Hold Whirlpool of India; target of Rs 245: SPA Research

SPA Research has recommended hold rating on Whirlpool of India with a target of Rs 245 in its August 08, 2012 research report.

“Whirlpool of India (WPL) reported sales of INR 8,939 in Q1FY13, a YoY growth of 10% backed by ~5% volume growth. EBIDTA margin expanded by 92bps YoY to 11.27% on the back of price hikes and favourable product mix. PAT grew by 26% YoY to INR 646mn. With deficient monsoon and high inflation squeezing the disposable income, sales are expected to remain subdued going forward but supported by new product launches and expansion in distribution reach. However, improved product mix and softening in RM cost would result in margin expansion going ahead. We maintain our 15 months target price of INR 245 (16x operating FY14E EPS plus INR 30/share cash surplus) and recommend HOLD due to limited upside potential.”

“WPL reported sales of INR 8,939mn in Q1FY13 at YoY growth of 10%. Despite weak consumer sentiment, company registered 5% volume growth in Q1FY13 compared to decline in FY12, on the back of new product launch and increase in distribution reach. Company has been seeing good growth in its new products like Protton (3-door refrigerator) and Ace Washstation (top-load washing machine). Also, severe summer and delay in monsoon supported overall demand for refrigerators and air conditioners (ACs). AC industry reversed its declining trend and grew by 20% YoY in Q1FY13.”

“Going ahead, we expect sales growth to remain subdued due to pressure on disposable income and weak consumer sentiment owing to unfavorable economic conditions. However, expected improvement in margins on the back of moderation in RM cost and favourable product mix would derive growth in profitability. Company continues to remain debt free with high cash flows and good return ratios. We expect sales and PAT CAGR of 9% and 23% respectively during FY12-14. We maintain our 15 months target price of INR 245 which provides an upside of 4% from CMP. We therefore change our rating from BUY to HOLD,” says SPA Research report.

Public holding more than 90% in Indian cos

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