thanks !
Around 80% comes from Cooker. They manufacture cooker in house & outsource futura cookware production. TTK outsources cooker production to China, but Hawkins doesnāt do it bcz the quality is lowā¦
(P.S: This is the data i can recallā¦ Iām not sure of the latest data)
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Among the downsides I could fathom
a) execution risks - given the long lasting troubles at both plants there could be occasional hiccups and execution delays catering to lagging sales. The same earlier issues (labor problems, environmental risks) can persist again putting all projections haywire.
b) one time expenses - the December quarter might see some one-time expenses pertaining to labor settlement and pollution clearance related costs, which could impact the bottom line.
c) Higher ad spends or promotional activities could dent margins
d) No clear direction in terms of capacity expansion and incremental growth (volumes) ahead.
Given the constraint on production and the huge demand, company should be able to do 125-130 Cr of revenues, but what happens when the risks pop up.
When one is considering very high allocation, asserting the downside is required more so as to have a proper back up and exit plan framed in case things do go wrong.
Hawkins is one of those rare ethical group where demand for their product n hence growth remains strong. So until the time pricing power n growth is intact lest remain invested.
Hawkins is one of those rare Brahmin owned or steered group where ethics have played a major part on lines of TVS, TAFE, TTK,Sanmar, Shriram Transport, Kalyani, Murugappa,Infosys, TCS, Titan, Tata Global,Mahindra n others but certainly not Vijay Mallya,India cement or JP .
Please add to the above list.
Theseare allpurelymy personalopinionswith out anyscientific research
a) execution risks - given the long lasting troubles at both plants there could be occasional hiccups and execution delays catering to lagging sales. The same earlier issues (labor problems, environmental risks) can persist again putting all projections haywire.
**Just few months back only it got resolved. I think it may not be so much problem at least upto 1year time frame. **
b) one time expenses - the December quarter might see some one-time expenses pertaining to labor settlement and pollution clearance related costs, which could impact the bottom line.
** They have so many pending orders and they cancompensate expenses it by executing theextra orders.**In worst case we will get same result as last quarter result
c) Higher ad spends or promotional activities could dent margins
May be this is the case .But I have not seen any ads in Tvs [ Not sure about it]
d) No clear direction in terms of capacity expansion and incremental growth (volumes) ahead.
**This Could be the problem after 1 to 1.5 years, if they have not taken any steps. **
Given the constraint on production and the huge demand, company should be able to do 125-130 Cr of revenues, but what happens when the risks pop up.
When one is considering very high allocation, asserting the downside is required more so as to have a proper back up and exit plan framed in case things do go wrong.
** I have not seen any stock which has more demand than supply , honest management ,Pricingpower , Simple business and at present commidites prices are stable.**
Even if they give badquarterresults ,but 1 year time frame we will get minimum 20% return for fy14E
Hi Marketlearner,
Everybody knows this is a great business.No debates on that.The question we are pondering over here is not about the positives.It is about price.A lot of posities has been already priced in the current price.
One needs to ascertain the key negatives, and in effect the possible potential downside if the stock is bought at these levels. Given the extremely low liquidity, the stock may not be suitable for large allocations for people with large portfolios. Exit in those cases will be a concern.
The thing we are clearly trying to emphasize here is understand the risks before hand if you are willing to enter/add at current levels. And have a back up/exit plan ready in case things do go wrong.
At the end of the day it is call from an individual investorās risk:reward perspective, portfolio allocation and time horizon. Make an informed decision so that you donāt get struck / regret later.
that.The price.A
I got it what your are trying to say. Thank for your cautions note.
Nowadays whenever I visit any hypermarket, I make sure to spend some time at the cookware counter.
This time it was Spencer, Gurgaon (near Sikandarpur Metro station). As compared to the big bazaars there was a stark contrast this time round. Hawkins overwhelmingly outnumbered Prestige.
What was literally surprising was huge stock of Futura cookware. Loaded up across stacks. And the shop people told me Futura cookware is selling very well. Till now my focus was totally on pressure cookers (Hawkins, Miss Mary & Futura). It seems, need to incorporate higher growth from other segments too.
thanks for the feedback rudra.
Guys,
Can we have some scuttlebutt about Hawkins from other cities (apart from Kolkata/Delhi) specially in South India ?
It will be really helpful. Next time when you visit your nearest Reliance/Big Bazaar/Spencer/More just spend a few minutes at the Cookware counter and ask around.
Hi rudra,
I have always heard people talk about the cooker capacity for Hawkins and disruptions caused to it due to pollution and labour issues but havenāt seen much mention about their cookware capacities. If you know about it, can you please throw some light on it and what kind of margins does that segment have?
Hi Hemant,
For Hawkins the cookware segment has been growing on a smaller base. (Fig in Rs Cr)
| Sales | FY12 | Split | FY11 | Split | YOY Grw |
| Pressure Cooker | 303.96 | 85% | 282.65 | 87% | 8% |
| Cookware | 55.51 | 15% | 42.25 | 13% | 31% |
| Total | 359.47 | 324.90 | 11% | ||
| Profits | 30.1 | ||||
| PAT Margin | 8.37% |
No specific details are given in AR regarding segment profitabilities.The rise in pressure cookers came totally from price increase (YOY 8%) as there was no volume growth due to the ongoing constraints.Whereas in case of cookwares, it was 8% price growth and rest from volume growth.
