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Strong franchise

Well established brand with strong parentage: Whirlpool of India Limited (WIL) is one of India’s leading manufacturers and marketers of major home appliances like refrigerators, washing machines, air conditioners and microwave ovens. WIL has also expanded its portfolio in cooking and built-in business by investing in ‘Elica India’. WIL has a strong parentage i.e. Whirlpool Corporation which has more than 100 years of history and a global presence in over 170 countries with 77,000 employees and 59 manufacturing locations.

Promising industry growth prospects: The white goods industry has seen strong recovery post COVID lockdown led by strong pent up demand. We expect the white goods consumer durables industry to register robust growth, given the low penetration of key appliances such as refrigerators – 33%, washing machines – 14% and air conditioners – 4%. The rise in disposable income, easy availability of finance and pick-up in real estate bodes well for the industry growth prospects.

WIL consistently gaining market share: Over the last five years, WIL has consistently strengthened its market share in its key segments (refrigerator, washing machine & air conditioner) led by expansion in the distribution network, filling product gaps and new launches. We expect a similar trend to continue given its strong brand recall, wide product portfolio and management’s constant focus on innovation and growth. Further, WIL's entry into a newer segment (air purifiers & kitchen appliances) and continuous branding efforts would drive growth for the company.

Worse of margin pressure is behind: While WIL has posted decent revenue growth over FY20-22 considering the pandemic, the margins has been impacted owing to higher raw material cost. However, we expect margins to improve going forward led by combination price increase, recent easing in commodity prices and cost control measures.

Mixed show in Q1FY23: WIL reported mixed set of numbers in Q1FY23. While the company reported best ever quarter on the revenue front, margins were a tad bit disappointing despite an expansion YoY. On a sequential basis, margins contracted 231bps while net profit remained flat.

Valuations: We like WIL in the white goods space given its strong brand presence and management constant focus on filling product gaps across its category. Moreover, widening distribution reach and addition of new product categories would support growth. We estimate WIL’s revenue/EBITDA/PAT to grow at a CAGR of 21.3%/43.6%/57.3%. We recommend a Buy on the stock with a target price of Rs. 2,277.

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