Whirlpool of India

Whirlpool - a MNC, play on consumption story and super underperformer in 2021,used to be market quality bucket candidate ( still is probably as no major long term thesis changes)

Quick look at long term performance

  • Sales growth has been good across all periods, has not de grown even in 2021 though many in industry did, Profit under pressure inline with industry trend.

  • It is been a negative working capital, Solid cashflow machine all throughout, reason behind long term average 55 PE.( screener data)

  • Appears Elica acquisition(90%) is at very attractive validation ( approx 650 cr) for a fast growing consumer brand with approx revenue of 400 cr vicinity in FY 22

Valuations

  • TTM it is at 6200 cr revenue, opm 8% at 475 cr, PAT 290 cr , Q3 is generally best in lot

  • TTM under long term average margins for similar revenues, opm at 11% at 700 cr, pat would be 500 cr+

  • At nominal 10% topline growth in FY 23 , revenue would be 7000 cr+, opm at 12% around 840 cr , pat around 600 cr+

  • For FY 23, add about 400 cr revenue from Elica, at similar margin it adds 40 cr in bottomline ( remember it’s a high growth segment and irrespective of covid has grown 20% in FY21 as well to 310 cr) - Here details

  • That is FY 23 , 7500 cr rev and 900 cr opm, 640 cr in bottomline - at long term median avg of 55 that gives us 34000 cr+ mkt cap, cash in books would be 2500 cr+ ( 500 cr per year type and after elica acquisition they Currently have 1500 cr). Current market cap is 23000 cr. That is 35-40% upside when margin performance revert to mean

Technicals
On long term support levels and bouncing back with good volumes on weekly

Now on Risks

  • Don’t know for sure as to what caused recent steep fall from 2300 to 1800 - multiple factors seem to have converged
  1. Margins trajectory is weak, but so is case of rest of industry, should mean revert eventually given secular consumption growth in home appliances
  2. Apparently they lost some mkt share to LG/Samsung- as they took price hikes and competition didn’t, now competition increasing prices as well and counter measures from Whirlpool - article in thread above
  3. Apparently tax evasion at parent ( Whirlpool usa) level, though this doesn’t impact India unit,
  4. Competetitive intensity and ability to retain/grow mkt share in core segments of washing machine and refrigerator- innovation, quality and customer services driven - key monitorable

Small position

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