TTK Prestige and Hawkins

 

While Prestige trades at a P/E of 14.44, Hawkins' stands at 12.3, a tad higher

 

The recovery in consumer durable demand has put wings in the stocks of kitchen appliances and utensils makers and it's showing in the stock prices of TTK Prestige and Hawkins Cooker, two leading manufacturers of pressure cookers and utensils.

   The stocks have not only gained close to 30% so far in 2010, but also have outperformed the Sensex in the past one year. Against a two-fold increase in the Sensex, these stocks have jumped more than five times since the recovery in the broader markets since March 2009. Moreover, both stocks made their all-time highs.

   On Monday, the momentum in the stock price came after Prestige announced the launch of a new range of induction stoves last Friday. These stoves runs through power, but don't generate flame and need induction compatible cookware. To support this requirement, the company is further planning to launch a new range of pressure cookers and cookware with an induction base that can also be used on conventional gas stoves and hobs.

 
   While for most part of past one year, the Hawkins stock seemed taking a lead over that of Prestige since early March this year, the latter has kept an edge over the former. The rising disposable income of the Indian middle class as well as a comparatively-defensive nature of the industry has helped both kitchen appliance majors sustain revenue growth in the past two years. However, Prestige's profit margins have remained on the lower side compared to that of Hawkins. One reason for this outperformance could be the company's diversification into the realty sector.

   On a standalone basis as well, for the year ended December '09, even as the revenues of both these companies grew by a similar 24%, Hawkins demonstrated a higher profitability growth. While the operating profit (PBIDT) more than doubled during the trailing 12-month period ended December '09, net profit grew by more than 125% against a growth of 81% in the PAT of Prestige for the period. At the current market price, Prestige is, however, trading at a P/E multiple of 14.44 which is closer to its past five-year average of 14.3. On the other hand, Hawkins is currently trading at a P/E of 12.3, which is a tad higher than its past five-year average of 8.5.