Hawkins: Is it Good for Long Term?

Hawkins Cookers Ltd is engaged in Manufacturing, Trading and Selling Kitchenware. The Company’s products include Pressure Cookers and Cookware.

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(A) Introduction

  • Hawkins Cookers Limited established as a Private Limited company in 1959 by H.D. Vasudeva, in technical collaboration with L.G. Hawkins of England.
  • Today, it has two Offices and three Manufacturing Plants at Thane – Maharashtra, Hoshiarpur – Punjab and Jaunpur – Uttar Pradesh.
  • The Company exported its products since 1974 to various countries – in each of the six continents of the world.
  • In 1975, company converted into a Public company and changed to its present name “Hawkins Cookers Limited”. It manufactures its products under its own brand names – Hawkins, Futura and Miss Mary.
  • Hawkins has an extensive product range consisting of Pressure Cookers, Cooker Accessories, Non-stick Cookware, Cuisinettes and Satilon Cookware. All Hawkins pressure cookers are guaranteed for five years.

(B) About the Founder

Mr. H.D. Vasudeva, professional manager turned entrepreneur found Hawkins Cookers Ltd. He found success early in life but by the partition of India, he had to start in mid-life all over again. He started the company in technical collaboration with England based company L.G. Hawkins at the age of 54 in the year 1959 with a capital of Rs.20,000, when pressure cookers were virtually unknown in India.

Then after 25 years, he stepped down from the management passing on his legacy to his son ‘Mr. Brahm Vasudeva’. Later in 1984, Mr. Brahm Vasudeva became the Managing Director of the Company.

(C) Shareholding Pattern

hawkins research report with details for shareholding pattern
hawkins research report with details of major shareholders

Besides, Individual shareholding with share capital upto Rs. 2 Lacs stands 20.24% of total shares as on 30 June 2020.

(D) Executive Management

(i) Mr Brahm Vasudeva – Non-Executive – Non Independent Director – Chairperson

He passed away on 10 July 2020 at the age of 84 years. Mr Brahm was the son of founder Mr H.D. Vasudeva. In 1984, he joined the company as Chairman & Managing Director. In 2006, Mr. Brahm Vasudeva retired as Chairman and CEO.

(ii) Mr. Subhadip Dutta Choudhury – Vice Chairman, MD/CEO

He joined the Company in 1992 as a Management Trainee & worked for 8 years as a Sales Manager. Mr Subhadip became Vice President in Marketing in 2000. Then, he became Executive Director – Marketing in 2004. His age is 52 years. By qualification, he did B. Tech. Electrical Engineering, IIT, Kharagpur, Post Graduate Diploma in Management, IIM, Calcutta.

He is not related to Vasudeva family.

His remuneration for FY20 amounted to Rs. 4.55 crore which is 6.27% of Net profit for the year & 0.67% of Net Sales.

Recent Controversy experience: As on 11 April 2019, Chief Judicial Magistrate, Hoshiarpur, under Factories Act, 1948, alleged that the company’s Hoshiarpur factory has not provided the facility of an Ambulance Room & related staff in the factory. Then, an order passed on April 11, 2019, for the accused Mr. Subhadip Dutta Choudhary & factory manager, Mr. Sandeep Singh Toor to undergo simple imprisonment for a period of six months & also to pay fine of Rs.25,000 each. Bail granted to both accused.

(iii) Mr Sudeep Yadav – Executive Director

He is son in law of Mr Brahm Vasudeva. Mr Sudeep did B.Tech. from Indian Institute of Technology, Delhi & Postgraduate Diploma in Business Management from Indian Institute of Management, Calcutta. He joined the company on 22 July 2013. Also, he worked with Citibank N.A. for 12 years & in ANZ Grindlays & Standard Chartered Bank for 9 years. At Hawkins, he holds position of Director in Finance & Administration.

He is 52 years old. His remuneration for FY20 amounted to Rs 3.28 crore which is 4.52% of Net profit for the year & 0.49% of net sales.

