Hawkins Cookers : Is growth coming back?


(Raj) #201

Vipul,

Just a quick question…if they would not have reduced the inventory this quarter it should have reduced last quarter or next quarter. Does this impact overall annual result?

I am not an expert in reading balance sheet and hence need to understand. Will be thankful if you could explain.

Regards,

Raj


(Vipul Patel) #202

Hi Raj,

It doesn’t impact annual result as inventory buildup/reduction is part of business. I was just trying to point out that this margin expansion should be viewed with respect to inventory reduction which took place in this Q [as against new norms]. Usually Hawkins do inventory build up in Q1 and Q3 and reduce it in other Qs and hence have lower/higher margins on those Quarters. Hawkins is good company with clean management but we should also see result with reference to all parameters rather than all-time cheerful consensus.


(Rohit Kotewale) #203

Vipul, I am actually a bit confused, please help me out.

The item “Changes in Inventories of FG,WIP,SIT” is showing a value of +8.83cr

So doesn’t it mean the inventory at the company side actually increased by 8.83cr ??

What you were saying is that company sold inventory worth 8.83cr and hence its margins increased. If that would have been the case, shouldn’t the number be -8.83cr ? Bcz the item is listed under the head “Expenses” and a +ve value will increase the expense and reduce profit .


(Raj) #204

Thanks Vipul for the clarification.

I look at Hawkins from yearly perspective. The best part in Q2 result was an indication of volume growth which was not coming has begun.


(Rudra Chowdhury) #205

Hi Rohit,

Inventory is valued in different methods like FIFO, LIFO, weighted average etc.

So suppose Hawkins had 500 cookers(say) in June left with it as inventory, 500 more were added in last quarter and 500 were sold. Now the change in inventory will signify the increase/decrease of inventory in hand.

So in FIFO (First in First Out), the cost of material for first 500 will be considered, and higher RM cost of later 500 will increase your inventory cost. Basically the COGS is mentioned as COGS = (Beginning Inventory) + (Purchases of Inventory) - (Ending Inventory) which is Expenses a) b) and c) combined in case of Hawkins.

Hence, a positive figure on “Changes in Inventories of FG,WIP,SIT” will indicate destocking of earlier stock as Vipul mentioned. Thus the +8.8Cr in Sep '13 quarter signifies destocking.

This expense line item “Changes in Inventories of FG,WIP,SIT” is a negative figure meaning stocking up which reduces the COGS as seen in Hawkins June quarter.

Hi Vipul,

As mentioned in the AGM speech of 2013, there was price hike in April hence a lot of distributors built up inventory by late March, hence the June quarter had an inventory build up and pooreroff take, which was cleared off in September quarter as pointed by you.

Looking at the half yearly numbers, clearly shows this as there is hardly any sales growth 206 Cr (H1FY14) vs 199 Cr(H1FY13) or a sales growth of 3.6% only. What however has changed is that overall expenses has reduced from 87% of sales to 85% sales, this additional 2% flowing to the bottom line pulling NPM up by 2% from 7% to 9%.

Thus a mere 3.6% jump in half yearly sales has resulted in a half-yearly profit jump of 21% - classic operating leverage at play.

What’s promising is the good offtake of earlier inventory and coupled with higher push sales on multiple channels (as compared to earlier pull sales on limited channels) makes us hope again for the next two quarters :slight_smile:

Your views please.


(Rohit Kotewale) #206

Thanks a lot Rudra for the explanation. I somehow managed to misunderstand the sign of the line item :smiley:

Also regarding the dull sales growth in half yearly comparisons, management had indicated that the demand revival takes time due to the issues faced by the company in last 2 years and hence June quarter sales were affected. So shouldn’t we ignore the half yearly comparison? (I knw many will have opposition to this :smiley: )

Also any news on “many” new launches which were going to happen pre-diwali ? I don’t see much development on their website. Will visit a few stores in Pune and check.


(Vipul Patel) #207

That’s good explanation Rudra!

I agree that there’s operating efficiency built in Hawkins. If they get their act right and start growing 20-25% topline, then bottomline can increase at higher pace. Question is when’ll it start growing ? Investors were/are hoping it since more than 3 years on growth. Moreovermany players are entering everyday in kitchen appliances [heard that VGuard is latest entrant] :slight_smile:


(PRASAD V. K.) #208

Unless hawkins shows a meaningful topline growth the stock is not going to go anywhere.Increased margins coupled with topline growth is what the people want.As mentioned by some members, in past couple of years the home appliances space has seen a

lot of new entrants and the sale are more corelated to ad spending as always happens in fragmented markets.It will be very interesting to see how hawkins is able to maintain brand visibility in media and distribution channels and still maintains healthy bottomline.

Meaningful new product launch has not happened yet which can be termed as gamechanger.Nothing much to take home for shareholders.Expect stock to remain sideways for next few months.

DISC hawkins is 45% of my portfolio.


