whirlpool india cmp target rating - spark capitalmailers.sparkcapital.in/uploads/apurva/whirlpool...
TRANSCRIPT
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
1
Stock performance (%)
1m 3m 12m
WHIRL 8% 6% -10%
Sensex 8% 4% 13%
CG Index 19% 9% 16%
Financial summary (Consolidated)
Year Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) P/E(x) EV/EBITDA(x)
FY14E 28,429 2,018 1,152 9.1 23.9 13.0
FY15E 31,920 2,394 1,392 11.0 19.8 10.7
FY16E 36,916 3,101 1,876 14.8 14.7 8.1
COOL & CLEAN
Find Spark research on Bloomberg (SPAK <go>), Thomson First Call, Reuters Knowledge and Factset
Date Mar 20, 2014
Market Data
SENSEX 21920
Nifty 6527
Bloomberg WHIRL IN
Shares o/s 127mn
Market Cap Rs. 27.8bn
52-wk High-Low Rs. 240-124
3m Avg. Daily Vol Rs. 21mn
Index member BSE 200
Latest shareholding (%)
Promoters 75.0
Institutions 13.1
Public 11.9
Vijayaraghavan Swaminathan
+91 44 4344 0022
Ravi Swaminathan
+91 44 4344 0058
Mid-Cap Idea
Poised to benefit from a recovery in white goods market Whirlpool India (WHIRL), a 75% subsidiary of Whirlpool Corporation (US), is a leading white goods players with strong
presence in the refrigerator and washing machine market in India. WHIRL with a market share of ~15% in these two products
is also present in air-conditioners, microwave oven and premium segment of small kitchen appliances. Given its strong
parentage (~100 year old brand globally), low market penetration for its key products (Refrigerators -19%, Washers – 7%) and
possible market share gains on the back of new product launches, we believe WHRIL is well poised to benefit from a recovery
in the white goods market. Recent announcement of increase in dearness allowance to government employees (5mn of
government employees to benefit, ~Rs. 20,000 per annum per person), lower inflation and seventh pay commission are the
key catalysts which could possibly drive volume growth for the industry, in our view.
Investment rationale
• New product launches to drive volume growth and market share gains – Weak macro-economic environment has led to muted
demand for both white goods industry and WHIRL (1.3% CAGR in FY11-FY13) over the past 2-3 years. WHRIL is launching 12 new
variants (40-50 SKUs) across various products over the next 2-3 months. These product launches are focused on mass markets with
an aim to gain market share. Based on our dealer interaction, we believe WHIRL can gain market share from the competitors
• Pick up in volumes to result in margin expansion – Low operating leverage on the back of muted volume growth over the past 2-3
years has led to EBITDA margin contracting from 10.9% in FY10 to 7.9% in FY13 inspite of gross margin remaining relatively stable.
Led by possible market share gain we expect WHIRL to improve volumes, which will in-turn lead to operating margin expansion
• Export market to supplement overall growth – Exports currently contribute ~8% of total revenue (FY13) with products exported to
Australia, Europe and SAARC countries. While demand environment in the developed countries has been subdued, strong growth
observed in Nepal, Bangladesh (50% of total exports growing at 50% y-o-y) and foray into new markets (Thailand, Philippines and
MENA region) with new products are expected to contribute to incremental growth
• Strong financials with debt free balance sheet and healthy return metrics– Healthy cash generation inspite of weak demand
environment, stable and low working capital requirement (~22 days) and higher return metrics are definite positives
• Threat from Samsung is a key concern – Samsung India, backed by its strong performance in its hand held mobile segment (Rs.
180bn and Rs. 22.1bn of FY13 revenue and EBIT respectively), has increased its focus in the white goods space. We believe any
aggressive strategy adopted by Samsung in pricing/distributor margins might impact WHIRL adversely
• Valuation & Outlook – WHIRL is trading at 19x one year forward P/E, above which it has traded for ~50% of the trading days in the
past 5 years. We believe volume growth pick-up driven by new product launches and the resultant improvement in operating margins
should result in a possible re-rating . Our target price of Rs. 281 is arrived based on 19x FY16E earnings.
