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Market share gain continues; assign ADD rating

Result Synopsis

Whirlpool’s consolidated revenue came below ours and consensus estimates. Revenue declined 5.6% yoy. This decline is attributed downward revision in prices taken to regain the lost market share. We had already highlighted in the channel check note that WHIRL has become aggressive in terms of pricing in quest to regain its lost market share. The company. The company in its press release has mentioned there was marginal volume increase in the flattish market indicating market share gains for the company. Gross margin has improved ~198bps on stable raw material prices, however it is still below its historical high that company used to enjoy, hence there is further scope for improvement. EBITDA margin has contracted on yoy basis despite expansion in gross margin on negative operating leverage. Our channel checks suggest that WHIRL is filling the product gaps at the premium end which will benefit the company going forward. We expect WHIRL to continue with its current aggressive strategy and win back the lost market share and then further build on it. Management will continue to focus on improving profitability in the medium term. On the ELICA front recent portfolio expansion actions in the cooking category are yielding good results with Elica India business trending well. Despite near term demand headwinds, we continue to believe WHIRL’s strong parentage, and recent action of launching new products across the range, taking price correction in refrigerators and growth in ELICA will bode well for company going forward. We maintain however have cut or estimates forFY24 and FY25 respectively on back of aggressive pricing strategy adopted by the company. We now have ADD rating with PT of Rs1,840 valuing the stock at 45x vs 42x as company is gaining market share.

Result Highlights

* Quarter summary – WHIRL revenue growth was lower, with its revenue declining 5.6% on yoy basis. This revenue decline was the result of down pricing action taken by the company to win back the market share.

* Margins – EBITDA margin contracted by 71bps yoy contraction was largely on account of negative operating leverage arising out the lower revenue resulting from aggressive pricing strategy adopted by the company.

* 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 their volumes has seen marginal increase vs flattish volume for the industry, while Elica India business is trending well

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