Hawkins Cookers : Is growth coming back?


(samir s) #1

any views on Hawkins Cooker???

Is anybody holding Hawkins Cooker with high conviction of turnaround?

this stock really testing mypatience.


(GreyFool) #2

Sold long time back(with high conviction!). Category getting competitive now with every big consumer related co moving into Kitchenware. Regional players too have expanded rapidly(e. Butterfly) all this while when Hawkins failed to handle labour problems & now is in trouble over non-compliance with environmental regulations. Their mindset is still of a Duopoly(with TTK) where it earned fat margins without much innovation. If it stays that way then it’s best days might well have been over…


(Hemant V Bhatia) #3

At the AGM mgt states that,it will take time to get things resolved.At Jaunpur plant negotiations with workers representatives failed,many workers approached mgt for direct settlement & hence co is signing settlement with each & every worker which is long process.At Hoshiarpur plant,court has directed to Punjab Pollution Board to visit plant immediately after 15th Aug & submit its report,but till then co will loose time & production will suffer.Further mgt was silent abt the CAPEX Plan,as they don’t think it is necessary to inform.The managers of Kotak & SBI Mutual fund along with some other shareholders,were upset by slow response of mgt,as some felt that its better to corrupt the officials at pollution board & get things done insted of waiting for courts to do same.So all in all as stated above it seems that best days are over for now.


(Shashi) #4

I think it will take only one quarter’s good results to double from here .It will test your patience but patience pays .The stock did not fall much after bad results because we pay for forward earnings and after 15 august pollution inspector can visit it anytime and there will be news that hoshiarpur plant is fully operational .The dividend yield is good .If you go to their website they are hiring people in sales .Management is good although they donot speak much they took it from 80 crore in 2006 to 800 crores in 2012 so they know what they need to do I hope they will deliver .

All Good things take time.


(Hitesh Patel) #5

I tend to agree with shashi here.

I think at cmp although it seems expensive most of the negatives seem factored and any good news will be cheered with vigour.

the face that such bad results as the q1 fy 13 results has not led to punishment in stock price does tell something about mentality of market participants and long term investors.


(Shashi) #6

http://www.hawkinscookers.com/3.6.DNA_AGM_12.html Sameer ji yeh pad lo your mind will change automatically

http://www.hawkinscookers.com/3.7.job_opp.html here is the link of their hiring .The company is having pending orders . More demand then supply .


(Shashi) #7

http://www.hawkinscookers.com/3.6.DNA_AGM_12.html Sameer ji yeh pad lo your mind will change automatically

http://www.hawkinscookers.com/3.7.job_opp.html here is the link of their hiring .The company is having pending orders . More demand then supply .


(Rohit) #8

There are a few things that I really like from the chairman’s speech at the agm-2012:

“Every individual, every family, every company, from time to time, goes through hard times.The hard times may be self-inflicted or imposed by external circumstances.In my experience and to my way of thinking, it hardly matters whether the hard times are the result of a fault of character or whether they are a result of the forces of history or an Act of God.What matters is how the individual or the company deals with the hard times.Whether one is overwhelmed by the misfortune or whether one survives and emerges stronger from the experience, to a great extent, depends upon how one deals with the hard times.”

“If youare not going to act on the basis of fear and if you are not just going to do the expedient thing, **you will have to work out your policy and strategy on the basis of your principles, your beliefs, your values.What is true?What is fair?What is legal?What is ethical?What is beneficial in the long haul?**These are not easy questions to answer in difficult circumstances â but there is no way of avoiding them.In Hawkins, we donât know of any other way of managing our business.”

Finally, put in your best efforts and continue to do so no matter how bleak the outlook appears to be.Have faith in God.Seek His guidance and grace in prayer.Sleep well, enjoy your work, enjoy life.You, and the outcome of your efforts, are in the hands of God.”

And they really need to walk the talk on this one:

“Theneed for Communication.Whether you deal with government or with customers, whether you deal with militant labour or a court of law â communicate, communicate, communicate.Spend time on internal consultations and on speaking and writing as clearly, as comprehensively and as concisely as you can.And then, do it again.Repeat as often as it is needed”

There are all sorts of risks associated with this investment: single product category risk, key man risk, valuation risk, environment risk, labor issues and what have you.