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
Corporate Factsheet
Company Background Incorporated in 1960, Whirlpool India Ltd (part of Whirlpool Corporation, US) is a leading manufacturer of home appliances.
Whirlpool US has annual sales of USD 18.7bn and manufactures appliances for various uses, including fabric care, cooking,
refrigeration, dishwashing, garage organization and water filtration.
Presence It caters majorly to the Indian market and derives ~8% of its sales from exports which is spread across many countries.
Management depth Mr. Arvind Uppal – Chairman & Managing Director
Mr. Arvind Uppal is a B.Tech from IIT Delhi and is a post graduate in management from the Faculty of Management Studies,
Delhi. He has over 25 years of experience in Business Development, International Marketing and General Management. Prior
to joining Whirlpool he was with Nestle in India and overseas. He is a Director in two other Indian companies, i.e. Tuscan
Ventures Private Limited, Akzo Nobel India Limited.
Business WHIRL is primarily engaged in manufacturing and trading of refrigerators, washing machines, air conditioners, microwave
ovens and small appliances which caters to both domestic and international markets. They also provide services in the area of
product development, information technology, accounting and procurement services to Whirlpool Corporation, USA and other
group companies.
Corporate Structure As on March FY13, Whirlpool India does not have any subsidiary
Revenue Model Refrigerator (61% of FY13 Revenue), Washing machine (21% of FY13 Revenue), Air conditioners (7% of FY13 Revenue) and
others (10% of Revenue);
Capacity & Facilities Three manufacturing facilities – Pune, Faridabad and Pondicherry. Both refrigerator and washing machine are manufactured
while their other products are outsourced ; 3500 dealers covering 150 towns. In FY13, Whirlpool service academy was
inaugurated primarily to improve their service standards
Key Clientele Middle income population
Key Success Factors A diverse product range (Direct cool, Frost free refrigerators, ACE semi automatic washer, 360 degree bloom automatic
washer), constant production innovation, brand strength and expanding distribution network
Credit Rating Long Term: AA-, Short Term: A1+ (CRISIL)
Corporate Bankers Citibank, N.A., The Royal Bank of Scotland, HDFC Bank Limited
Auditors S. R. Batliboi & Co. LLP, Chartered Accountants
Company Factsheet
2
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
3
1960
•Whirlpool India is incorporated and commence operations (manufacture of washing machine)
1987
•Whirlpool and Sundaram Clayton enters into a JV to form TVS Whirlpool ltd
1995 •Acquires Kelvinator India to foray into refrigerators
1996 •Whirlpool Washing Machines and Kelvinator India Ltd. merged together to form Whirlpool of India
1998 •Launches range of non-CFC frost-free refrigerators
2000
•Expands product range by launching air conditioners and microwave ovens
2004 •Enters into a distribution tie up with Faber India
2006
•Opens call centres in B class towns & non-metro cities to facilitate easy consumer access
2008
•NDTV Profit Business and Leadership Award 2008 for 'The Best Consumer Durables Company'
2009
•New range of fully automatic top load and front load washing machines, including the high capacity models, under White Magic and Professional brands
2014
• In the process of launching new range of products across all key verticals – refrigerators, washing machines and air conditioners
Whirlpool India corporate timeline Refrigerators comprise major portion of the overall revenue
Source: Company, Spark Capital Research
Refrigerators 61%
Washing Machines
21%
Airconditioners 7%
Spares & accessories
5%
Other Products 4%
Microwave Ovens
2%
Product Mix (FY13 Gross Revenue : Rs. 34.3bn)
Sluggish revenue growth from FY10 due to market share losses
Source: Company, Spark Capital Research
-5%
0%
5%
10%
15%
20%
25%
30%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Gross Sales (Rs. mn) Gross Sales Growth (%) - RHS
Corporate timeline & Business Overview
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
4
Growth in refrigerator market has slowed over the past two years ...
Source: Industry, Spark Capital Research
Washing machine market has also witnessed similar trends ..
