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SYNOPSIS

Hawkins Cookers Limited is a company in India which manufactures domestic pressure cookers and cookware.

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.

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

Stock Data:

Sector: Consumer Durables

Face Value Rs. Rs.10.00

52 wk. High/Low (Rs.) 2117.95/827.05

Volume (2 wk. Avg.) 898.00

BSE Code 508486

Market Cap (Rs.In mn) 7868.54

Share Holding Pattern

1 Year Comparative Graph

Hawkins Cookers Ltd BSE SENSEX

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

HAWKINS COOKERS LTD

Result Update: Q2 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market

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

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Basic EPS of the company stood at Rs.17.64

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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.

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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

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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

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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

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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

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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

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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:

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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.

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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

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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.

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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.

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