MOSL: WHIRLPOOL OF INDIA (Buy)-Revenue in line; commodity prices dent gross margin
(WHIRL IN, Mkt Cap USD3.6b, CMP INR2113, TP INR2650, 25% Upside, Buy)
Two-year revenue CAGR stood much better than RAC peers
- 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.
Whirlpool of India Limited is a manufacturer of home appliances. The Company is primarily engaged in manufacturing and trading of Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and small appliances and caters to both domestic and international markets. It provides services in the area of product development, and procurement services to Whirlpool Corporation, the United States and other group companies. Its geographical segments include Sales within India, which represents sales made to customers located within India and Sales outside India, which represents sales made to customers located outside India. The Company also offers Water Purifiers, Built-In Appliances and Induction cooktop. The Company offers accessories for Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and Water Purifiers. It offers Surge Protector and Affresh Accessories. Its plants are located at Faridabad, Haryana; Rajangaon, Pune, and Thirubhuvanai Village, Puducherry.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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