For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

Buy This Mid Cap Consumer Durable Sector Stock For Target Price Of Rs 2,035 To Get 13% Potential Gains

|

The brokerage firm Ashika Stock Broking has given a buy the stock of Whirlpool Of India Ltd. for a target price of Rs 2,035 apiece. Whirlpool Of India is one of India's prominent and leading players in the household Appliances industry. According to the brokerage's estimated target price, the stock has the potential to gain 13% if the stock of the company is bought at the Current Market Price. It is a mid-cap company having a market cap of Rs 22,872.45 crore.

 

 Stock Outlook

Stock Outlook

On NSE, the Current Market Price (CMP) of stock is Rs 1,793.75 apiece, trading 0.16% up from its previous close at the time of writing. It was opened at Rs 1800.40 apiece. The 52-week low of the stock is Rs 1,365.10 apiece recorded on 26 May 2022, and the 52-week high is Rs 2,550 apiece recorded on 12 October 2021, respectively.

Returns on Investment

Returns on Investment

The stock over the past 1 week has fallen 1.32% whereas, in the past 1 month, it surged roughly 0.7%. In the past 3 months, the stock has given a 12.69% of positive return. Over the past 1 year, it has given a negative return of 17.56%. Over the 3 and 5 years, the stock gave positive returns of 9.15% and 51.2%, respectively.

Best Play in White Goods Space
 

Best Play in White Goods Space

Whirlpool of India (WHIL) provides the best opportunity in white goods listed space owing to its strong exposure to refrigerators and washing machines compared to other listed players. Penetration of refrigerators and washing machines in India stands at ~33% and 14%,respectively which is lower vis-à-vis other countries. Both these categories are expected to witness massive up-scaling in technology and consumer preferences towards premiumization on account of rising per capita income. Further, the infrastructure boom with increasing electrification of villages would inevitably create demand for white goods. In refrigerators, the technology is movingtowards direct cooling to frost-free, higher capacity and double-door, while in washing machine segment, preferences are now shifted to fully automatic machines from semi-automatic. The company's overall market share stands at 15-20% in the categories it operates. Besides, the company has gained market share at an average of ~100bps almost each year, which reinstates its brand recall and connect. WHIL also intends to expand in replacement market, which can be a key monitorable from long-term perspective.

FY22, most challenging year in past decade

FY22, most challenging year in past decade

Gross margin declined to 32.4% in FY22 from an average of 39% over FY18-21 owing to higher commodity prices and supply side challenges. Besides, lower other income resulted in sharp decline in WHIL's PAT margin in FY22 to 3.8% (vs. average of 7.1% over FY18-21)and decadal low return ratios of 7.5% (vs. average of 19%over FY18-21). WHIL's strategy to move towards premium products paid well and the growth was majorly led by mid and premium products (midsized and large washing machines, microwave ovens and refrigerators) in FY22.The company's entry-level products (semi-automatic machines and single-door refrigerators) sales were muted due to rise in cost of living and deferred discretionary purchases. Premiumization will help to pass on input cost inflation and maintain gross margin. While inflationary concerns continue to plague growth in 1HFY23, the company continues to strengthen its core business and cost-cutting measures (like lower ad spends).

 Launch of New Products to Aid Market Share Gain

Launch of New Products to Aid Market Share Gain

WHIL has been enjoying a strong brand recall and over years. It has been improving its positioning in Indian market due to management's focus on growth. The company has wide offerings in refrigerators and washing machines and has been filling the gaps in its product portfolio with new launches. It entered into air purifier segment in CY18 and acquired 49% stake in Elica PB India(manufacturer of kitchen cooktops). Acquisition of Elica PB India has paid off positively for the company,as Elica is exhibiting strong growth and higher share of premium products. The JV has been focusing on filling the product gaps by launching India-centric products. In addition to this, by leveraging the distribution network of Elica, WHIL aims to build Whirlpool as a strong cooking brand. It continues to launch and new innovative products in refrigerators and microwaves even in challenging year like FY22.

Wider Distribution Network

Wider Distribution Network

Over the years, WHIL has scaled up its distribution network to 90%-95% of the industry leader. The company is now present across a large number of outlets. However, a lot of them are not directly covered by WHIL. The company is now focused on improving the quality of its distribution network and increasing its direct coverage and wallet share. The company is also focusing on online sales thus, partnering up with e-commerce companies. Besides, WHIL has also invested in digital platforms for building capability in order to deliver orders in 48hours. It has no questions asked 7-days return policy. The company has also launched direct service centres in Delhi, Chennai and Bengaluru to enhance last-mile delivery. According to the management, there is a tectonic shift in the consumers' adoption of digital channels for shopping and most other aspects of lives.

Key risks

Key risks

Higher metal prices and inability to pass on the same.
Inability to gain further market share or meaningfully penetrate into newer products/segments.

Valuation

Valuation

Whirlpool of India ltd (WHIL) provides the best opportunity in white goods listed space owing to its strong exposure to refrigerators and washing machines compared to other listed players. Under-penetration of products in India along with electrification in villages offers massive opportunities for growth of consumer durables. Further, consumer preferences are moving towards premium products owing to rise in per capita income. WHIL has rightly strategized with upcoming products in premium range, which will be margin-accretive, going forward. Acquisition of 49% stake in Elica PB India, a manufacturer of kitchen cook tops, is a right fit. "The management opined that there is a tectonic shift in the consumers' adoption of digital channels for shopping. Hence, WHIL has invested in digital channels and also has built capability to deliver orders in 48 hours. At CMP, the scrip trades at 35.7x of FY24E EPS. We recommend the investors to 'BUY' the stock at a Target Price of Rs. 2,035," the brokerage has said.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of IAshika Stock Broking. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.

Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X