Emkay Global Initiates Buy Call on Stovekraft, Targets Rs 700

Stovekraft Logs Strong Q4, Eyes 15% Revenue Growth for FY27

Stovekraft, a leading player in the Indian cookware industry, reported a robust Q4 performance, driven by a 32% year-over-year (YoY) growth in revenue. This increase was largely attributed to strong growth across various verticals, excluding gas cooktops, amidst ongoing gas supply shortages. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 26% YoY, while earnings before interest, taxes, depreciation, amortization, and management fees (EBITDAM) fell by 30 basis points quarter-over-quarter (QoQ) to 9.2%. This decline was partly offset by better operating leverage, which was facilitated by an 80 basis points QoQ drop in gross margin (GM).

The company's management provided guidance for FY27 revenue growth of 15%, with a focus on small appliances and the ramp-up of supplies to IKEA, which is expected to reach its full potential of Rs 2-2.5 billion per annum from Q1FY27. Additionally, the normalization of exports is expected to contribute to the growth. To counter the rise in commodity costs, the company has already implemented a 10% price hike. Furthermore, from June 26, 2026, price hikes pending due to negotiations will be implemented in export supplies as well. Long-term GM is expected to remain in a similar territory, with a potential rise of ~1% per annum as volumes scale up. The company's focus for FY27 is to protect its 11% EBITDAM, with management confident that operating leverage will drive further improvement as revenue grows.

Outlook

Read also: Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4

With the majority of its capital expenditure (capex) cycle now behind, Stovekraft aims to achieve Rs 25-30 billion in revenue over the next 2-3 years without any significant incremental capex. We have rolled forward our estimates to March 28, 2028, and retained our BUY recommendation while increasing our target price (TP) by ~8% to Rs 700 (from Rs 650) at 11x FY28E enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). The 10% change in our earnings per share (EPS) estimate is solely due to a change in the accounting policy for lease liabilities and does not affect our valuations.

Recommendation Report: [Insert link]