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Hawkins Cookers v/s TTK Prestige: A Comparison

Feb 27, 2012

Hawkins Cookers and TTK Prestige. Both biggies of the cookware industry and both possessors of strong brand names. In the stock markets though, TTK Prestige has managed to endear itself more to shareholders than its staunch competitor, Hawkins. What else could explain the fact that while the former trades at an earnings multiple of close to 30 times its trailing twelve month (TTM) earnings, Hawkins has to make do with a lot less 24 times? This is not all. When one compares the FY11 earnings, the PE that TTK gets of nearly 36 times is way ahead of Hawkins that gets a multiple of close to 20x times for the same period.

Is this premium for TTK Prestige justified? Let us try and find out. When it comes to topline growth between the period FY06 and FY11, TTK has certainly fared much better. Its standalone topline has grown by around 3.3 times while that of Hawkins has witnessed a lesser growth of around 2.4 times.

But sales alone do not tell the complete story. It is important to know what kind of resources have gone into bringing about the growth in sales as well as the cash that both the companies have managed to extract from a given level of sales.

On the EBITDA margin front, it is Hawkins that comes out ahead. Its average operating margins for the five years ending FY11 has stood at 13% whereas the same for TTK has stood at 11%. Thus, although TTK's topline growth rate has been higher, Hawkins has been able to eke out higher profits per rupee of sales registered.

Know More: Which way are the markets & the mutual fund industry headed?

We believe that the real test of a company's value is not its profits and net profit margin. But rather the free cash flow. Thus, the surplus cash that remains once the company has invested in plant and equipment and has also satisfied its working capital needs, is the true indicator of the value that the company adds to its shareholders we believe. As mentioned, this number we call as the free cash flow of the company (FCF) and is arrived at by adding net profits to depreciation and subtracting working capital investment as well as capex.

And how do the cash flow margins of the two companies compare? Well, here too, Hawkins has the edge as per the numbers. Its FCF margins average around 6.5% of sales for the five years ended FY11. Whereas the same for TTK Prestige has come in slightly lower at 5.9% of sales. This is not the end of story though. It is clear that TTK Prestige has put in more resources but has it brought about the required growth in terms of sales? It certainly has we believe. By putting in an extra 0.6% of sales (the difference in the above two numbers), TTK has managed to grow its sales 3.3 fold in the five year period as opposed to 2.4 times for Hawkins.

And the stock market has indeed rewarded TTK Prestige for its better use of resources. Between 2008 and 2011, the stock of the company went up nearly 13x as opposed 7x for Hawkins.

However, what about the future? It is clear that TTK Prestige cannot possibly keep on growing at the same rate as it has done in the past. Thus, it will have to grow slower and pay out the rest of the money as dividends or it will have to look for new avenues of growth and the same could lower its capital efficiency. It is the answer to this question that will determine the fate of these two stocks over the next five years we believe.

Latest Update on Hawkins Cookers and TTK Prestige

In the years since this piece was posted, both Hawkins Cookers and TTK Prestige have grown multifold in terms of business, financials and stock prices.

Hawkins Cookers and TTK Prestige's shares have grown at a Compounded Annual Growth Rate (CAGR) of 16.9% and 22.4% respectively, over the past 10 years.

Hawkins Cookers has emerged as India's leading manufacturer of pressure cookers and cookware. It has more than 50 years of history with established brands like Hawkins and Futura among others. The company has sold over 72 million pressure cookers worldwide since its inception.

The company's operations have been generating positive cash flows for the past 10 years. It has consistently rewarded its shareholders with high dividends.

Average return on equity (ROE) for the company stands at 59.8% over the past 10 years.

It now stands at a market cap of about Rs 25,482 million.

You can see Hawkins Cookers company fact sheet here.

On the other hand, TTK Prestige started out as a pressure cooker importing company over six decades back. Even after its manufacturing operations started, they made only pressure cookers until 2001. But over the past two decades, the company has diversified into non-stick cookware, gas stoves, electric appliances, and home cleaning.

Since its inception, TTK Prestige had sold over 75 million pressure cookers and cookware worldwide. The company has around 75 models of cookers in 11 variants.

Average return on equity (ROE) for the company stands at 27.6% over the past 10 years.

The company's market cap stands at about Rs 83,430 million.

You can see the TTK Prestige company fact sheet here.

How the Valuations Changed Over the Years?

For the purpose of our analysis we compare the average P/E, P/BV and EV/EBITDA multiples as on March 2020 financials.

Valuation Ratios EV/EBITDA P/E P/BV
Hawkins Cookers 19.1x 28.3x 14.7x
TTK Prestige 23.3x 36.5x 5.2x
Data Source: Ace Equity

As can be seen from the above table, TTK Prestige is more expensive than Hawkins Cookers on two of the three chosen valuation metrics.

Keep a track of the latest valuations for both the companies here and here respectively.

You can see a comparison between both the companies' latest financials here.

Do check out the current share price of Hawkins Cookers and share price of TTK Prestige.

Rahul Shah

Rahul Shah (Research Analyst), Managing Editor, Microcap Millionaires has led the team from the front in developing some of our most stringent and rewarding research processes. As per his own admission, the turning point in Rahul's life as a financial analyst came a few years back when he got introduced to the works of Warren Buffett and Charlie Munger. From Buffett, he understood the value of investing in good quality business with powerful moats and strong management teams. Charlie Munger on the other hand inspired him to be a lifelong learner and use mental models in order to arrive at the crux of matters across most disciplines. Rahul firmly believes that in order to be successful at investing, you have to do the big things right and possess a great temperament and a contrarian streak.

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2 Responses to "Hawkins Cookers v/s TTK Prestige: A Comparison"

P.N.John

Nov 6, 2012

The consumer is least bothered about the superior returns TTK Prestige has given to shareholders.Now that labour problems and other issues have been resolved Hawkins will give better returns to its shareholders henceforth as its pressure cookers are just as good and command tremenous brand equity.

Like (3)

R Sathyamurthy

Feb 29, 2012

You have picked Hawkins over TTK Prestige. I think an investor will do well by having both the Companies in the portfolio. I think both Companies have equally same opportunities for growing their existing business itself.

Like (2)
  
Equitymaster requests your view! Post a comment on "Hawkins Cookers v/s TTK Prestige: A Comparison". Click here!

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