Source: Industry, Spark Capital Research
... on the back of slowing growth in disposable income and rising CPI
Source: CMIE, Spark Capital Research
0%
2%
4%
6%
8%
10%
12%
0%
5%
10%
15%
20%
25%
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Personal disposable Income - YoY Growth (%) CPI (%)
LG is the market leader in both refrigerators & washing machines
Source: Industry, Spark Capital Research
Whirlpool16%
Samsung17%
LG37%
Godrej12%
Others18%
FY13 Refrigerator market share (%) - Rs. 127bn
Industry Analysis: White goods market impacted by lackluster demand environment
-5%
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
120
140
FY08 FY09 FY10 FY11 FY12 FY13
Refrigerators Market Size (Rs. bn) YoY Growth (%) - RHS
-5%
0%
5%
10%
15%
20%
25%
0
10
20
30
40
50
60
FY08 FY09 FY10 FY11 FY12 FY13
Washing Machines Market Size (Rs. bn) YoY Growth (%) - RHS
Whirlpool14%
Samsung19%
LG31%
Godrej10%
IFB10%
Others16%
FY13 Washing machine market share (%) - Rs. 50bn
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
5
LG has grown at a faster pace (relative to peers) in the white goods
space ...
Source: Company, Ministry of Corporate Affairs, Spark Capital Research
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
FY10 FY11 FY12 FY13
Home appliance revenues (Rs. mn)
Whirlpool Samsung LG
... propelled by success of new product launches ...
Source: Company, Industry, Ministry of Corporate Affairs, Spark Capital Research
CompanyLaunch
PeriodProduct launched Impact
R evenue gro wth
C A GR fro m
launch
Samsung Dec'10
Launches 29 new refrigerators across
four different capacities under the Inspira
(Frost Free) or Pride (Direct Cool) rangeLow 4.0%
LG Mar'11 New range of 19 Direct Cool refrigerators High 11.2%
Whirlpool Mar'12Launches 160 models across six product
categoriesMedium 6.3%
Samsung Mar'12Launches new refrigerators and washing
machine modelsLow 3.0%
LG Mar'13Launches Power Cut Evercool
refrigeratorsHigh -
Whirlpool Mar'14
Expected to launch ~45 SKUs across key
products - Refrigerator, Washing Machine
and Air conditioners
- -
... which also got reflected in improving margins
Source: Company, Ministry of Corporate Affairs, Spark Capital Research
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
FY10 FY11 FY12 FY13
Home appliances segmental margin (%)
Whirlpool Samsung LG
• Growth in the white goods market has been muted over the past two
years on the back of falling growth in disposable income leading to weak
demand environment for refrigerators and washing machines. Subdued
replacement demand which constitutes ~30% of the overall sales has
dragged overall market growth
• Among the leading players in the refrigerators and washing machines
markets, LG with its strong success of products launched over the past
2-3 years including Evercool refrigerators has witnessed relatively better
growth compared to its peers. Margins for LG has also improved during
the same period
• Whilrlpool’s new product introduction in Mar’12 has led to 6.3% growth
in FY13 inspite of a subdued environment. With the company planning
to launch new products in the near term, we expect these launches to
drive volume growth going forward
Competition Analysis: LG has performed better in recent past, Whirlpool set to catch up
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
-
10,000
20,000
30,000
40,000
Refrigerator, two door, 200 to 350
lts, frost free
Refrigerator, one door, 200 lts and
below, Direct Cool
Washing Machine Prices - Top load,
Fully automatic, 6.1 to 7 kgs
Washing Machine Prices - Front
load, Fully automatic, 6.1 to
7 kgs
Avera
ge P
rice (
Rs.)
LG Samsung Whirlpool
6
Whirlpool is launching a new range of frost free refrigerators, twin tub washing machines and air-conditioners
Source: Company presentation, Spark Capital Research
Attractive pricing of products to give WHIRL edge over peers
Source: Compare India website, Spark Capital Research
• WHIRL is expected to launch 12 new products (~45-50 SKUs) across all
key sub-segments – refrigerators, washing machine, air conditioners
and kitchen appliances - by the end of FY14.
