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3QFY21 Results First cut – Inline revenue with slight miss on margins

* Result summary – Revenue growth was in line with the estimates, while contraction in gross margin leads to margin miss. Revenue/EBITDA grew 17.5%/12.2%. Higher interest, depreciation and lower other income led to decline in PAT.

* Revenue – Our Channel checks have been highlighting double digit growth in the festive season which had continued in month of December as well.

* Margins – Gross margin contracted 292bps yoy on change in product mix towards high end refrigerators and high commodity prices. Consequently EBITDA margin contracted only 32bps yoy on cost control initiatives. Company had refrained from taking any price increase in 3Q to offset higher commodity prices leading to contraction in gross margins. Cost control initiatives and lower A&P spends might have led to marginal increase in other expense.

* Near‐term outlook – Demand for both refrigerators and washing machines continue to remain strong, and our interaction with the dealers suggest company has taken prices increases from 1st Jan to offset commodity price inflation. We believe with strong demand momentum and gross margin improvement in Q4, we expect expansion in EBITDA margin.   

* Our view ‐  Stock trades at 43x FY23 EPS which is at discount to its peers like Havells and Hitachi. Given the quality of balance sheet and high cash balance and improvement in margin stock should command better multiples. We continue to remain positive on stock.

Whirlpool clarification ‐ Should help the stock recover

* The management clarified in a press release that there were certain one‐offs and LFL EBITDA grew 42% vs reported 12% and PAT grew 15% vs a reported decline of 3%. The stock fell 5.3% post result announcement, and we expect a recovery tomorrow post this clarification and a strong commentary given by the company where they have talked about continued share gains and recovery in large cities in the quarter in addition to a significant shift in white goods penetration.  

* Whirlpool Q3'20‐21 EBITDA, PBT and PAT includes special items and timing impact of approximately 26.4 Cr.

* On a like for like comparison, underlying EBITDA is up by 41.7%, standalone PBT up by 17.4% and PAT up by 14.8%). 

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