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Thursday, July 17, 2008

Hawkins Cookers: Good defensive stock for investors


 
Hawkins' cookers financials 
Hawkins Cookers is a low-profile company with market leadership in the pressure cooker and allied kitchenware product segments. Its brand is a household name and the company is one of the two national players in its segment. Branded kitchenware is now in the limelight, thanks to the defensive nature of the industry and rising disposable incomes of the urban middle class in India.

BUSINESS:

Hawkins, which recorded a turnover of over Rs 200 crore in FY08, has been growing strongly over the past couple of years on the back of its market leadership and rising product prices, especially metal. The company has also been launching new products in the cookware segment .

Unlike its peer, TTK Prestige, which has diversified into the real estate sector, Hawkins continues to focus on its core strength. This strategy has helped it to post 15-20 % annual growth in revenues , and an even higher profitability rate over the past three years. The management believes in healthy sharing of profits with its shareholders.

Hence, in FY08, the company announced 100% dividend, amounting to Rs 10 per share, its highest ever. This translates into an attractive dividend yield of 5.7%. The company derives over 75% of its revenue from pressure cookers, with the balance contributed by other kitchen utensils. It also derives close to 5% of its turnover from exports.
Hawkins' marketing network is spread across the country.

The kitchenware industry is characterised by a large number of organised sector manufacturers and numerous brands. However, increasing urbanisation, rising disposable incomes and expansion in organised retail are positive factors for branded national players like Hawkins. To tap the high-end market, the company diversified into non-stick cookware with a launch of a slew of products under the 'Futura' brand. Hawkins' manufacturing operations are located in Jaunpur, UP and Hoshiarpur, Punjab.

FINANCIALS:

Hawkins posted robust growth in FY08, compared to FY07. But the March '08 quarter was not that impressive as its net sales grew just 2.7% to Rs 60.3 crore, compared to Q4 FY07. A check on operating costs led to a 15.2% growth in PBIDT to Rs 6.3 crore, vs Rs 5.5 crore in the yearago period. Thanks to higher growth in sales in earlier quarters and increased operating margins, PBIDT for FY08 shot up by 39.4% over FY07. It hardly has any long-term debts and its interest cost fell by 16.6% in FY08, over FY07. Its FY08 net profit of Rs 11.3 crore translated into EPS of Rs 21.3.

VALUATIONS:

At Rs 175, the company's stock is valued at just under nine times its FY08 EPS. But Hawkins has not been too aggressive in expanding its activities. To sustain healthy growth in turnover, it has to expand, even if needs to borrow funds. In a bear market, the stock is a good defensive bet for investors with a horizon of six months to one year.

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