• Key products in the new launches include direct cool single door
refrigerators with frost free element, top load washing machine with front
load efficiency and dual exhaust fans air conditioners. At present, none
of the product range is available with its competitors
• The company is primarily targeting the ‘mid-economy’ segment and is
expected to price the products attractively (mass market) in an effort to
gain market share
• Propelled by the launch of these new products, we expect WHIRL to
growth at ~ 14% CAGR over the next two years – faster than the overall
market growth, which is expected to be ~10% CAGR during the same
period thereby gaining market share
Product Initiatives: New product launch to drive growth, product pricing gives an edge
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
7
Product exports have been broadly flat due to weakness in key markets
–Australia, Europe …
Source: Company, Spark Capital Research
1834 1705 1823 1575 1767 1714
344 542 621
714 745 708
0%
2%
4%
6%
8%
10%
12%
0
500
1000
1500
2000
2500
3000
FY08 FY09 FY10 FY11 FY12 FY13
Exports Products (Rs. mn) Exports - Service (Rs. mn) Exports (% of Total)
Whirlpool US has led to growth in service export revenues
Source: Company, Spark Capital Research
320 422 443
499 555 587
41 45
49 41
24
119
136
170 141 80
0
100
200
300
400
500
600
700
800
FY08 FY09 FY10 FY11 FY12 FY13
Service Exports (Rs. mn)
Whirlpool (US) Whirlpool (Europe) Whirlpool (Australia & Others)
.. but strong growth observed in SAARC countries should drive
exports
Country Commentary/Growth Activities
Nepal • >50% yoy growth observed
• Opened exclusive brand outlets
Bangladesh
• >50% yoy growth observed
• Signed up with new distributors, significantly expand retail
coverage
Sri Lanka • Strengthening market reach
Philippines • Planning to Launch Neo I-Chill Frost Free refrigerators
Thailand • Started operations with launch of Neo I-Chill Frost Free
Refrigerators
MENA Region • Expanding reach after success of Neo I-Chill Frost Free
Refrigerators in Dubai
Australia & Europe • Current market conditions remains subdued
Source: Company, Spark Capital Research
• Product exports has been flat over the past five years on the back of
muted demand from key markets – Australia and Europe. But strong
growth observed in neighboring countries (Nepal and Bangladesh) which
currently constitutes almost half of export turnover has sustained overall
export and is expected to increasingly contribute to overall growth
• Also, WHIRL is strengthening its reach in new markets - Philippines,
Thailand and MENA region by introducing new products (Neo I-Chill frost
free refrigerators).This is expected to add to incremental growth in
exports
• Competitors, LG and Samsung have also increased focus on the export
markets on the back of challenging environment in the domestic market
• We expect strong growth in WHIRL’s exports (~8% of FY13 revenue) to
mitigate the impact of weakness observed in the domestic market
Export Markets: Growth in SAARC countries, foray into new markets to drive exports
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
8
Strong growth in Samsung’s hand held phones and tablets divisions ...
Source: Ministry of Corporate Affairs, Spark Capital Research
... has led to exponential growth in the segment’s profitability
Source: Ministry of Corporate Affairs, Spark Capital Research
-5
0
5
10
15
20
25
30
FY10 FY11 FY12 FY13
EB
IT (
Rs.
bn
)
Samsung segment-wise EBIT (Rs. bn)
Hand Held Phones Audio Visual Information Technology Software Development and Export Home Appliances
Distributor/Dealer Comments
• Overall demand for white goods has been subdued. Samsung, backed by
robust growth in the mobiles segment has turned aggressive in the
washing machine and air conditioner segments - Viveks management
(Consumer durable retail chain)
• LG is the best in terms of after sales service for white goods among the top
three players. Samsung is better in term of advertisement and promotion of
products. Whirlpool’s products are fast selling and least expensive –
George Enterprise (Consumer Durable dealer)
• Washing machines and refrigerators have witnessed 10-15% yoy price
increase over the past 18 months and has impacted sales in an already
weak demand environment – LG exclusive brand showroom
• Samsung has company representatives present in major retail stores to
push the company’s products to walk-in customers resulting in better
customer conversion rate – Girias dealer (Consumer durable retail
chain)
• Among all segments, Samsung India has witnessed strongest growth in
its hand held mobile segment over past 3-4 years (Rs.42bn in FY10 to
Rs. 180bn in FY13) primarily driven by the success of its new product
launches in smart phones
• This had lead to the segment’s EBIT increasing from Rs. 1.6bn to Rs.
