SPA Research`s view on Whirlpool of India

SPA Research is bullish on Whirlpool of India with a target of Rs 245 in its May 21, 2012 research report.

“Whirlpool of India (WPL) reported slightly better than expected Q4FY12 sales at INR 6,494mn (up YoY 6% and QoQ 5%), primarily on the back of new product launches. EBIDTA margins at 9.31% (down 81bps YoY) in Q4FY12 remained under pressure due to RM cost pressure. PAT at INR 372mn (down YoY 21%) was in-line with our expectation. For the full year company registered sales of INR 26,579mn, a YoY de-growth of 2% and PAT of INR 1,237mn, a YoY de-growth of 26%. EBIDTA margins declined by 139bps YoY to 8.39% in FY12. Going ahead, we expect sales and PAT CAGR of 9% and 23% respectively during FY12-14.”

“WPL reported sales de-growth of 2% in FY12 compared to 25% CAGR in previous two years. WPL's 70% of sales comes from refrigerators (60%) and ACs (10%), the demand for which was impacted due to briefer and milder summer. Also, uncertain economic environment with high inflation resulted in refrigerator and washing machine sales to remain flattish and ACs sales to de-grow by 25% in FY12 at the industry level. Further, price hikes to the tune of 10-12% also impacted the demand. WPL unveiled 160 products across its six categories in the price range of INR 10,000-100,000 in Feb 2012 with the aim to achieve leadership in refrigerators and washing machine in next 18 months and overall leadership in home appliances in the next three years. The step taken by the company has been very encouraging considering strong headwinds faced by other players on sales and margin front resulting slower product launches. Major Korean players who sell majority of products in India through imports have been impacted due to sharp INR depreciation which forced them to cut dealer margins to protect profitability. WPL with zero debt balance sheet along with manufacturing facilities in India for refrigerators and washing machines is therefore in much better position.”

“We expect WPL to report higher growth than Industry due to its strong focus on profitability and innovation led growth. Company has spent ~INR 1bn in FY12 on R&D initiatives to develop India specific products and continue to invest similar amount over the next 2 years funded by internal accruals. Despite short term concerns, we remain positive on the long term consumer growth story and prospects of consumer durable industry on the back of changing lifestyle. We have revised down our FY13E EPS by 17% due to slow recovery in margins. We introduce FY14E EPS and rollover our multiple one year forward to arrive at target price of INR 245 (16x operating FY14E EPS of INR 13.32 plus INR 30/share cash surplus),” says SPA Research report. 

Institutional holding more than 40% in Indian cos

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