Buy Whirlpool; target of Rs 580: Microsec

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Microsec`s research report on Whirlpool of India“We continue to recommend Whirlpool of India Ltd a “STRONG BUY”. Whirlpool of India is the subsidiary of world's largest consumer durables company Whirlpool Corporation, USA. The parent company is headquartered at Michigan, USA having global presence over 170 countries and manufacturing operation in 13 countries with 11 major brand names such as Whirlpool, KitchenAid, Roper, Estate, Bauknecht, Laden and Ignis. Diversification of products in a single segment, launching of new models and rupee appreciation/ stable commodity prices to increase margins and ease pricing pressure, new stable government to lead to well balanced economy and ensure level playing field.” “The management has targeted up to 12% growth in turnover at INR3,700 crore (Gross turnover) in the current fiscal on the back of new product launches including hi‐end kitchen appliances and prudent cost management. It will launch 200 products this year in four key categories ‐ refrigerators, washing machines, air conditioners and microwave oven. The company will focus on hi‐end product in its key categories to achieve its growth target. The company is expected to invest INR150 crore this year on product innovations, marketing and advertising. The management has indicated that the company would be more efficient in doing business in all segments to safeguard margin by delivering a higher rate of productivity in all areas of the business. Whirlpool of India is also targeting over six‐fold jump in revenue from its kitchen appliances in three to four years to touch INR200 crore in three to four years on the back of demand for its hi‐end products. The company, which expects its kitchen appliances segment to be one of the future growth drivers, expects to record INR30 crore turnovers in the current year. The company is working with a number of modular kitchen manufacturers for its built‐in appliances and also talking to builders for providing its products to luxury apartments. It has a distribution network of 200 stores showcasing products in India. For this it has partnered with Bangalore‐based Something's Cooking Culinary Arts to organize Kitchen Wars, a corporate culinary contest.” “The company’s P/E has been ranging between the levels of ‐3x to 24x in last ten years. Currently the industry P/E is trading at the levels of 38‐41x, much higher than the company’s P/E of 36.8x. Also, the 2‐ year forward industry P/E is expected to trade at 21x as compared to company’s P/E of 12x. The Q1FY15 top‐line YoY robust growth of 19% and bottom‐line growth of 67.4% gives some signs of revival in the company’s performance with management’s active strategies mentioned above in the key highlights. Consequently, post this performance the company deserves a higher growth rate in future. Hence, we have revised the estimates on higher side. This accompanied with the above mentioned rationales has compelled us to assign a higher P/E multiple of 24x for FY16e and arrive at a target price of INR580 per share; an upside of 32% from the CMP of INR461 per share,” says Microsec research report. 

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