Hawkins is a company with high brand recall, pricing power, high quality products, decent free cash flow as % of sales, high return ratios, about 50cr cash on books vs mcap of 800cr, almost debt free, high dividend payout and what seems to be like able and ethical management. It has created enormous wealth for those who have been holding at much lower levels. An investor with cost price per share of 80-400 has not only achieved a multibagger in terms of price appreciation but has a dividend yield of 10-50%! Most of the shares are with long term investors including promoters, MFs, early movers, believers and a minority is those who got stuck at 1500-2100 levels. As such, those with multibagger returns and high yield are keeping quiet and continue to believe in a better future. They have little incentive to sell. For them search costs are high, and there is a high opportunity cost given things may turnaround (unknown and unknowable, as such, potentially high returns). Only a small percentage of the recent entrants seem to believe that Hawkins will generate better than market returns, and a majority of recent entrants are impatient and possibly waiting for lower levels to average their holding cost or higher levels for a cash out. However, if this goes down to 1200 or below, there will be lots of people in queue buying, and unmet demand will take the price higher. Additionally, history suggests that at lower levels or at times of panic, only strong take a step forward. So, unlikely that those who are impatient and dissatisfied now, will change behavior. If the price goes up, it will be the effect of some positive trigger and it might not give others sufficient time to join the bandwagon without losing out on some returns and putting himself at risk of potential capital loss.

Market pays for the future and majority of shareholders in Hawkins seem to believe that future will be better than today.

However…

A great investor once said, “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative

My accounting professor taught me that relevant cashflows are cashflows that will occur in the future.Considering the risks associated with this opportunity at current levels and relevant cashflows, I think it neither “promises” safety of principal nor an adequate return. As such, this is a speculative operation. As such, I need to take a guess about the possibilities and associated probabilities if I want to pursue this further. I will take the following guess about returns in 3 years and associated probabilities:

1). 0x - 0%

2). 0.5x - 30%

3). 1x - 30%

4). 2x - 30%

5). 3x - 10%

expected returns: 1.35x, which is lower than 1.38x, what the company is offering for FD.

(there will be some dividends coming in as well because of which probability of 0x is 0%. But lets just assume that 3years of dividends will not be more than 10% of current price, and as such, not significant.)

But what happens if I take a longer term view, say, 10 years. This time, the dividends at 40/share every year will take care of about 0.3x. If the stock compounds at 25%, it will become 9x in 10 years, which doesnt seem unachievable. 15% compounding will give around 4x, 35% will give 20x. Probabilities:

1). 0x - 0%

2). 1x - 10%

3). 4x - 50%

4). 10x - 30%

5). 20x - 10%

expected returns: 7.1x, a CAGR of 21.6%, which is 10% higher than 11.5% CAGR offered by the company for a 3 years FD.

Should I take this bet? Yes, of course. How? Allocate capital in parts and increase with performance of the company.

These are just some of the scenarios, I am sure there are more scenarios possible. But at the end of the day, if you really want to grow a part of your capital at 21.6% CAGR, why not consider other opportunities which can offer similar/higher returns with lower risk of loss of capital? Shouldn’t you consider not investing in HDFC Bank an opportunity loss of 25% CAGR? As such, shouldn’t your required rate of return for investing in other stocks be more than 25%?

Will you still think about investing in Hawkins today? Why?


(samir s) #9

HitBhai,

That is my worry … it is not actually factoring in negatives … otherwise how come its available at PE of 27 … such mute growth cos should be available at PE of 10-15 atmost (in case of good management) and PE 4-6(in case of bad management)


(Vivek Gautam) #10

There used to be a very ethical co in murky world of real estate called Alacrity Housing based in Chennai.

Unfortunately it had to close down its operation as that’s the reality of truly ethical co fate in India. See the gall of Indiabulls promoter launching police case against sole gutsy Research analyst group Veritas.

Could the slowdown in CSD have played a part in poor peformance of Hawkins besides the plant problems?


