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This Mid-Cap Stock Gets Buy Rating For 30% Potential Gain, No Debt Since Last 5 Years

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Leading brokerage firm ICICI Securities has given buy rating to the stock of Whirlpool of India Ltd. for a potential gain of 30% if you buy it at its current market price of Rs 1537.50 apiece. Whirlpool of India (Whirlpool) reported decade low return ratios in FY22, as its PAT margin suffered a blow from input material inflation. The premium and mid premium segments did well but entry-level products were impacted due to high inflationary period.

Stock Outlook

Stock Outlook

The current market price of the stock is Rs 1537 apiece with a dip of 0.32% in today's trade till 3.43 pm. The stock has touched a 52-week high of Rs 2550 apiece and low of Rs 1365.10 apiece. The stock has given a negative return of 30.4% in 1 year and a positive return of 38.09% in 5 years. If investors buy the stock at its current price of Rs 1537 they can get a likely gain of 30% with a target price of Rs 2000 apiece.

Current Market PriceRs 1537
Potential Gain30%
Target PriceRs 2000
52-Week HighRs 2550
52-Week LowRs 1365
5-Year-Return38%
Premium and mid-premium segments registered growth
 

Premium and mid-premium segments registered growth

The company registered strong growth in premium and mid-premium segments during the year. However, entry-level segments were impacted due to deferred discretionary purchases by consumers in high inflation environment. Whirlpool continued to launch new innovative products across sub-segments. It added new SKUs to IntelliFresh Pro series of bottom-mount refrigerators. It also launched a new range of microwaves. The company launched a new direct service network with three centers across Delhi, Chennai and Bangalore. It is likely to help consumers avail better services after purchasing the products.

Higher working capital days leading to lower FCF (Free Cash Flow)

Higher working capital days leading to lower FCF (Free Cash Flow)

Net working capital days have increased from -1 in FY21 to 12 in FY22. The deterioration in working capital days is reflected in weak FCF generation. FCF generation declined in FY22 due to higher working capital investments and acquisition of Elica. The company faced pressures on gross margin (and thus on overall profitability) due to inflation in input prices. This led to a steep reduction in the return on equity from 13.2% in FY21 to 7.8% in FY22.

Valuation

Valuation

According to ICICI Securities: We model Whirlpool to report revenue and PAT CAGRs of 17.5% and 47.5% over FY22-FY24E, respectively, and RoCE to move to 13.9% in FY24 (FY22: 7.7%). We remain positive on the company's business model due to its established competitive advantages and growth opportunities. Maintain BUY with DCF-based target price of Rs2,000 (implied P/E 48x FY24E). Key risks: Steep increase in competitive pressures and steep inflation in input prices.

About the company

About the company

Whirlpool of India Ltd, is a subsidiary of Whirlpool Corporation, committed to being the best global kitchen and laundry company, in constant pursuit of improving life at home. Headquartered in Gurugram, the company is one of the largest manufacturers and marketers of major home appliances in the country. The company owns three manufacturing facilities at Faridabad, Pondicherry and Pune. With over 110 years of global expertise, it has presence across multiple categories in India and the Indian subcontinent with a wide product portfolio ranging from washing machines and refrigerators to air conditioners and kitchen appliances. The market capitalization is Rs 19,506 crore.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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 taking any investment decision.

 

 

Read more about: whirlpool of india
Story first published: Tuesday, June 28, 2022, 16:31 [IST]
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