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Healthy performance; maintain Buy
Whirlpool of India Ltd. (WIL) reported its Q4FY19 numbers which were largely in-line with our estimates. Its revenue growth was sluggish at 7.7% and lower than our estimates mainly due to delayed summer season. However, the margin recovery was stronger than expected as it expanded 147bps YoY and 459bps QoQ at 12.6%. Despite strong operational performance, the net profit growth was restricted to 13.9% YoY due to higher depreciation cost and higher tax rate during the quarter. Going forward, we expect WIL’s business growth to continue given low penetration levels, and the company’s constant focus on increasing market share through network expansion. We have marginally tweaked our estimates for FY20E and FY21E and arrive at target price of Rs. 1,591.
Q4FY19 Result Update:
* WIL’s revenue growth was sluggish at 7.7% YoY in Q4FY19 at Rs. 1,355 cr mainly due to delayed summer season. For FY19, the company continues to outperform the industry and has registered a healthy revenue growth of 11.7% led by market share gains. Going forward, with positive industry growth prospects given low penetration levels and higher disposable income, we expect WIL to grow at 15.5% CAGR over FY19-21E led by company’s constant focus on increasing market share, increase in branding efforts and new product launches.
* The operating profit came in higher than our estimates registering a strong growth of 21.9% at Rs. 171 cr. The margins expanded 147bps YoY and 459bps QoQ mainly due to lower material cost and better operating leverage during the quarter. As mentioned in our Q3FY19 update, the margin expansion has exceeded our expectations and hence going forward, we expect margins to improve gradually.
* Despite strong operational performance, the net profit growth was restricted to 13.9% YoY at Rs. 104 cr mainly due to higher depreciation cost and higher tax rate during the quarter. For FY19, WIL has delivered strong performance with revenue and profit growth of 11.7% and 16.1%.
Outlook & Valuation:
WIL remains optimistic on delivering a double digit growth over the next few years given low penetration levels, rising disposable income and higher GDP growth. Further, its constant efforts in expanding its distribution reach (both rural and urban), enhancing its product portfolio and increase in branding efforts has led to market share gain in the last two years. We expect the same trend to continue going forward despite rising competition. The company also aims to grow its export revenue (3.4% of FY18 revenue) faster than the domestic market. We believe positive industry growth trends coupled with WIL’s expanding distribution network, new product launches, in-house manufacturing facilities, healthy return ratios and negative working capital makes WIL one of our preferred picks in the sector. We have marginally tweaked our estimates and expect WIL’s Revenue/EBITDA/PAT to grow at CAGR of 15.5%/17%/19% over FY19-21E. We maintain a Buy on the stock with a target price of Rs. 1,591.
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