(iv) Other Family Members in Business

  • Wife of Mr Brahm Vasudeva, Ms Susan Vasudeva, is also on the Board as Non-Executive Director.
  • Mr Neil Vasudeva, son of Mr Brahm Vasudeva, holds the position of Executive Vice President – Marketing since 1997. Earlier, he worked as Product Manager Pest Control in Reckitt & Colman of India Limited. He is 49 years old. He received remuneration of Rs. 1.21 crore for FY20.

Total managerial remuneration for FY20 amounted to Rs. 9.54 crore which is 13.61% of Net profit & 1.42% of net sales for FY20.

(E) Business Segments

hawkins research report with details of revenue segments
hawkins research report with details of geographical revenue segments

(i) Pressure Cookers

Hawkins is one of the largest pressure cooker manufacturers in India and exports its products to more than 40 countries since 1974. Company manufactures its products under its own brand names – Hawkins, Futura and Miss Mary. Hawkins Ltd manufactures 85 different models of Pressure Cookers in 12 different types.

Hawkins Classic was the first range of Pressure Cookers, introduced by the company. It is also the largest selling & most popular Pressure Cooker range of Hawkins Cookers Ltd.

(ii) Cookware

Company offers Cookware under its own brands name – Futura and Hawkins. Company provides cookware in 3 types –

  • Futura Cookware: Includes wide range of Pots, Pans and Tavas. Futura Cookware is offered in 2 types of cooking surfaces – Hard Anodised and Nonstick.
  • Hawkins Try-Ply Stainless Steel Cookware: Hawkins launched this range of Cookware in 2019-20. The vision of the Company behind launching this range is to remove the disadvantages of sticking & burning that is faced by the Non-stick users.
  • Hawkins Stainless Steel TPan: Launched in 2018-19. Ideal for making Tea, Coffee and Soup, for boiling Water and Milk, for cooking instant Noodles & for re-heating food.

(iii) Accessories

This includes pressure cooker accessories namely Grids, Separator, Futura Steaming Basket, Molds, Combi set, Idli Stands etc.

(F) Financial Highlights

(For each Financial year ended 31 March)

(i) Sales Growth

hawkins research report with details of growth of sales for 10 years

Hawkins net sales grew at CAGR of 8.96% over last 10 years. Sales growth for FY20 is 3% against 18% for FY19.

(ii) Earnings

hawkins research report with details of PAT for last 10 years

PAT growth for FY20 is 34% YOY. PBT increased by 19% for FY20 YOY. The PAT is higher for the year because of lower income tax rate opted for by the Company which is 25.17% for FY20 as compared to 34.94% for FY19.

For FY20, Hawkins secured its highest ever profits. Also, the percentage increase in net profits is higher than the percentage increase in profit before tax due to the Company choosing lower rate of taxation as allowed by the Government.

(iii) Margins

hawkins research report with details of PAT Margin over last 10 years
hawkins research report with details of EMITDA margin over last 10 years

Hawkins Cookers’ margins as well as growth has remained strong over last 10 years. Expansion in profit margins is a strong attribute.

(iii) Free Cash Flow

hawkins research report with details Free Cash Flow

The free cash flow for FY19 was negative due to unfavorable working capital changes.

(iv) Dividend Payout

hawkins research report with details of dividend payout over last 10 years

Dividend payout ratio of Hawkins Cookers is consistently very high from last 10 years. For FY20, management decided not to pay dividend on account of current unclear circumstances due to Covid-19 pandemic. Thus, management decided to maintain cash.

(v) Debtor Days

hawkins research report with details of receivable days

(G) Valuation

(i) ROCE

hawkins research report with details of valuation with ROCE

Hawkins has the highest return on capital employed (ROCE) amongst the industry peers. The company has been able to maintain its ROCE. More cost saving efforts by the management, as highlighted in the Annual Reports, may result in expansion of return.

(ii) Earnings Growth

Company’s PAT grew at CAGR of 7.02% in last 10 years.

