the kind of parallel that's between tableware and kitchen appliances. In terms of why is kitchen appliances hurting, there are two or three reasons for that. One is, of course, the overall economic situation and the inflation that is there, which is affecting discretionary consumption as a whole. Within that, there is a base effect that we have between last year and this year. And then there is a share of wallet that has been shifting over a period of time. And we believe that slowly but surely, this will get normalized as we speak. The other thing is there is also, in most cases, I don't know about the other my peers in the industry, but what we have been seeing is last year, the channel actually up stocked, and I don't think that happened this year.
So while the secondary might actually be equal, if not marginally lower than last year, the up stocking did not happen this year because it was not necessary. Last year, probably they had restocked enough so that the primaries are looking slightly different. This is an inference from our numbers. I could be wrong with the other competition. But largely, there's nothing to be worried about. There is a base effect. This quarter, there is a delayed Diwali, so probably it could also play out that way. But overall, I think the second half should be better than the first half.
Speaking of, one more point on our sales and strategy front. One thing that we are doing is, obviously, we have launched a Judge brand to conquer the competition per se. When we look at kitchenware or cookware category, cookware, which we have 15%, which comes to 2% of the portfolio, majority demand there comes from, as you say, replacements are demanded. It is going to be manufactured in one of the most mature categories. On appliances, just trying what is our, as in our case, when we even get deeper into appliances, there is competition, and there is competition from imported ware and brands. Within cookware, we are the number one brand, right? Within appliances, there are many brands and many imported ones that do have to be ensured.
So how do we look at growth going forward, and what is our take on how do we take our positioning one notch higher within the appliance sector to keep up with our? Even if there are challenges, like we have seen the base is high right now, but in the challenging times, we would be able to deliver that kind of growth or have that kind of sustainable growth going forward. Any insight on that?
You see, yeah, the kitchenware, which is the pressure cookers and cookware, which you are able to largely. There are very few players like us which have much larger shares in the market. Unlike appliances, where the shares of the leaders are in very low double digit at the max. Largely, everybody, it's a much more fragmented play in the appliance side. But I don't agree with you that there is imported competition there. I don't think imports are viable today as an option for most of the categories that we operate for two reasons. One is that the gas stoves that we do and the mixer grinders that we have are very different from what is being sold by China or any of our counterparts there. The products are very different. So these are India-centric, and these are largely almost 100% made in India.
Within that, there are a lot of now non-tariff barriers that the government has introduced in terms of certifications, like BIS certifications, like BEE certification to be coming in soon. It's going to be unviable for people to bring in products from outside other than at component level to bring it from outside. There are the new age appliances, which are the small domestic appliances like toasters, blenders, etc., which are China-centric, which have also become unviable to import from there. And largely, that is also the supply chain issue. You will be aware that we were one of the first companies to actually move supply chains to India, largely. In fact, we have now stopped imports of finished goods from China for quite some time, which was a strategic move that we made. The competition has always been there. These categories have always been fragmented.
TTK Prestige has approached this with a very consistent customer-centric innovation-based approach. So what we have is new products that come in, which provide genuine solutions to people's problems. And that is why we have been leaders, and that is how we intend to maintain our leadership.
Sorry, this is just a follow-up to the previous question. So by imported, I mean Morphy Richards or Philips. I just mean other brands who are leaders in different appliance markets. So how do we replicate TTK Prestige brand within appliances? Or do we actually go out and, like Aniruddha mentioned, launch another brand at premium positioning, super premium or premium positioning? How would that work, I mean, replicating the brand that we have within cookware and cookware to appliances?
We don't have to replicate anything. Surely, as you are aware, by the way, Philips is an Indian brand, if you want to. It might be available elsewhere, but it's an Indian brand. But we don't have to replicate anything. We are already leaders in appliances. There is nobody who is doing the kind of turnover that we are doing in the appliance turnover in the portfolio that we have. So, I mean, and that has been achieved through this innovation-based customer-centric approach that we have through our distribution, through our consistent marketing efforts. That is what we are going to continue to do.