22bn during the same period, with the hand held mobile segment’s EBIT
currently constituting ~92% of the overall EBIT
• Our interaction with dealers and channel partners have indicated that
Samsung India is increasing its focus to grow their white goods segment
through aggressive sales and promotion schemes
• We believe Samsung India, driven by its strong financial performance in
the mobile segment might adversely impact WHIRL’s growth
0
40
80
120
160
200
FY10 FY11 FY12 FY13
Samsung Hand Held Phones division revenue (Rs. bn)
Revenue (Rs. bn)
Samsung’s strong performance in mobile division could play spoilsport
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
9
Product-wise revenue break-up
Source: Company, Spark Capital Research
0
10000
20000
30000
40000
FY08 FY09 FY10 FY11 FY12 FY13
Reven
ue
(R
s.
mn
)
Product-wise Revenue Break-up (Rs. mn)
Refrigerators Washing Machines Airconditioners Microwave Ovens Other Products Spares, accessories and service
Muted revenue growth has led to margin compression due to lack of
operating leverage ...
Source: Company, Spark Capital Research
Lack of operating leverage resulted in EBITDA margin contraction
Source: Company, Spark Capital Research
(% of net sales) FY08 FY09 FY10 FY11 FY12 FY13
Gross Margin (%) 33.8 35.8 38.6 37.1 36.4 37.4
Employee Costs (%) 7.8 7.9 7.0 7.1 8.0 8.8
Ad & Sales Promo (%) 4.9 4.5 4.8 4.8 3.3 3.1
Freight (%) 3.5 4.0 3.8 3.7 5.3 5.3
Admin & Others (%) 11.9 11.2 12.2 11.9 11.4 12.4
EBITDA Margin (%) 5.7 8.2 10.9 9.7 8.4 7.9
Royalty & Know-how payment to parent has been broadly stable
Source: Company, Spark Capital Research
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
-
50
100
150
200
250
300
350
400
FY08 FY09 FY10 FY11 FY12 FY13
Royalty (Rs. mn) Royalty as % of sales (RHS)
Financial Analysis: Lack of operating leverage has led to margin compression
5.7%
8.2%
10.9%
9.7%8.4% 7.9%
7.9%
9.9%
28.8%
21.9%
-1.6%4.3%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
FY08 FY09 FY10 FY11 FY12 FY13
EBITDA Margin (%) Revenue growth (%) - RHS
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
10
Capex have been for both capacity addition and new product
development
Source: Company, Spark Capital Research
224
340
663
1,053
915
0
200
400
600
800
1,000
1,200
FY09 FY10 FY11 FY12 FY13
Capex (Rs. mn)
Cash flows have been broadly robust ...
Source: Company, Spark Capital Research
1,839 1,881 2,053
2,170
1,440
1,151
579
922 858 687
0
500
1,000
1,500
2,000
2,500
FY09 FY10 FY11 FY12 FY13
Operating Cash flow (Rs. mn) Free cash flow (Rs. mn)
... With operating cash flow and EBITDA being similar
Source: Company, Spark Capital Research
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
500
1,000
1,500
2,000
2,500
3,000
FY08 FY09 FY10 FY11 FY12 FY13
EBITDA (Rs. mn) Operating Cash Flow (Rs. mn) OCF/EBITDA
Return metrics healthy inspite of muted growth
Source: Company, Spark Capital Research
29.6%
46.1%
42.1%
27.1%
23.1% 22.0%
41.1% 42.0%
26.6%
22.5%
0%
10%
20%
30%
40%
50%
FY09 FY10 FY11 FY12 FY13
RoE (%) RoCE(%)
Financial Analysis: Stable cash generation and healthy return metrics in slowdown period
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
11
Going by the history, revenue growth momentum holds the key for re-rating
Trading at 19x FY15E, well below ~26x observed 1-2yrs ago
Source: Bloomberg, Spark Capital Research
18.0x
14.0x
10.0x
26.0x 22.0x
0
50
100
150
200
250
300
350
400
5 years one year forward multiple
P/E Multiple
range
No. of days
traded
% of of no. of
days
Cumulative
traded no. of
days
%of Cumulative
no. of days
12x 269 15% 269 15%
12 - 14x 70 4% 339 19%
14 - 16x 89 5% 428 25%
16 - 18x 186 11% 614 35%
18 - 20x 171 10% 785 45%
20 - 22x 220 13% 1005 58%
22 - 24x 255 15% 1260 72%
24 - 26x 229 13% 1489 86%
26 - 28x 160 9% 1649 95%
28 - 30x 92 5% 1741 100%
Total 1741 1741
Source: Bloomberg, Spark Capital Research
We expect multiples to expand as revenue growth picks up
Source: Company, Bloomberg, Spark Capital Research
-5%
0%
5%
10%
15%
20%
25%
10
12
14
16
18
20
22
24
26
28
FY11 FY12 FY13 FY14E FY15E FY16E
Average 1yr fwd P/E Revenue growth (%)
