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Market share and margins set to improve; upgrade to BUY

Result Synopsis

Whirlpool’s consolidated revenue came inline with the estimates. Revenue grew 17.9% yoy. Double digit revenue growth was driven by executional excellence, cost productivity and shifting of festive season with more festive days falling in Q3 vs Q2 in previous year. Volume across the category grew for WHIRL with them grew faster than the market resulting in market share gains. The company has rationalized the prices and have added significant amount of retail executive that have enable to derive incremental revenue from the distribution. Company expects growth momentum to continue in the ensuing quarters as well. The company has guided high single digit revenue and margins over longer term. This guidance is given taking current environment into account where durables industry is facing growth challenges and competitive intensity is significantly high. Guidance will be revised if the current environment changes. Gross margin has improved ~35bps 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 remained in low single digit as pricing action and increased investments in retail executive has resulted in higher costs negating benefit of cost takeout program. The company is working on preimmunizing products across the product category and working on launching new technological advance products. 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 and believes ELICA can deliver longterm sustainable growth as cooking category is in the nascent stage of growth. 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 estimate FY23-26 Revenue/EBITDA/PAT CAGR of 10%/27%/33%. We upgrade the stock to BUY rating with PT of Rs1,677 valuing the stock at 40x rolling forward our multiple to FY26 EPS.

Result Highlights

* Quarter summary – WHIRL revenue growth has been in line with estimates, with its revenue growing 17.9% on yoy basis. This revenue growth was the result of pricing action taken by the company to win back the market share.

* Margins – EBITDA margin expanded by 7obps yoy expansion was largely on account of higher volumes owing out of increase in retail executive and pricing action taken by the company.

* New product launches - WHIRL have been aggressive in new product launches and expect the intensity of new products launches to continue going forward as well. New products are being launched with latest technology

* Market share – Company has now started to gain market share from past two quarters after it took pricing action and added field executives and new launches.

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