Wonderful. Thank you.
Thank you. She must press star and one to ask the question. Next question is from the line of Sameer Gupta from IIFL. Please g o ahead.
Hi. Good afternoon, sir, and thanks for taking my question. Just wanted to understand this performance and going forward, the commentary on the second half. So basically, I've seen this in some other companies also, or sectors also. During COVID, there was excessive demand for home improvement products, and ours also is somewhat that category. And is it just that there was overbuying or maybe more than normal buying at that time, and now things are normalizing? And when we say that we expect the pickup in the second half, is it just the base catching up, or there is something strategic here, just sales, etc.? Any color you can throw? What will drive the pickup?
So it's a pickup, everything that you mentioned. When we came out of COVID, there was pent-up demand. There is no doubt about it. It was also accentuated, as I said, because the channel stocked up at that time. And it was also accentuated because people were more involved in the kitchen because there was nothing for. So all of those things that you say are true. And the share of wallet was higher. Today, people suddenly, after two years, they want to go out, and so you see hospitality, luggage, these kind of industries doing extremely well, and the share of wallet going the other way. That is getting normalized. That is one reason. The second thing is we know that last year, the second half was not good for most companies. So there is a base effect catching up, like you said.
Third thing is Diwali is delayed. Given that Diwali is delayed this year, you are likely to see a bigger second half than normal as compared to last year. So these are some of the things, all the three things playing out, which is why we are saying what we are saying. Most of our product launches happen in the first half so that we can then become relevant for them in the second half for the first season.
Got it. Just to reiterate, it is more of a normalization that we are expecting, and so maybe one thing for it will look like a pickup rather than actual demand picking up?
Absolutely. Actual demand may go with its normal growth level. And there will be, of course, categories that will go here and there depending on what kind of products we launch. And therefore, you might see a little bit of up and down here and there.
Got it, sir. That's very helpful. Thanks. I'll come back in the future and see you.
Thank you. What is the name? She must have star one to ask the question. Next question is from the line of Abhilasha Satale from Quantum Asset Management. Please go ahead.
Thank you for taking my question. So I have a question on margin. So gross margin has been improving on quarter-on-quarter basis and year-on-year basis. So I just wanted to understand the reason behind this, like have we seen any sales increases or is it a consumer product mix? And going forward, how much further improvement do we expect in our margin?
You're absolutely right. The gross margin has gone up primarily because the raw material costs have been declined. And no, we have not taken any price increases. The price increases need not be taken. They are not justifiable if we want to take. And as I said in the beginning, our peers have been quick to pass on many of these savings, which we believe was not healthy because even now the raw material costs are not as low as they were pre-COVID. So passing them on may not be right. So we work very hard to make sure our gross margins are retained to the extent possible. Going forward, we expect the gross margins to remain stable because we expect the raw material costs to be remaining stable.
There are no price increases planned for this year as of now, given the raw material cost situation that we have.
Okay. Thank you, and my second question is towards our A&P spend. So, can you throw some light on how has been our A&P spend moving? Because we have launched a few products, and we are also in the process of launching a premium branding. So overall, what is the outlook for our A&P spend?
Either in a good or bad year, we have been very consistent in our A&P spending. We've been between 6%-6.5% typically on advertising and promotion across the year. And that is going to continue, and that is what we've been doing this year as well. What we decide to advertise is based on the kind of portfolio and the new innovations which we launch. We believe that there are mature categories that don't need advertising on a regular basis. But if there's a new product, something that's completely different, we'd like to advertise and invest in that category, aggregating to this kind of spend generally in that time. That's how we do it. If there is a new brand that we are launching, that strategy, I don't think we can discuss at this point in time because it's not ready.
