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Hawkins Cooker: Input cost inflation impacts margins

News: Hawkins reported strong growth in revenues for Q2FY22 on a YoY basis, however lower gross margins and higher other expenses led to flattish EBITDA and Net profit.  Revenue grew by 38% YoY to Rs. 266 crore (up 76% QoQ). Gross margins declined by 340 bps YoY to 49.3% probably due to input cost inflation. Higher other expense to sales ratio led to EBITDA margin being lower by 480 bps YoY at 13.9% and EBITDA remaining flattish at Rs.37 crore (Q2FY21: 36 crore) in spite of strong revenue growth. Consequently, PAT remained flat YoY at Rs.26.2 crore (Q2FY21: Rs. 26 crore).

Views: Hawkin’s revenue growth exhibited robust demand trend witnessed by the kitchen appliances category which is in line with strong revenue growth registered by peers. However, the company’s gross margin contraction may be due to input cost inflation and company might have to take price hikes in ensuing quarter which should aid in improvement of gross margin from current levels. Currently all operations of the company are back to normal except its Mumbai office which is operating at the permitted strength. With demand likely to remain upbeat owing to renewed customer interest in cooking appliances (as people preferred home cooked food), we believe that Hawkins revenues should gain traction going ahead. We continue to remain structurally 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%+