22 November 2018

Whirlpool of India Stock Analysis

Whirlpool of India stock is one of the finest quality stocks on our watchlist. The stock ticks of on most of the fundamental parameters. It has also posted decent growth numbers over the last 3 and 5 years. But the stock is expensive. The industry in which it operates will benefit tremendously with the rise in per-capita GDP and higher consumer spending. The current GDP per capita is $ 1,963. Different studies peg the 2023 GDP per capita to be between $ 2,800 and $ 3,300.

Industry Details

The Indian appliance and consumer electronics market (ACE) was worth $31.48 Billion in 2017. Smartphones made up $17.66 Billion of this market. The growth rate for the ACE industry is pegged at 9% p.a. till FY23. The volume growth in the manufacturing of the white goods is as given below.
LG has a ~ 35% market share in refrigerators and washing machines. Samsung is the second biggest brand in the refrigerator and washing machine market. Whirlpool’s market share is estimated to be at ~ 18%. However, many brands in the past have fallen from their peaks in the electronics and consumer appliances market. Whirlpool’s strength lies in the economic segment where the refrigerator prices are below Rs 25,000. Since FY14, their push into the rural markets has helped grow revenues and profits.


  • 70% of the refrigerator market is “Direct Cool” while the remaining 30% is “Frost Free”
  • The estimated market size of the refrigerator industry is $3.02 Billion and it is expected to reach $5 Billion by FY23. The penetration in India is ~ 9%
  • The refrigerator market has grown faster than the consumer durables industry
  • Estimates say that 75% of the refrigerator demand comes from urban areas

Washing Machines

  • Washing Machines are perceived as a luxury
  • Urban areas make up the major chunk of the demand
The top 5 players enjoy more a combined market share of more than 75%. In air conditioners, the competition is intense and the market is fragmented.

Industry Trend

Till FY13, the white goods and home appliance companies were facing a tough economic environment due to high inflation, lower consumer spending and a lower margins. However post FY14, the growth figures, margins and ROCE improved for the entire industry.
Despite the hiccups of Demonetization and GST implementation, the consumer spending in India picked up. Moreover with better pricing power and lower raw material costs, the EBITDA margins of these companies has expanded.

Whirlpool of India Stock Analysis

  • Whirlpool’s revenues have grown in the 10% to 12% p.a. CAGR range over the last 5 years. The growth rate has picked up in the recent years
  • The raw material and input costs have reduced and thus the EBITDA margins have improved from 2.6% in FY14 to 12.7% in FY18
  • The company has demonstrated it’s ability to convert profits into cash and has been able to meet it’s capital expenditure from internal accruals
As per the latest results, the company’s revenues grew by ~ 8% in the 6 month period ended 30th September 2018. The EBITDA margin expanded due to lower raw material costs while higher other income pushed up the PAT margin.
Whirlpool of India derives it’s revenues from 4 segments. The share of refrigerators has come down. Meanwhile “other home appliances” has become 13% of the revenues.

Operating Efficiency

Whirlpool has maintained it’s operating efficiency by reducing it’s receivable days and maintaining it’s inventory turnover ratio. The company has a healthy current ratio of 1.75. It has cash reserves of Rs 983 Crores as on 30th September, 2018. However, one should note that Whirlpool of India stock doesn’t have a high dividend yield.
The company imports a major part of it’s raw materials. In FY18, the company imported Rs 1,157 Crore worth of raw materials and stock in trade. However, the exports amounted to just Rs 288.48 Crores. The company’s margin could be affected by any sharp depreciation in the value of Rupee. But till now, the company has demonstrated pricing power.

Whirlpool of India Stock Analysis

If we look at the valuations, Whirlpool of India stock is not cheap. It commands a premium valuation, just like other consumption theme companies.
PE Ratio: 45.19 (20th November, 2019). The expected growth rate of the earnings is 18% to 22% over the next four years. However, there is an underlying risk that a new entrant in the industry can reduce volumes of existing players. In our VIP Industries stock analysis we saw how Xiaomi’s effect on the luggage sector. Xiaomi, flushed with funds, is looking to enter into the home appliance space. Competitors like this are a big threat to incumbents.
The very news of new entrants in the industry could result in de-rating of the Whirlpool of India stock. However, there have been examples like Maruti too which have gained market share despite competition. On the upside, Whirlpool of India can benefit from a rising per-capita-GDP and higher GDP growth numbers. Also, when the GDP growth averaged > 8% between 2007-12, Whirlpool’s topline grew by 15% p.a. in that period.
Will you invest in Whirlpool of India stock? If yes, then how much portion of your portfolio will you allocate to Whirpool?

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