Hawkins Cookers_Firstcall DEC 11 by icestar

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									                                                          HAWKINS COOKERS LTD
                                                                  Result Update: Q2 FY 12

  C.M.P                 : Rs.1488.00
  Target Price          : Rs.1681.00
  Date                  : 14th Dec 2011                                  BUY

    Stock Data:                                                     SYNOPSIS
    Sector:                      Consumer Durables    Hawkins Cookers Limited is a
    Face Value Rs.               Rs.10.00             company in India which manufactures
    52 wk. High/Low (Rs.)        2117.95/827.05       domestic   pressure   cookers  and
    Volume (2 wk. Avg.)          898.00               cookware.
    BSE Code                     508486               The     company       has      three
    Market Cap (Rs.In mn)        7868.54              manufacturing plants at Wagle estate
                                                      Thane, Hoshiarpur and Jaunpur. It
    Share Holding Pattern                             manufactures under different brand
                                                      names of Hawkins, Futura, Contura
                                                      and Ventura.
                                                      The company is the largest cookware
                                                      manufacturer in India and exports its
                                                      products to more than 60 countries.
                                                      The company continued its efforts on
                                                      product development with more
    1 Year Comparative Graph                          emphasis     on       research   and
                                                      development activity.
                                                      The Top line of the company is
                                                      expected to grow at a CAGR of 14%
                                                      over 2010 to 2013E respectively.
                                                      During the quarter, the company has
                                                      reported Net Profit increased to
                                                      Rs.93.27million from Rs.80.39 million
                                                      in previous year same quarter.
        Hawkins Cookers Ltd      BSE SENSEX




Years                Net sales              EBITDA   Net Profit           EPS               P/E

FY 11                 3338.89               515.56    317.65             60.07              24.77

FY 12E                3839.72               574.40    353.63             66.87              22.25

FY 13E                4223.70               625.23    381.02             72.05              20.65




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Peer Group Comparison

                                       Market
Name of the company       CMP(Rs.)   Cap.(Rs.Mn.)   EPS(Rs.)   P/E(x)   P/Bv(x)   Dividend (%)


Hawkins Cookers Ltd        1488.00      7868.54      60.07     24.77     17.07      400.00


Varun Inds                 246.75       7183.9       16.92     14.58     3.04        18.00


TTK Prestige               2675.05      30284.5      92.72     28.85     16.00      125.00


La Opala RG                107.75       1141.9       10.67     10.10     2.42        7.50




    Investment Highlights

       Q2 FY12 Results Update

        Hawkins Cookers Ltd disclosed results for the quarter ended Sep 2011. Net sales
        for the quarter increased by 15% to Rs.985.40 million as compared to Rs.854.34
        million during the corresponding quarter last year. During the quarter, the
        company has reported Net Profit increased to Rs.93.27million from Rs.80.39
        million in previous year same quarter. The Basic EPS of the company stood at
        Rs.17.64 for the quarter ended Sep 2011.


                          Quarterly Results - Standalone (Rs in mn)




                  As At               Sep-11        Sep-10     %change


                  Net sales           985.40        854.34        15


                  PAT                  93.27        80.39         16


                  Basic EPS            17.64        15.20         16




                                                                                          2
Basic EPS of the company stood at Rs.17.64




                                             3
Break up of Expenditure

Expenditure for the quarter stood at Rs.843.97mn, which is around 15% higher
than the corresponding period of the previous year. Consumption of Raw Material
cost of the company for the quarter accounts for 34% of the sales of the company
and stood at Rs.335.15mn from Rs.278.81mn of the corresponding period of the
previous year. Purchase of Traded Goods cost increased 83%YoY to Rs.102.85mn
from Rs.56.13mn and accounts for 10% of the revenue of the company for the
quarter.




OPM and NPM for the quarter stood at 15% and 9% respectively from 15% and 9%
respectively of the same period of the last year.




                                                                                   4
       Board recommends Dividend

       Hawkins Cookers Ltd has recommended a dividend of Rs. 40 per equity share of
       paid-up and face value of Rs. 10 each, which if approved, shall amount to Rs.
       2115.1 lakhs.



Company Profile



Hawkins Cookers has been in business since 1959. The Company presently has two
offices, three factories and about 1000 persons working for it.

The company markets its product range under its own brand names, Hawkins and
Futura. The plants are located at Thane in Maharashtra, Hoshiarpur in Punjab and
Jaunpur in Uttar Pradesh with installed capacities of 7,265,200 pressure cookers
and 140,000 idli stands.


Business area of the company:-

Hawkins Cookers is the leader in the pressure cooker market in India and has
exported its products since 1974 to various countries in each of the six continents of
the world.

