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Weak summer leads to muted demand; maintain BUY

Result Synopsis

Whirlpool’s consolidated revenue came in below ours and consensus estimates with, revenue declining 2.0% yoy. This decline is attributed to muted market growth in Q4 especially in refrigerators and air conditioners driven by a weak summer and concomitant declining entry segment markets. Margins were lower than expected on back of lower sales due to subdued market conditions and calibrated price correction action. We had already flagged off in our channel checks that company has taken price correction to win back the market share. Gross margins on standalone basis were stable despite lower pricing is a key positive. We expect WHIRL to post strong revenue growth once industry stabilizes. Our channel checks have also suggested WHIRL has launched new products which can be corroborated from its press release. Management is confident of the strong leverage of recent product launches in in mid and premium ranges combined with a renewed drive on all aspects of in-market excellence and accelerated cost reduction programs will help WHIRL grow profitably. On the ELICA front recent portfolio expansion actions in the cooking category are yielding good results with Elica India revenue growing at double digits with healthy margins. Despite near term demand headwinds, we continue to believe WHIRL’s strong parentage, and recent action of launching new products across the range, taking calibrated price correction in refrigerators and double-digit growth in ELICA will bode well for company going forward. We have built in moderate estimates for FY24 and maintain our BUY rating with PT of Rs1,690 valuing the stock at 40x. Prolonged demand slowdown in key categories of refrigerators could post risk to our estimates

Result Highlights

* Quarter summary – WHIRL missed ours and consensus revenue estimates with its consolidated revenue declining 2% on yoy basis. Gross margin contracted 105bps yoy to 31.6% largely on lower gross margins for ELICA.

* Margins – EBITDA margin contracted by 233bps yoy contraction was largely on account of on account negative operating leverage on back of weak summer resulting in muted demand.

* New product launches – Our channel checks have indicated that WHIRL have been aggressive in new product launches and expect the intensity of new products launches to continue going forward as well.

* Management Commentary – Management in their press release have said that the strong leverage of its recent product launches especially in mid and premium ranges combined with a renewed drive on all aspects of in-market excellence and accelerated cost reduction programs will help them grow profitably

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