For FY15, PAT decreased by 16%. The company’s cost of raw material increased by 10%. Although, the company took a price increase of 6% in pressure cookers & 4.5% in cookware as on 1 April 2015 consequent to increase in input costs. Further, for FY16, price raised of around 6% in Pressure Cookers and Cookware on April 1, 2016.

  • As on 1 August 2020, Market Cap of Hawkins Cookers Ltd is 2,179.06 crore.
  • P/E = 30.06
  • EV/EBITDA = 20.04
  • Earnings Yield = 5%
  • Cash & Investments as on 31 March 2020 amount to Rs. 48.73 crore.

(H) Key Highlights from Management Discussion from last 5 years:

(i) Effective Advertising in Sales Growth

Advertisement & sales promotion expenses as a % of net sales remain as 4-5% over last 10 years.

In 2015-16, management highlighted the effectiveness of advertisement campaigns & increasing viewership amongst target audience. Thus, increased efforts in advertising is one of the reasons of sales growth. Moreover, Mr Brahm Vasudeva focused on building brand identity with campaign focused on selling the product.

In 2016-17, the company did not take a price increase. This, along with effective advertising, led to a growth in demand for pressure cookers & cookware.

hawkins research report with details of Advertisement & sales promotion expenditure

(ii) Distribution Network

Hawkins Limited has a strong Distribution Network that ensures a wide reach through its Authorised Dealers who sell and stock Hawkins products. Currently, Hawkins Limited has around 700 Service Centres all across India, Nepal & Bhutan. Company also sells its products to the top Departmental Stores of Europe, Yugoslavia, Japan, Panama, Mexico, Finland, & the Netherlands.

As last specified, the company’s authorized dealer count was 5,050 as on 31 March 2018.

(iii) Market Share of Hawkins

Hawkins Limited is one of the leading manufacturers of Cookers in India. Besides cities, company widened its reach to the Rural Markets also, on account of Government’s Pradhan Mantri Ujjwala Yojana. Every year company tries to innovate its products in order to grab a good Market Share. In F.Y. 2019-20, Hawkins holds a Market Share of 30%, competing with more than 100 models of Cookers in the Market amongst both the organised & unorganized players.

Implementation of GST during FY18 was a great positive factor for organised players in consumer goods. Thus, tendency of for traders to deal in Hawkins products grew stronger.

Currently, the share of unorganized players is about 40% in the Market. It is expected that the organized brands will grow faster in coming years as compared to unorganized players. This may lead to market share gains for Hawkins.

In addition to above, the Government of India made the ISI mark compulsory for all pressure cookers sold in India from February, 2021. The company is the undisputed leader on the aspect of quality & thus expects to gain from this development.

(iv) Decrease in Aluminium Prices

Fluctuation in aluminium prices is one of the major factors of impacting cost & margins. From 1 April 2019, aluminium prices started decreasing which is beneficial for the company & shall help the company in improving its profits margins. Also, demand surges if there no high price increases, as earlier referred by the management.

In FY18, the company took a price increase of 4.8% in Pressure Cookers & 4.2% in Cookware effective April 1, 2018 consequent to increase in input costs. Then, from April 1, 2019, the company took price increase of 2.5%.

(v) Opportunities during Covid-19

The lockdown period, Hawkins Cookers Ltd has an opportunity to expand its distribution network & scale up its sales through E- commerce channels.

Also, the management expects to see an increase in demand due to more eating at home & more cooking at home once the lockdown is lifted fully which is an opportunity.

(I) Risks & Concerns

(i) Unorganized Players

Pressure Cooker market consists of various Organized, Unorganized and Regional players. Organised brands like Hawkins may have threat from the unorganized sector as number of unorganized players has been increasing in the Pressure Cooker Market due to low entry barriers.

(ii) Competition from Online Players

Company may also have threat from the online players as the competition in the E-commerce sector has been increased over the years. Some other established brands are also now focused on increasing online presence. Thus, competition in online space persists of renowned older brands as well as newer players like Wonderchef.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications. 

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

Author: PA Wealth Advisors

Financial Advisors, Investment Advisory Services, Portfolio Management, Mutual Funds Official Website : www.pawealthadvisors.com

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