Whirlpool of India Ltd - Stellar Results; Growth Story Back as we Believed; Result Update Q2FY15 :: Edelweiss, link

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Whirlpool of India Ltd. recorded stellar set of numbers this quarter with revenues improving by 21% YoY at INR 745 cr. EBITDA for the quarter improved by a stupendous 98% with margins of 8.6%, reflecting visibility of  impending ‘good times’ for the consumer durables space.  PAT for the quarter stood at INR 64 cr, up a whopping 146% YoY. At the CMP of INR 493, the stock trades at a PE multiple of 34.6x FY15E and 28.3x FY16E. The Consumer Durable industry has witnessed a slow yet steady rise in demand over the past few months. We believe Whirlpool of India with its MNC parentage, strong brand recall and a wide distribution reach would be successful in garnering a major share of the growing consumer durables pie. We are confident of improved revenue visibility on the back of strong consumer demand as well as an increase in sales from high-value goods.

Bumper performance: Revenue surges up with a 21% growth

Whirlpool of India recorded an impressive performance this quarter, with revenues increasing by 21% YoY at INR 745 cr. The company had witnessed de-growth in H1FY14, but the adverse phase got broken starting H2FY14  followed by Q1FY15 numbers that showed that the company was starting to experience good times again. Q2FY15 has bettered the growth trend witnessed in Q1FY15. The company’s revenue growth has been averaging 6.8% over the past 10 quarters. Growth in revenues this quarter can be attributed to an extended summer and spurt in festive season sales. A prolonged summer due to delayed southwest monsoon positively impacted the air-conditioning segment of the consumer durables industry this quarter. We are confident of improved revenue visibility on the back of a strong Diwali season as well as an increase in sales of high-value goods.

EBITDA grows by a massive 98%; Margins gain 334bps YoY

Whirlpool of India’s EBITDA increased by 98% to INR 64 cr this quarter while EBITDA margins expanded by 334bps. This growth was supported by an improvement in gross margins by 131bps. The improvement in margins was aided by increased sale of high-value goods. We continue to believe that margins will improve further going forward. PAT recorded a growth of a whopping 146% at INR 41 cr.

Discretionary spend to improve aided by steady rise in consumer demand

The Consumer Durable industry has been recovering slowly over the past few months. In addition, the October heat (second summer) around Diwali period in the western and southern India could provide further boost to the consumer durables industry. The company’s revenue growth had been under pressure (down for 12 straight quarters with an average of -1.3%) which has been arrested by four successive quarters of good growth since Q3FY14. Although we are confident about a revival in the domestic consumer sentiment, the sustainability of the same hinges on a steady improvement in India’s macro-economic impulses.

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