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Focus on profitable growth and market share gains in premium end of market

Whirlpool plans to focus on profitable growth and may not use pricing actions to protect / gain market shares. It is likely to use investments in branding, supply chain and new launches to grow the share. That’s the key insight from Whirlpool’s analyst meet. Key highlights are (1) While Whirlpool has lower market shares in the premium market, it plans to steadily expand shares via differentiated launches, leveraging its parent’s portfolio and R&D; (2) Cooking segment offers healthy growth, and distribution expansion of Elica is likely to offer healthy growth even in medium term; (3) Less than 35% penetration across white goods offers long-term growth potential. While there is short-term impact due to steep inflation in input prices and intensifying competitive pressures, we believe the company is likely to protect market shares in medium-long term which is DCF accretive. As margins and valuation multiples are near mean – 1 standard deviation, it provides downside support. The company’s cash on books is ~10% of its market cap. Maintain ADD with a DCF-based TP of Rs2,000 (41x FY24E).

Focus on profitable growth: While competitive pressures have increased in white goods, we believe Whirlpool will focus on profitable growth. It is likely to invest in new product launches, distribution expansion and additional brand-building efforts to maintain / grow market shares. However, we believe it may not necessarily use pricing actions to protect / increase its market shares.

Efforts to increase market shares in premium end of market: Whirlpool has lower market shares in premium sub-segments compared to low and mid-price segments. The company has largely maintained / grown its market shares over the past decade. We believe it has lost some market shares in direct cool and semi-automatic machines but plans to focus on gaining fair share of market at premium end of market via investments in branding, improving digital reach and supply chain.

Opportunity in cooking: The penetration of large cooking aids is less than 1% in India which offers sustainable growth ahead. With acquisition of Elica and support of parent’s portfolio, we model Whirlpool to be a beneficiary of increase in penetration. Distribution expansion of Elica also offers growth opportunity over FY23-24.

Low penetration offers long-term growth: The penetration of white goods is less than 35%. With rising income levels, electrification and urbanization, we believe the penetration of white goods to steadily increase

Maintain ADD: We model Whirlpool to report PAT CAGR of 21% over FY21-FY24E and RoCE to be upward of 16% over FY23-24. We remain positive on the company’s business model due to its established competitive advantages and growth opportunities. Maintain ADD with a DCF-based TP of Rs2,000 (implied P/E 41x FY24E). Key risks are increase in competitive pressure and inflation in input prices

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