Whirlpool profit and revenue jumps in fourth quarter , should you hold or buy?

Source :Sify
Author :Finance Desk
Last Updated: Fri, Jun 18th, 2021, 14:59:04hrs
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Whirlpool-of-India

Mumbai: Consumer Durable brand Whirlpool of India on Tuesday announced a significant jump in revenues and profits for the quarter ending March 2021.

Compared to last quarter, revenue from operations was up 31.5% to Rs 1,779 crores while consolidated Profit after Tax (PAT) was up by 40.8% to Rs Rs 130.1 cr.

Arvind Uppal, Chairman at Whirlpool remained optimistic. He is quoted as saying, "Whirlpool has delivered a very strong quarter across all financial levers. Underlying growth momentum in the home appliances industry continues to be very healthy. Despite the headwinds due to the re‐emergence of COVID and inflationary trends, we remain optimistic about the longer term trends for our business."

Vishal Bhola, Managing Director, said, "It was a really strong end to the year with an acceleration in topline growth and profitability. The performance came on the back of strong and broad based double digit volume growth. All categories and geographies showed continued momentum which helped end the year with the business growing ahead of markets. We continue to be optimistic about our short and medium term prospects."

Whirlpool also announced a dividend of Rs 5 per equity share of face value of Rs 10 for the financial year 2020-21.

However, for the year 2020-21, Whirlpool's net profit is down by 30% to Rs 333.3 crore from Rs 476.3 crore in the previous year.

The company's operating revenue also was down at Rs 5,900 crore for the year ending 2021. In the last year it posted revenues of Rs 5,993 crore. 
Another major fear is the rise in cost of raw materials and total expenses which are likely to affect its lower sales.

Shares of Whirlpool gained by 7.22 percent to Rs 2,351.85 per share on the Bombay Stock Exchange. 1.10 lakh shares exchanged hands on Tuesday.

Brokerage Firm Emkay Securities in its latest report recommended a hold on the shares at Rs 2,370.

The analysts report read, "EBITDA beat by 13% despite multi-year low gross margins of 35.6%. The noticeable impact on GMs can be attributable to commodity inflation, delay in price hikes and unfavorable revenue mix."

"Whirlpool has maintained its market share in washing machines in FY21, while its share marginally improved in refrigerators. Price hikes and sustained demand recovery are critical for double-digit revenue growth."

"We have cut FY22/23 EPS estimates by 20%/6%, led by lower revenue growth in FY22, gross margin moderation and lower other income. Maintain Hold with a revised TP of Rs2,370 (45x FY23E EPS)," add analysts. 

Analysts at Yes Securities suggest that Whirlpool has managed to gain market shares in both refrigerator and washing machine categories. "Whirlpool saw strong growth in Q4 with all categories and geographies showing strong double-digit volume growth. Cost rationalization has resulted in EBITDA margin expansion despite sharp contraction in gross margins," they say.

"We expect FY21-23E Revenue/EBITDA/PAT CAGR of 16%/34%/46% on a favorable base and arrive at our PT of Rs2,794 valuing the company at 50x FY23 EPS," adds the analysis from Yes Securities.

Analysts at Motilal Oswal too offer a buy rating with an upside of 23 percent or a target price of Rs 2,900. MOST analysts find revenues 9 percent ahead of its estimate and 2 year CAGR at 15%. "Strong pent-up demand post the first lockdown enabled the company to end FY21 with broadly flat revenue. The management commentary suggests market share gains across all categories. Whirlpool has not resorted to
aggressive cost cuts like peers, thus leading to a 200bp EBITDA margin contraction in FY21 – a key reason for its underperformance v/s peers in the past one-year," adds the report.

"Whirlpool’s revenue growth performance doesn’t suggest any market share loss, providing us confidence as a strong White Goods franchise," it adds further.

"To account for the second COVID wave, we cut our FY22E/23E EPS by 20%/4% and TP to INR2,900 (from INR3,020 earlier) based on unchanged target FY23E P/E of 55x. Maintain Buy," concludes the report.

The results were announced on Tuesday, 15 June and the stock ended at levels of Rs 2,345. On Friday, the stock traded to Rs 2,199 per share. 

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