Valuation: Scope for re-rating when revenue momentum picks up
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
12
Environment, Social and Governance Analysis
Corporate Governance philosophy
• "We will pursue our business with honor, fairness, and respect for the
individual and the public at large . . . ever mindful that there is no right way
to do a wrong thing.“ – Jeff. M.Fettig, Chairman , Whirlpool Corporation
• In spite of the tough market conditions, the company and the management
have laid strong emphasis on its value transparency, integrity, honesty and
accountability in all transactions and relations
• The company’s disclosures always seek to attain best practices in
international corporate governance and endeavor to enhance long-term
shareholders value and respect minority rights in all our business decisions
Source: Company, Spark Capital Research
Board of Directors
Source: Company, Spark Capital Research
Name Position
Mr. Arvind Uppal Chairman & Managing Director
Mr. Anil Berera Whole Time Director
Mr. Vikas Singhal Whole Time Director
Mr. Sanjiv Verma Non-Executive & Independent
Director
Mr. Simon J. Scarff Non-Executive & Independent
Director
Mr. Anand Bhatia Non-Executive & Independent
Director
Green Initiatives & Environmental impact measures
• The company has taken various energy conservation measures across its
three manufacturing plants in Faridabad, Pune and Pondicherry and is
planning for further steps to be taken in the future to conserve energy
• Has invested in new platforms (Project Gen-Y) to introduce more energy
efficient refrigerators in Direct Cool range
• The company has started using environment friendly R-600a refrigerant in
refrigerators.
• The company has continued its focus to produce energy efficient products
and use of green gas at its Faridabad plant
Source: Company, Spark Capital Research
Other Observations
• Three out of the six board of directors are independent directors indicating
healthy levels of supervisory positions
• Top management’s total remuneration at Rs. 75.7mn in FY13 is 3.1% of
overall employee cost (Rs. 2.4bn for ~2500 employees) which we believe
is reasonable and fairly linked to the company’s performance
• Related party transactions: During FY13, WHIRL received Rs. 587mn
from its parent Whirlpool Corporation (U.S) as product technology service
fee. Further, Rs. 121mn was received from Whirlpool Europe and other
group companies
• As on FY13, a sum of Rs. 1.8bn (29% of FY13 net worth) stood as
contingent liabilities. This pertains to disputes with tax departments, LCs
and bank guarantees outstanding
Source: Company, Spark Capital Research
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
13
Financial Summary
Rs. mn FY13 FY14E FY15E FY16E FY13 FY14E FY15E FY16E
Profit & Loss Growth ratios
Revenues 27,727 28,429 31,920 36,916 Sales 4.3% 2.5% 12.3% 15.6%
EBITDA 2,188 2,018 2,394 3,101 EBITDA -1.9% -7.8% 18.6% 29.5%
Other Income 237 272 313 360 PAT 3.2% -9.8% 20.8% 34.7%
Depreciation 603 633 703 763 Margin ratios
EBIT 1,822 1,658 2,004 2,697 EBITDA 7.9% 7.1% 7.5% 8.4%
Interest 30 12 15 18 PAT 4.6% 4.1% 4.4% 5.1%
PBT 1,792 1,646 1,989 2,679 Performance ratios
PAT 1,278 1,152 1,392 1,876 RoE 23.1% 17.1% 17.7% 20.8%
Balance Sheet RoCE 22.5% 16.6% 17.3% 20.4%
Net Worth 6,175 7,327 8,395 9,614 RoA 11.3% 9.3% 10.9% 13.2%
Deferred Tax 248 248 248 248 Fixed asset turnover (x) 2.9 2.7 2.7 2.9
Total debt 0 0 0 0 Total asset turnover (x) 2.0 2.1 2.1 2.1
Total Networth and liabilities 6,423 7,575 8,643 9,862 Financial stability ratios
Gross Fixed assets 9,723 10,723 11,723 12,723 Net Debt to Equity (x) (0.3) (0.2) (0.2) (0.3)
Net f ixed assets 3,886 4,253 4,550 4,786 Current ratio (x) 1.3 1.5 1.6 1.6
CWIP 263 0 0 0 Inventory and debtor days 107 104 104 104
Investments 0 0 0 0 Creditor days 86 78 78 78
Inventories 5,223 5,608 6,297 7,282 Working capital days 22 26 26 26
Sundry Debtors 1,709 2,492 2,798 3,236 Interest cover (x) 60.7 138.2 133.6 149.9
Cash and bank balances 1,550 1,297 1,819 2,446 Valuation metrics
