TTK Prestige, the largest kitchen appliances company in the country, is likely to see a dip in its margin in coming quarters due to rise in fixed costs, depreciation and interest expenses, feel analysts.
"Whilst rupee appreciation would help margins to some extent, the commissioning of its new pressure cooker and cookware plant increases pressure on margins...Furthermore owing to increasing competition and already slowing demand the company is not in a position to pass on meaningful increases in expenses. We cut our 2012-13 EBITDA (earnings before interest, tax, depreciation and amortisation) margin estimate by 25 basis points to 15.6%," Nitesh Sharma, analyst with Espirito Santo Securities, wrote in his note to clients today.
The Bangalore-based company will announce its second quarter earnings tomorrow.
Espirito has also cut its rating on TTK Prestige stock to 'neutral' and lowered its revenue forecast for the current financial year by 5% and earnings per share estimate by 6%.
"We see increased risk to demand as slowing GDP (gross domestic product) growth, negative real wage inflation and lack of employment opportunities increase risks to consumption of discretionary items. This risk has been exacerbated by persistent inflation and a slow monsoon," Sharma said.
"During our last meeting, the hitherto optimistic management sounded cautious, highlighting that decreasing disposable income has meant that they are struggling to achieve even 25% top line growth," he added.