The company makes 57 different models of pressure cookers in 10 different types. All
Hawkins pressure cookers are listed by Underwriters Laboratories Inc., USA, a not-
for-profit institution testing products for public safety


Its products:-


Hawkins offers 57 different pressure cooker models in three different brands -
Hawkins, Futura and Miss Mary




                                                                                         5
The different types of pressure cookers:-

   Hawkins Classic model
   Futura Pressure Cooker
   Futura in Stainless Steel
   Hawkins Contura model
   Hawkins Contura model-Hard Anodised Body & Stainless Steel
   Hawkins Ekobase model
   Hawkins Ventura model
   Hawkins stainless steel model
   Hawkins Stainless Steel model
   Hawkins Bigboy model
   Miss Mary Model
Futura cookware range

   Tava (Griddle)
   Flat Tava
   Frying Pan
   Deep Fry Pan
   Saucepan
   Sautepan
   Cook- N-Serve Bowl
   Handi
   Stewpot
   Cookware Sets




                                                                6
SWOT Analysis
Strengths:

      Presence of established distribution networks in both urban and rural areas
      Strong brand equity

      Global scale of operations

      Flexible production system

      New innovative and world class technology

      Strong management high quality motivated human resources

      Exports iron-ore to China and Japan on a large scale.


Weakness:

      Demand is seasonal and is high during festive season

      Low purchasing power of consumers

      High rate of accidents gives rise to a number of health and safety issues.

      Infrastructural bottlenecks in terms of power, utility, road transport etc.


Opportunity:

      Brand image and Market Size

      Easy availability of finance

      Rapid urbanization

      Improvement in the quality of employments


Threats:

      Cheap imports from Singapore, China and other Asian countries

      Fluctuations in exchange rates
      High competition from global players

      Adverse Govt. policies




                                                                                    7
Financial Results
12 Months Ended Profit & Loss Account (Standalone)

 Value(Rs.in million)     FY10A      FY11A           FY12E     FY13E

                           12m       12m              12m       12m

      Description

      Net Sales           2871.28   3338.89      3839.72       4223.7

    Other Income           21.45     32.03           36.83      42.36

    Total Income          2892.73   3370.92      3876.56       4266.06

     Expenditure          -2299.9   -2855.36     -3302.16      -3640.83

   Operating Profit       592.83    515.56           574.4     625.23

       Interest           -17.14     -20.88           -26.1     -31.84

     Gross Profit         575.69     494.68          548.3     593.39

     Depreciation         -16.93     -19.18          -22.06     -24.7

   Profit before Tax      558.76     475.5           526.24    568.68

         Tax              -190.38   -157.85          -172.61   -187.67

   Profit after Tax       368.38    317.65           353.63    381.02

    Equity Capital         52.88     52.88           52.88      52.88

       Reserves           336.17     407.99          761.62    1142.64

      Face Value            10        10               10        10

  Total No. of Shares      5.29       5.29            5.29       5.29

         EPS               69.66     60.07           66.87      72.05

*A=Actual, *E=Estimated




                                                                          8
Quarterly Ended Profit & Loss Account (Standalone)

 Value(Rs.in million)     30-Mar-11   30-Jun-11      30-Sep-11   31-Dec-11

                             3m           3m            3m        3m(E)

      Description

       Net Sales          1046.88      750.03         985.4       945.98

    Other Income             7.6        9.39           8.23        9.88

     Total Income          1054.48     759.42         993.63      955.86

     Expenditure           -895.78     -639.38        -843.97     -832.47

   Operating Profit         158.7      120.04         149.66      123.39

       Interest             -6.62       -6.91          -6.13       -6.74

     Gross Profit          152.08      113.13         143.53      116.65

     Depreciation           -5.08       -5.21          -5.3        -5.62

  Exceptional Items          0           0              0           0

   Profit before Tax        147        107.92         138.23      111.03

          Tax              -48.64      -35.04         -44.96      -36.42

    Profit after Tax        98.36       72.88          93.27       74.61

    Equity Capital          52.88       52.88          52.88       52.88

      Face Value             10          10             10          10

  Total No. of Shares       5.29        5.29           5.29        5.29

         EPS                18.6       13.78          17.64       14.11

*A=Actual, *E=Estimated




                                                                             9
Key Ratio

    Particulars       FY10     FY11     FY12E    FY13E

     EPS (Rs.)        69.66    60.07    66.87    72.05

 EBITDA Margin (%)   20.65%    15.44%   14.96%   14.80%

  PAT Margin (%)     12.83%    9.51%    9.21%    9.02%

   P/E Ratio (x)      16.52    24.77    22.25    20.65

      ROE (%)        94.69%    68.92%   43.42%   31.87%

     ROCE (%)        112.54%   74.82%   53.77%   42.32%

  EV/EBITDA (x)       10.26    15.26     13.7    12.59

 Debt-Equity Ratio    0.32      0.44     0.26     0.19

  Book Value (Rs.)    73.57    87.15    154.03   226.08

       P/BV           15.64    17.07     9.66     6.58


Charts:




                                                          10
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Outlook and Conclusion


    At the current market price of Rs.1488.00, the stock is trading at 22.25 x FY12E
    and 20.65 x FY13E respectively.