(prashant shah) #209

does any one track butterfly gandhimati feedback would b most welcome any price trgtsfor

buuterfly gandhimati hemant


#210

Noticed while shopping at Easyday in Mysore (Karnatka) :

Hawkins : Packing has manufacturing date of Jun2013— MRP more than below 2

Prestige :Packing hasmanufacturing date of Aug2013

Butterfly:Packing hasmanufacturing date of Oct2013 — MRP Cheaper than above 2

Inference drawn from above :Butterfly seems to be moving faster than others.

Disc : Hold Hawkins


(Rudra Chowdhury) #211

Hi Surender,

Thanks a lot for the feedback. Such inputs around the country would be helpful in tracking what’s happening on the ground.

However, I would disagree with the inference drawn since Prestige/Butterfly has much better distribution/supply in the southern region. It may be a case of dealer stocking Hawkins in bulk (thus older manufacturing date) and Prestige/Butterfly in smaller lots (fresh supplies).

Would request others to provide similar feedback (from the Norther belt if possible) which would help us to confirm your inference.

Disc: Hold Hawkins

:Packing hasmanufacturing

Butterfly:Packing hasmanufacturing :Butterfly


(Vaibhav Patni) #212

Have been trying to check availability of Hawkins products on sites like homeshop18.com and snapdeal.com. While it may not be logical to draw any inference on demand-supply based on this, here are few things I have noticed:

1). They do not keep high inventory. Most products availability is 7 or less.

2). When a product goes “Out of Stock” which is quite often from what I have seen, it takes 10-15 days for it to be back available.

3). Homeshop18.com is offering Rs500 off on purchase of Rs2000 on Hawkins and prestige as well. Havenât known Hawkins to provide such discounts.

Disc: Invested


(Rohit Kotewale) #213

Visited 2-3 D-Mart stores in Pune. I have been visiting them since May 2013.

The inventory is getting sold as I have been observing cookers with mfg date May,June…Oct getting sold. Now almost all cookers present are from Nov 2013 date. So I am assuming its getting sold pretty quick. Saw new stock of Piegeon brand in good quantity. Prestige was also present in fair quantity but with mfg dates ranging from May-Oct 2013.

I think generating good sales from large retail stores is good for hawkins as it hasn’t been previously doing that. Also unlike Big Bazaar, D-Mart pays in cash so the relationship can sustain for long.


(Shashi) #214

Today I saw a flex of Hawkins near IIT Powai Road, I think good times are ahead
Disc. Invested


(Sunil) #215

Hi,

in 2011 Balance Sheet company had loan of approx 20Cr and paid 2.09Cr as interest.

In 2012 it had loan of 12.2 Cr and it paid 2.88Cr interest.

In 2013 it had loan of 11.01 Cr and it paid 3.01Cr interest.

I believe I am missing some information/understanding. As I am new in digging balance sheets and reports can someone please guide me what is happening here with interest rate? Why interest is increasing despite loan amount being reduced?

Regards,

Sunil


(Raj Panda) #216

@Sunil,

Balance sheet is a snapshot of the financial position of a single day on which it is taken. Like in this case, you are quoting the Debt as on of 31st March. Where as P&L (from where you are quoting the interest expense) is for a period of time, like in this case for a period of 12 months.

Over the 12 months, the debt might have gone up/down (fluctuated) depending on companies cash requirement, about which we don’t have the data and hence the interest expense might vary a little. Overall, unless there is huge difference in the data between what should be the interest expense based on debt and actual interest expense we shouldn’t be worried.

Regards

RajPanda


(Sunil) #217

Thanks a lot Raj for explaining.

Hi,

in 2011 Balance Sheet company had loan of approx 20Cr and paid 2.09Cr as interest.

In 2012 it had loan of 12.2 Cr and it paid 2.88Cr interest.

In 2013 it had loan of 11.01 Cr and it paid 3.01Cr interest.

I believe I am missing some information/understanding. As I am new in digging balance sheets and reports can someone please guide me what is happening here with interest rate? Why interest is increasing despite loan amount being reduced?

Regards,

Sunil


(Kiran) #218

Am not invested in Hawkins, but checked out Spencers, Koramangala, Bangalore today in the Kitchen section.

a) Hawkins cookers (Futura and Contura) have manufacturing dates of Jun/Jul. The salesman said both Hawkins and Prestige move equally well (no big differentiation, both offer 5% discount). Prestige had more recent manufacturing dates though.

b) Hawkins cookware across the board had manufacturing dates as January/February 2013. Lot of them were stacked. He said due to lack of discounts, not too many cookware are moving.

Of course, this is just one sample data point and that too in a relatively affluent area like Koramangala, where they may not be many cooker buyers left :slight_smile:


(Supratik) #219

Dear Senior members,

I understand that most of our forum members are bullish on Hawkins. I am convinced that this is a great business to own but would like to know what are the immediate triggers that we exepct a growth.

We have had the legal issues as well as the labour problems resolved. What would entitle that the next level for this company is unfolding.

Thanks in advance for guidance.

Supratik


(Raj) #220

Please read the chairman’s speech at the following location. There are enough pointers as well.

http://hawkinscookers.com/AnnualReports.aspx

You may also read Rudra’s portfolio thread for some excellent work done wrt numbers.

http://www.valuepickr.com/forum/portfolio-q-a/607992338#329675836

Regards,

Raj