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- 27 May 2022
- ICICIdirect Research
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HAWKINS REPORTS SUBDUED PROFITABILITY AMID INPUT COST INFLATION
News: Hawkins reported decent growth in revenues for Q4FY22 on a YoY basis, however significantly lower gross margins led to decline in EBITDA and Net profit. Revenue grew by 11% YoY to Rs. 272 crore (up 1% QoQ). Gross margins declined by 851 bps YoY to 44.9% probably due to input cost inflation. In spite of employee and other expense to sales ratio declining by 290 bps and 380 bps YoY respectively, EBITDA margin was lower by 180 bps YoY at 11.4% and EBITDA declined by 4% YoY to Rs. 31 crore (Q3FY22: 27 crore). Consequently, PAT registered a YoY de-growth of 11% to Rs. 21 crore (Q3FY22: Rs. 19 crore)
Views: The company’s gross margin continued to contract probably due to input cost inflation and company not resorting to price hikes. The key monitorable will be whether the company takes a price hike to shore up its gross margin in the ensuing quarter. Demand for cooking appliances has moderated as a category from its peak. Hawkins has introduced close to 39 new SKUs in FY22 to provide thrust to its revenues and for full year FY22 the revenue growth was 25% driven by strong growth in H1FY22. We continue to remain positive on Hawkins owing to its robust balance sheet and good promoter pedigree. Over the years, the company has maintained balance sheet prudence with controlled working capital cycle (20% of sales), non-leverage balance sheet and generating healthy RoCE of 55%+
Impact: Neutral