Okay. Okay. Thank you. And my last question is on how do we see our growth on a consumer basis? Because as you understand, there was a pent-up demand, which has been high, and therefore we cannot comment on this year's growth or anything. But going forward, when the situation is more normalized and when we see overall consistent improvement in the disposable income, how do we see our growth in terms of we want to grow low double-digit, get mid double-digit, some guidance on that?
Obviously, sorry about that. Obviously, our focus is to maintain market share. So that means we have to at least do category growth rates overall, and that is one thing that we want to do. The second thing is we believe that on a normalized basis, a double-digit growth in the Indian economy is possible provided the other things normalize. And we have so many things that are going here and there. But these things get normalized as we go along. Inflation, I think, is updated. Overall, I think real incomes in rural India and the small-town India is actually growing. India is a bright spot in the world economy, and we are fully cognizant of that. So a low double-digit growth is something that we would think is possible, and that's what we will go after.
Okay. Thank you.
Thank you. What is the name? She must have star one to answer question. Next question is from the line of Mustafa Khedwala from Cube Investments. P lease go ahead.
Thankful for the opportunity, if we look at our quarterly numbers, the cooker plus cookware division results that we add up , it has experienced a -10% growth. If we compare this to our nearest competitor who had a relatively positive growth, is it true that we are losing market share in our cookware and cookware business? So can you shed some light on this, please?
So there's one thing that we had last year, which we didn't have this year, which is why our numbers are looking the way they did. Last year, we had a one-off sale of cookware, which was very substantial during this quarter, which didn't happen this year. That is one reason. Second thing is, as I said, last year, the channel stocked up, and this year, the channel didn't stock up so much. And I believe that that is also optically making this sale look the way it is. One of the things that we track on our traction is on front-facing channels, whether it's e-com, whether it's our own Prestige Xclusive , or whether it is modern format where we sell cookware. These places, we have had healthy growth. We don't believe that there are any market share losses, though optically, this looks lower than the previous year.
We have launched a nice new range of products, both in non-stick cookware as well as in stainless steel, which is meeting with the good demand, and we believe that this will get normalized as we go along.
So what is the quantum of this one-off?
Sorry. Sorry. One last thing is the provision mentioned, which looks optically higher. I'm not sure whether they have disclosed whether it is in exports or whether it is in domestic.
And, sir, even in there, I think we have lost out on export potential, whereas that is only been 10% in a year.
Yeah. So exports are based on the customer profile. They're all stocking up and stocking down. And you are aware that many of these large customers, because of supply chain vagaries, had actually ended up stocking up again last year, which is getting normalized. So that is all coming together. That is why we're seeing it like that.
Sir, are we in a position to tell how much was this one-off last year for extra stocking or extra sale of cookware that you mentioned?
I don't want to give a number out. Having said that, it is significant.
Okay. Sir, lastly, there was an announcement sir, about some capacity enhancement about some inner-lid cookware. Sir, is this a fresh launch for us, or are we already in inner- lid?
No, no, no. We are already in inner- lid. The capacity is a fresh capacity that has come up given our Roorkee factory. This is for inner- lid stainless steel pressure cookers. As you know, there has been a movement from aluminum to stainless steel overall in the category. And this is to augment our capacity to supply stainless steel cookers in the market, which is in and largely inner- lid cookers are sold in the non-South. So this factory is now going to be able to supply some closer to market from there. It is definitely a capacity enhancement in line with what we think are the demands that might go up in the near future.
So what is the contribution of inner- lid cookers to cookware sale?
About 1/3 .
About 1/3 . Okay. Thank you so much, sir.
Thank you.
Thank you. A reminder to all the participants who must press star one to ask a question. Is there no further question? I will now hand the conference over to the management for closing comments.
Thank you, everyone, for coming to the analyst call and attending this call. And as I said, we are hopeful that we will have a second half as we go along. The company is doing well. Overall, the basic components of the company are intact, and we haven't given in to any of the other pressures that might be there. Thank you again for coming.
Thank you very much. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.