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Pure play in the underpenetrated White Goods space

* WHIRL has established itself as a strong and fast growing brand in the White Goods space, especially in Refrigerators and Washing Machines. The MNC company, which has been witnessing improving market share, commands the third position in both these categories, with the top two slots occupied by Korean giants – LG and Samsung (both unlisted in India).

* A strong distribution network and move to rural India, in-house capex, and innovative product offering have been growth drivers for the company. Despite investing on capex, employee expansion, advertising spends, and R&D, it commands a high RoE/RoIC, making it an attractive long-term investment.

* We initiate coverage on WHIRL with a Buy rating and TP of INR3,020 (55x FY23E EPS). We forecast revenue/EBITDA/PAT growth of 21%/35%/42% over FY21-23E. At the CMP, the stock is trading at FY22E/FY23E P/E of 54x/45x, which is cheaper than other leading Electricals, i.e. HAVL (FY22E/FY23E P/E: 58x/52x) as well as single White Goods companies like BLSTR and VOLT (trading at FY23E P/E of ~55x, adjusted for the Project business). The company deserves to command a premium as its portfolio provides the best revenue growth potential in the wider Consumer Durables space.

Going from strength-to-strength in the White Goods space

In the White Goods listed space, WHIRL provides the best opportunity owing to its strong exposure in Refrigerators (industry size: ~USD3.5b) and Washing Machines (industry size: ~USD1.5b) v/s other listed players that are largely in a single category (i.e. highly competitive AC segment). The penetration of Refrigerators/Washing Machines stands at 30%/~10%. Both categories are expected to benefit on account of up-scaling (Refrigerators: direct cool to frost free/higher capacity/double door; Washing Machines – semi automatic to fully automatic). As per our estimate, WHIRL commands a volume market share of 17-18% in each category. It has been gaining market share in volume terms and its product portfolio is poised for strong 13-15% structural growth over the next decade, even beyond the low base led growth due to the COVID-19 outbreak.

Product portfolio expansion and higher ad spend aiding brand recall

The company enjoys a strong brand recall and has been improving its positioning in the Indian market over the last 5-6 years, given the management’s focus on growth. It has an array of offerings in Refrigerators and Washing Machines, and has been fast to fill the gaps in its product portfolio with new launches. The company’s portfolio also includes ACs and Kitchen Appliances. It entered into the Air Purifier segment in CY18. In the same year, WHRIL acquired 49% stake in Elica PB India, a manufacturer of kitchen cooktops. The company has focused on brand endorsements via celebrities and the print media and has increased its ad spends to ~2% in FY20 from 1.3-1.5% over FY17-19.

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