(Hitesh Patel) #11

**_

HitBhai,

That management)

Sometimes u have to listen to what markets are trying to tell you. There have been 3-4 trading sessions post the results and still if the stock does not go down significantly what does it tell us?

To me it tells that majority of people interested in the stock and hence directing stock price are believing that the company still has a lot of juice left once its short term pains are over.

regarding PE here one has to look at the clear cut market opportunity the company has against the market cap of the company. thats because it is still almost a duopoly between ttk and hawkins.

Regarding management I think they might be ethical and honest but to me they dont seem to be in sync with the times. Hence the problems and delay in resolution of these problems.

Say these problems persist and then give a time frame for resolution of these things. I would give it max 6 months. Then think about the likely scenario of sales and profits and stock price. If this stock doubles in 2-3 years whats wrong with that scenario? Plus the benefit here is that one can bet heavily on this one due to brand and pricing power of this company.

I dont say one needs to go out and buy tomorrow but it makes sense to accumulate gradually on every dip with a 2 year view.

_**


(Hemant V Bhatia) #12

This write up in today’s E.Times explain the situation, Hawkins share holders face today.http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2012/08/10&PageLabel=28&EntityId=Ar02801&ViewMode=HTML


(Manish Vachhani) #13

Hawkins Cookers Ltd has informed BSE that:

"Further to Note No.3 which formed part of the Unaudited Financial Results for the quarter ended June, 2012, published on August 06, 2012, we have to advise all concerned that we have received a No Objection Certificate dated October 22, 2012 from the Punjab Pollution Control Board for our Hoshiarpur factory for manufacturing 5,200 pressure cookers and their components per day, as applied for by the Company.

Further to the mention made in our Directorsâ Report dated July 02, 2012, forming part of the Annual Report for the year 2011-12, we have to report that the Industrial Relations situation in our factory in Jaunpur district has been largely resolved by the signing of a Wage Agreement between the Company and 85% of the workmen and the registration of the said Agreement on October 20, 2012 by the Assistant Labour Commissioner, Varanasi."


(Akbar Khan) #14

Surprising that this news was shared before the quarter results… looks like more good news in the results can be expected.


(Srinivas) #15

Hawkins crossed more than 100 crs sales despite of pcb problem in sep 2012quarters. I hope it will give good results incoming quarters . I think it will out performed TTK coming1-2 years.good days started forHawkinsholders.

views are invited

Dis: I have invested in this stock and major part of my portfolio. As i am new to stock market (1 year old)do your home work before take any position.Might beinfluenced by TED.


(Sunil Bakshi) #16

Hawkins results are pretty good , revenue up 15% despite so many supply side problems. This is a 35% plus CAGR story for the next 3-4 years. Have done lot of dealer/customer scuttlebuts in Delhi NCRregion for the last one year. Most of the customers prefer Hawkins and had to ‘compromise’ on a Prestige because there was no availability of Hawkins (note this is a Delhi NCR scuttlebut and not all India). On top of that , the ROCE has been around 88% which is comparable to an FMCG co like HUL. Can’t see a better visibility of sales growth and high cash generation than what Hawkins can provide.

Disc: Hawkins forms 20% of my portfolio.


(Shashi) #17

Hawkins can post an EPS of 100 for FY14 and at PE of 30 it can easily touch 3000 .


(Shashi) #18

correction :

EPS of 80 - 90 FY 14, PE will depend on the market . If results are good dividend can go upto 50 /share . Saw their advertisement in newspaper .


(Amit) #19

TTK Prestige has 35% sales coming from cookers and the rest from appliances etc.

As for Hawkins, does anyone have an idea how much of sales is cookers? A back of paper calculation depending on vague numbers from chairman’s speech and article in economic times tells that its over 85%. can anyone confirm this?

does this mean Hawkins still has more room to leverage its brand and grow in the cookware/appliances segment?

also do companies like Hawkins/Prestige outsource manufacture of appliances? How do they manage so high ROE?

do the seniors think 2100 is a good entry point?


(Shashi) #20

This would be helpful to you