Key-takeaways from Whirlpool Annual Report FY10

Theme of the Annual Report,

Taking a leap into the next growth curve

India is at an inflection point of sustained growth and so is Whirlpool. With a strong brand, well differentiated products and a healthy balance sheet, Whirlpool of India has embarked on a journey of accelerated growth. With the intention of doubling its business over the next 3-4 years, it has charted a 3-pronged business strategy.

  • Grow the core business
  • Extend the core business
  • Expand beyond the core

This business strategy will be supported both by heavy investments and channel strategy.

Channel Development:

  • Reaching out to tier 2, 3 & 4 towns

The immediate focus of Whirlpool is on 700+ towns in tier 2, 3 and 4 where it plans to expand its presence.

  • Expanding Modern Trade Footprint

Volume grew by almost 60% last year, vital for growing the premium range.

  • Enhancing Brand Experience

Increasing visibility and reach through exclusive outlets by trebling the number of brand shops from the current count of 35.

Home Appliance Industry comprising Refrigerators, Washing Machines, Microwaves and Air-conditioners grew by 15-20%. Our estimate of category growth is 15-20% for Refrigerators and Microwaves and 20-25% for Washing Machines and Air-conditioners.

Outlook and Opportunities:

Penetration of home appliance is still very low and the long term growth opportunity for this industry is very attractive. Out of every 100 consumers living in urban India, only 33 own a refrigerator and 13 a washing machine and these numbers are miniscule in rural areas. Penetration of air conditioners, microwaves and electrical water purifiers is even lower.

Within the home appliance industry, categories/segments that are expected to grow ahead of the industry average are washing machines, microwaves and air-conditioners.

My take : Whirlpool has a diversified portfolio of products leading with refrigerators. Market size should be huge but the competition is also intense. It is a debt-free company with a very good return ratios (ROE of 44% and ROCE of 49%) and at CMP of 300, it trades at 30x FY10 and 23x FY11 expected earnings which is neither cheap nor expensive. Company plans to invest Rs 4bn over next 3 years which indicates the growth prospects it foresees.


6 responses to “Key-takeaways from Whirlpool Annual Report FY10

  1. Can margins expand further? Operating efficiencies?Havent had a detailed look but seems interesting.

  2. deveshkayal

    Margins should remain stable. They have increased the product prices by 2-3% due to increase in input costs.

    I dont think there is scope for margin expansion on a sustainable basis for any consumer durables maker.

  3. But if one can predict such margin expansions,there is some easy money on the table.Case in point Hawkins.

  4. Good times in terms of margin expansion are behind us for most of the industries. I believe returns will now depend on earnings growth. PE re-rating is over. Though some small-caps could be exceptions.

  5. Manish Madnani

    Hi Devesh ,

    This is manish (Jaishrikrishna) from ted, nice to see ur blog, atlast have succeded in finding you. Keep up the good work.

    Warm Rgds,

  6. Pingback: Akash Prakash’s Amansa Capital Portfolio | Long & Short of Indian Equities

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