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Strong brand equity and leadership position in the intensely competitive space of consumer durables: Over the last couple of decades, WIL has established its leadership position in the Indian consumer durables market specially in the refrigerator & washing machine segments.

Substantially low penetration levels and favorable conditions makes India a lucrative market:

The current penetration of refrigerators, washing machines & air-conditioners in India is around 33%, 14% & 5% respectively, substantially lower than average global penetration levels.

India to be the global hub for sourcing which is likely to drive the growth going forward:

According to a recent article in a business daily, Whirlpool Corporation is exploring options to turn its Indian business into a global sourcing hub for both components and finished products in order to de-risk itself from potential supply-chain disruptions arising out of China.

Consistent expansion of product portfolio and rising advertising spending to result in promising future:

The management is now striving to strengthen other categories such as air-conditioners, dishwashers, microwave ovens and water purifiers as well. Furthermore, the company is now increasing its advertisement spend which will benefit in strengthening its brand. Robust fundamentals play a key role in fetching rich valuations: WIL has consistently been growing its sales & profits at a double digit. Over the last 3,5 and 10 years, the company’s top-line has grown at a compounded annual growth rate (CAGR) of 15%, 13% and 11%, respectively while its profits have expanded at a CAGR of 15%, 18% and 12% during the same periods.

OUTLOOK & VALUATION

WIL is a leading home appliances maker with leadership in segments such as refrigerators and washing machines in particular. The company is backed by strong parent and global leader, Whirlpool Corporation, USA. The parent is keen on making India a manufacturing hub and global sourcing major and thus enhancing capacities and the management is also focusing on increasing dominance in other product categories which are currently small.

Further, the strong fundamentals including consistent growth, debt-free status, robust cash position, relatively high margins, negative working capital cycle alongwith strong brand equity plays a key role. Going forward, we expect the company to deliver an EPS of Rs.51.9 in FY23; assigning a target multiple of 54x we arrive at a target price of Rs.2,802 showcasing an upside potential of 21.2% from current levels with an investment horizon of 18-24 months.

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