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Sunday, November 30, 2008

Hawkins Cooker:-Just right for your palate

Markets today:-Though the US markets had closed on a buoyant note on Friday in a holiday truncated session, the Asian bourses are trading mixed Monday morning. I think we should open marginally higher and build on the initial modest gains. The sentiment was very bullish on Friday evening as the settlement ended.My own sense is that the US Black Friday sales estimates of a rise of more than 7% as compared to last year are much higher than anticipated. The cold shower is that shoppers may have completed almost 40% of their holiday season shopping. Since the Dow has already risen for five trading sessions on the trot, it will be difficult for the index to do an encore. Coming back to our markets, a lot of positions were built on Friday, so we could see some profit booking by weak hands, but still I expect the markets to hold firm. Unless the Nifty goes below the 2650 mark, there is no room for panic.

Scripscan:Hawkins Cooker Ltd
Traded in:Bse

Story:The company’s main products are pressure cookers and kitchenware products. It operates in the branded segment and is among the largest manufacturers of kitchenware in the country. Its ‘Futura’ brand of non-stick kitchenware has higher margins and is growing at 20-25 % per annum.Even in its bread-and butter pressure cooker segment, the company’s sales volume is growing at 10-13 % on a year-toyear (y-o-y ) basis. Nearly two-thirds of the production cost is accounted for by aluminium, which the company sources from Hindalco. Hawkins is expected to gain from the recent decline in aluminium prices.At the London Metal Exchange (LME), aluminium is currently trading at $1,800 per tonne, compared to $2,900 per tonne in July this year.Though a part of this decline has been eaten up by the depreciation in the rupee against the dollar, Hawkins is well placed to lower its raw material costs and improve its operating margins by a few percentage points from December onwards.Its results for the December ’08 quarter will also reflect the buoyancy of the festive season when kitchenware products normally pick up. Diwali was followed by the wedding season, which also has a positive influence on Hawkins’ earnings growth.Thus, the growth and margins in the second half of FY08 are likely to be higher than those posted by the company in the first half. Meanwhile, the company is in the process of de-bottlenecking its units, to raise capacity, improve efficiency and bring down costs.The company reported net sales of Rs 60.7 crore in the September ’08 quarter of the current financial. This is up by a healthy 22% against the corresponding quarter of FY08. Its operating profit during the period surged by 48% y-o-y to Rs 7.7 crore. At 12.6% of net sales, operating margin in the second half was better than the trailing four quarters operating margin of 12.1%.It is almost a zero-debt company as it has debtors of only Rs 8 crore. In Q2 alone, Hawkins posted a net profit of Rs 4.5 crore on a small equity base of Rs 5.3 crore. Its net profit of Rs 8.7 crore for the first half of FY09 translates into earnings per share (EPS) of over 16.5.The company has indicated that is unlikely to be adversely affect by the global slowdown and financial meltdown. It generates enough cash flows annually to finance its expansion and modernisation plans.The company also has a good dividend yield of 6.7%. Thus, in view of the anticipated earnings growth in the second half and cost-savings from lower aluminium prices, Hawkins’ stock offers a good investment opportunity for investors.

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