    Price to Book Value of the stock is expected to be at 9.66 x and 6.58 x
    respectively for FY12E and FY13E.

    The company has three manufacturing plants at Wagle estate Thane,
    Hoshiarpur and Jaunpur. It manufactures under different brand names of
    Hawkins, Futura, Contura and Ventura.

    The company is the largest cookware manufacturer in India and exports its
    products to more than 60 countries.

    The company continued its efforts on product development with more emphasis
    on research and development activity.

    The Top line of the company is expected to grow at a CAGR of 14% over 2010 to
    2013E respectively.

    During the quarter, the company has reported Net Profit increased to
    Rs.93.27million from Rs.80.39 million in previous year same quarter.




                                                                               13
      Earning per share (EPS) of the company for the earnings for FY12E and FY13E
      is seen at Rs.66.87 and Rs.72.05 respectively.

      On the basis of EV/EBITDA, the stock trades at 13.70 x for FY12E and 12.59 x
      for FY13E.

      We expect that the company will keep its growth story in the coming quarters
      also. We recommend ‘BUY’ in this particular scrip with a target price of
      Rs.1681.00 for Medium to Long term investment.



Industry Overview


Consumer durables are the products whose life expectancy is at least 3 years. These
products are hard goods that cannot be used up at once.


The consumer durables sector can be segmented into consumer electronics, such as,
VCD/DVD, home theatre, music players, color televisions (CTVs), etc. and white
goods, such as, dish washers, air conditioners, water heaters, washing machines,
refrigerators, etc.


With the increase in income levels, easy availability of finance, increase in consumer
awareness, and introduction of new models, the demand for consumer durables has
increased significantly. Products like washing machines, air conditioners, microwave
ovens, color televisions (CTVs) are no longer considered luxury items. However, there
are still very few players in categories like vacuum cleaners, and dishwashers.


Consumer durables sector is characterized by the emergence of MNCs, exchange
offers, discounts, and intense competition. The market share of MNCs in consumer
durables sector is 65%. MNC's major target is the growing middle class of India. MNCs
offer superior technology to the consumers, whereas the Indian companies compete on
the basis of firm grasp of the local market, their well-acknowledged brands, and hold
over wide distribution network. However, the penetration level of the consumer
durables is still low in India. An important factor behind low penetration is poor
government spending on infrastructure. For example, the government spending is very




                                                                                  14
less on electrification programs in rural areas. This factor discourages the consumer
durables companies to market their products in rural areas.


Sector outlook


There has been strong competition between the major MNCs like Samsung, LG, and
Sony. LG Electronics India Ltd. has announced its extension plan in 2006. The
company is going to invest $250 million in India by 2011 and is planning to establish
a manufacturing facility in Pune. TCL Corporation is also planning to establish a $22
million manufacturing facility in India.


The Indian companies like Videocon Industries and Onida are also planning to
expand. Videocon has acquired Electrolux brand in India. Also, with the acquisition of
Thomson Displays by Videocon in Poland, China, and Mexico, the company is marking
its international presence.


According to isuppli Corporation (Applied Market Intelligence), country's fiscal policy
has encouraged Indian consumer electronic industry. The reduction on import duty in
the year 2005-06 has benefited many companies, such as Samsung, LG, and Sony.
These companies import their premium end products from manufacturing facilities
that are located outside India.


Indian consumers are now replacing their existing appliances with frost-free
refrigerators, split air conditioners, fully automatic washing machines, and color
televisions (CTVs), which are boosting the sales in these categories.


Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are
now focusing on rural areas also. These companies are introducing gift schemes and
providing easy finance to capture the consumer base in rural areas.




                                                                                  15
Growth rates


The sectors that are projected to achieve ‘excellent’ growth rates of more than 20 per
cent in terms of quantity produced are: air-conditioners (25 per cent), split air-
conditioners (60 per cent), frost-free refrigerators (54 per cent), washing machines (20
per cent), fully automatic washing machines (35 per cent), microwave ovens (35 per
cent), high-end flat panel TV (100 per cent), LCD TV (110 per cent), plasma TV (100
per cent) VCD/MP3 (20 per cent), DVDs (25 per cent), DVDs-organized (25 per cent).


There is a need to remove some anomalies affecting the growth of the industry, the
survey pointed out.


Consumer electronic manufacturers were of the opinion that in the era of digital
convergence, differential taxation policies for IT and consumer electronics products
create distortions and anomalous situations.




_______________                   ____            _________________________
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.




                                                                                       16
Firstcall India Equity Research: Email – info@firstcallindia.com
C.V.S.L.Kameswari                              Pharma
U. Janaki Rao                                  Capital Goods
D. Ashakirankumar                              Automobile
A. Rajesh Babu                                 FMCG
H.Lavanya                                      Oil & Gas
Kushwaha Ashish                                Diversified
Dheeraj Bhatia                                 Diversified
Manoj kotian                                   Diversified
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