From the AR 2012,
"...Owing to supply restrictions, pressure cooker sales value increased only by 7.5% over the previous year. In cookware, sales value increased by 31% over the previous
year. Management is working with full vigour to increase supply to match the growth in demand.
Profit after tax as a percentage of net sales in 2011-12 was 8.2% as against 9.5% in the previous year. The reduction in margins is because of low sales growth on account of restricted supply and increase in material costs...."
Incidentally the last page of AR 2012 introduces the new Futura cookwares I talked about in the last post.
Will dig around to see if I can find anything more regarding margins.
Adding the post from Krishna for discussion continuity,
As per the AGM speech, excess production could have been 154,000 (of which 138,000 could have been sold.)
This accounts for 70 days production ( constraint at Punjab was 2200 per day, geared down to 3000 from 5200) making 70 * 2200 = 1,54,000.
As per the last official figures, from AR 2011, the installed capacity base (no constraint basis) is 72.65 Lakhs.
Assuming Sundays and 10 holidays, leaves 303 working days, or approx 24,000 cookers per day.
Last reported capacity utilization was 43% (31.36L cookers produced in FY11). As per AGM speech, other facilities have a 27% increase in production.
Envisioning a similar increase at Hoshiarpur, we have a production of 39.2L cookwares for FY14. This is still at a capacity utilization of 54% over installed base of 72.65L cookers.
So there is no immediate need for capacity expansion.
Production and financials updated ( AR 2010-12) and Preliminary projections attached ( FY13 and FY14). Would work more on this later.
We need to refine and align the sales projections with unit figures to incorporate better
- Revenue mix (Cookers: Cookware)
- Export split
- Margin improvement flowing to bottom line
- RM (Aluminum) price volatility impact.
With respect to hawkins, i did visit Bigbazaar and Birla More (routine shopping) here in bangalore and was impressed with the hawkins products stuffed - cookwares/cookers.
There was also an offer going on cookwares where there was a discount of 150/- for buying set of cookwares(which consisted 3 different items)in big bazaar which i was seeing for the first time here in all my visits.
I get the impression that this quarter could be amagnificentquarter for hawkins.
My estimate is that hawkins would do better in the next 2 years. I believe strongly that they should be doing an EPS of 120-140 by FY14.
According to chairmans speech , had they produced 27% extra i.e 138000 cookers it would have enabled them to do 18 crores. so the price comes around 1300 odd.
So i took a rough calculation on the assumption that they are able to sell whatever they produce since demand overtakes supply as per chairmanās speech.
total capacity 12000 cookers per day,
working days - 320(minimum)
Price - 1300
so total Sales = 120003201300 = 500 crores.
Cookware contributed 15% for FY12. This should improve in the coming years. i expect it to add 100 crores.
So total sales comes around to 600 crores operating at full capacity without any issues forthcoming.
Taking it to account the operating leverage and the pricing power through extended sales, i am hoping it should be able to maintain 11% NP margin.
The EPS comes around to 120.
If the growth for FY14 is in excess of 25% then the EPS would be 150.
If the same Div payout ratio is maintained then it is like adding icing to the cake.
I strongly believe they would be adding the capacity by FY14.
Hawkins.xlsx (30.2 KB)
Excellent Rudra.
Hi,
The installed base figure in AR pertains to only a part of the pressure cooker, and not the whole pressure cooker. This was quite misleading to me also. They need to invest some amount (not that great) to grow production.
Regards
Thanks Vishal,
Can you point us to any relevant links/documents to throw more light on this ?
Also there are five broad categories with varying margins :
- In house production of Pressure Cookers, Domestic Sales (Futura, Hawkins)
- In house production of Pressure Cookers, Export (only Futura)
- Mostly outsourced production of pressure cookers, domestic sales (Miss Mary)
- Other smaller items, in house production, replacements (idly stands, replacements)
- Fully outsourced production, cookwares (Futura) - domestic sales & exports
I am expecting hawkins to do sales of 120 crores for december quarter and net profit of 11.4 EPS would be around 21 .
http://www.hawkinscookers.com/downloads/ckw_catalog.pdf
Their catalog of futura cookware has a product L34 which is quiet interesting as I have seen this kind of product first time it can be used for melting desi ghee in winters 
.
52 week high 2430 seems like in 2013 it will make highs every quarter .
hawkins cooker bula rahi ha Seeti bja rahi ha
Keep holding
Rudra,
Could you pls answer the below questions on Hawkins. Would be grt help -
-
I guess Hawkins has been delivering 60% ROCE in the past on an average. Is this sustainable going forward ? If yes, then on what grounds ?
-
Per your attached worksheet on hawkins you have mentioned 130 as the EPS for Hawkins FY14. Could you pls provide EPS FY14 for TTK as well (and if possible with detailed workins as you gave for Hawkins (and more preferably like a Hawkins worksheet - if you can) .
-
Is it true that TTKās EPS in FY14 will narrow down to that of Hawkins given that the issues that crippled Hawkins in the past are all over . ?
-
Is it true that the valuation gap between Hawkins and TTK is actually close 40% right now ? (explanation on this wld be great - not just a yes or no)
Overall the above questions will help me understand if - when EPS gap will narrow down between the 2 companies the valuation gap wil also narrow down leading to a possible hawkins re-rating.
Thanks very much