Loans and advances 1,217 0 0 0 Fully Diluted Shares (mn) 126.9 126.9 126.9 126.9
Current liabilities 7,425 6,075 6,821 7,889 Market cap (Rs.mn) 27,531 27,531 27,531 27,531
Net current assets 2,275 3,322 4,093 5,076 EPS (Rs.) 10.1 9.1 11.0 14.8
Total assets 6,423 7,575 8,643 9,862 P/E (x) 21.5 23.9 19.8 14.7
Cash Flows EV (Rs.mn) 25,980 26,233 25,711 25,084
Cash flow s from Operations 1,440 496 1,862 2,301 EV/ EBITDA (x) 11.9 13.0 10.7 8.1
Cash flow s from Investing (735) (737) (1,000) (1,000) BV/ share (Rs.) 48.7 57.8 66.2 75.8
Cash flow s from Financing 26 (12) (340) (674) Price to BV (x) 4.5 3.8 3.3 2.9
Abridged Financial Statements Key metrics
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
14
Absolute Rating Interpretation
Buy Stock expected to provide positive returns of >15% over a 1-year horizon
Add Stock expected to provide positive returns of >5% – <15% over a 1-year horizon
Reduce Stock expected to provide returns of <5% – -10% over a 1-year horizon
Sell Stock expected to fall >10% over a 1-year horizon
Recommendation History
Date CMP Target price Rating
Not Applicable
Spark Disclaimer
Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities. Spark Capital is registered with
SEBI as a Stock Broker and Category 1 Merchant Banker.
This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is
provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or
financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solely
for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject Spark Capital and/or its affiliates to any registration or licensing requirement within such jurisdiction.
The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this document may come are required to
inform themselves of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction
where such an offer or solicitation would be illegal.
Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital ,
its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the
securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company
referred to in this report.
This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through the independent analysis of Spark Capital. While we
would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory,
compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representatives
shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions or
actions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequential
including without limitation loss of revenue or profits that may arise from or in connection with the use of or reliance on this report.
Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital has
incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:
Whirlpool India CMP
Rs. 217
Target
Rs. 281
Rating
Buy
15
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research
analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.
Additional Disclaimer for US Institutional Investors
This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the Securities
Exchange Act of 1934, as amended) only by Decker & Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). Decker &
Co accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in the research material may do so through Decker & Co.
All responsibility for the distribution of this report by Decker & Co, LLC in the US shall be borne by Decker & Co, LLC. All resulting transactions by a US person or entity should be effected
through a registered broker-dealer in the US. This report is not directed at you if Spark Capital Advisors (India) Private Limited or Decker & Co, LLC is prohibited or restricted by any legislation
or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Decker & Co, LLC and Spark Capital Advisors (India) Private Limited is
permitted to provide research material concerning investment to you under relevant legislation and regulations;
Disclosure of interest statement Yes/No
Analyst ownership of the stock No
Group/directors ownership of the stock No
Broking relationship with the company covered No
Investment banking relationship with the company covered No