IGI Logo

Healthy growth momentum drives share gains; maintain BUY

Result Highlights

* Quarter summary – WHIRL delivered a mixed set of results with revenue beating expectations and EBITDA coming in‐line with estimates. Sharp reduction in other income resulted in lower than estimated PAT. Gross margin contracted 247bps which is attributable to higher commodity prices.

* Growth momentum continues – Whirlpool saw strong growth in Q4 with all categories and geographies showing strong double‐digit volume growth. Cost rationalization has resulted in EBITDA margin expansion despite sharp contraction in gross margins.  

* Commodity inflation impact – Gross margins contracted by 247bps to 35.6%, lowest in the past five years on the back of high prices of key commodities. We expect gross margin to remain muted in 1HFY22.

* Market share – Our channel checks have suggested that Whirlpool has managed to gain market shares in both refrigerator and washing machine categories.

Valuation and view –

4Q saw continued growth momentum as the company managed to maintain market share across its key categories i.e. washing machines and refrigerators. WHIRL was also able to improve EBITDA margins despite sharp contraction in gross margin on multiple cost reduction initiatives coupled with positive operating leverage. Some of the cost reduction is expected to be structural and will be a key catalyst for margin expansion going forward. We are already building 290bps EBITDA margin expansion in our assumptions considering 50bps gross margin expansion, cost controls and higher operating leverage.

We believe WHIRL has strong parentage, brand presence and a well penetrated distribution network capable of driving further market share gains. We believe the company has been adopting the right strategy by increasing its distribution in tier 3,4,5 cities and rural areas which should now become the next engines for next phase of growth. Strong balance sheet, increased distribution along with faster product refreshment rate could lead to sustained outperformance in the medium term. We expect FY21‐23E Revenue/EBITDA/PAT CAGR of 16%/34%/46% on a favorable base and arrive at our PT of Rs2794 valuing the company at 50x FY23 EPS. It remains our top durables pick, and we continue with our BUY rating on the stock.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer