Buy Whirlpool of India; target of Rs 2650: Motilal Oswal

Motilal Oswal's research report on Whirlpool of India

WHIRL's revenue grew 31% YoY in 1QFY22 (in line with our estimate), with a two-year CAGR at -18%, which is better than Room AC players like VOLT (est. -30%), BLSTR (-25%), Hitachi (-28%). It is the only White Goods company in our coverage universe to meet our revenue expectations in 1QFY22. Gross margin was impacted (-300bp YoY) due to commodity cost inflation and adverse revenue mix. EBITDA stood 34% below our estimate, with margin at 4.1% (est. 6.5%). The decline in gross margin could be partly attributed to WHIRL's focus on gaining market share in the mass market categories of Refrigerators and Washing Machines. WHIRL's revenue growth doesn't suggest any market share loss, providing us confidence in the strong White Goods franchise. On a relative basis, demand for Washing Machines and Refrigerators can potentially surprise over the next six months v/s a seasonal category like ACs, provided consumer demand holds good as the economy opens up. We cut our FY22E/23E EPS by 10% each to factor in higher than expected input cost pressures. Our TP stands at INR2,650/share (earlier: INR2,900/share) as we roll forward our valuation to Sep'23E EPS, but cut our target P/E to 50x from 55x earlier. We maintain our Buy rating.

Outlook

Our TP stands at INR2,650/share (earlier: INR2,900/share) as we roll forward our valuation to Sep'23E EPS, but cut our target P/E to 50x. We maintain our Buy rating.