Stove Kraft down 52% from all-time high; is now a good time to invest?

Stove Kraft, one of India’s leading kitchen appliances, has been witnessing a downward spiral in its share price over the last two years. During this period, the shares have plummeted to ₹547 levels from ₹1,066, resulting in a drop of 49%, and from their record high of ₹1,133, they have tumbled 52% to date.

Despite the company's shares being underperformers, domestic brokerage firm Equirus Wealth has remained optimistic about the firm's long-term prospects.

Stove Kraft, established in 1999, is among India’s leading manufacturers of a wide range of kitchen appliances and an emerging home solutions brand. With over two decades of strong presence in the Indian kitchen appliances market, the company has emerged as one of the dominant players in the pressure cooker, free-standing hob, non-stick cookware, and cooktop segments.

The company's Pigeon brand is well known for its ‘value for money' brand positioning. The brokerage notes that the products offered under the brand are at attractive price points (6-40% discount to its peers) in a highly fragmented market. It anticipates that the company will benefit from the consumer shift to organised players from unorganised players.

It said the company has been continuously expanding its product portfolio over the last few years, launching products like air fryers, budget gas stoves, and ORB mixer grinders, which is critical given the nature of the segment.

With a robust presence in the 'value for money' segment and attractive price points, the brokerage believes companies like SKL, with strong execution capabilities, are poised for significant growth.

From FY21 to FY23, the company has significantly expanded its retail presence by adding 30,791 new outlets, bringing the total retail touchpoints to 82,767 by the end of FY23. This extensive reach positions Stove Kraft to capitalise on growth opportunities emerging in Tier 2 and 3 cities, leveraging its strong market presence.

In 1QFY24, the company added 25 additional company-owned and company-operated retail stores of the Pigeon brand in South India, taking the total count of 77 stores, which leads to improving brand visibility for the company, the brokerage said.

Stove Kraft has seen volume growth of 33%, 23%, 14%, 10%, 6%, and 1% CAGR in the product segments- Induction Top, Pressure Cooker, Mixer and Small Appliances, Nonstick Cookware, and Gas Cooktop over FY21–23.

The overall volume for SKL has grown at a 21% CAGR during FY20–23, as against the industry volume growth rate of 8% during the same period. This, according to the brokerage, was led by strong execution and a focus on market share gains. Looking ahead, it anticipates a 12% CAGR in volume growth over FY23–26E.

Considering these favourable factors, the brokerage has initiated coverage on the stock with a 'long' rating and set a target price of ₹930 per share, reflecting a substantial upside of 70%. The brokerage expects robust growth in SKL’s revenue, EBITDA, and PAT, with projected CAGRs of 14%, 31%, and 51%, respectively, over FY23–FY26E.

02 analysts polled by MintGenie on average have a 'strong buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before making any investment decisions.