Whirlpool’s stock factors Q4 revenue growth adequately
PremiumWhirlpool’s shares have declined by about 15% from their 52-week highs seen in January on the NSE
Whirlpool of India Ltd’s March-quarter (Q4FY21) results have some bright spots. Standalone revenues jumped 31.5% year-on-year to ₹1,779 crore, higher than Bloomberg consensus estimates. This was led by a strong and broad-based double-digit volume growth.
To some extent, the favourable base of Q4FY20 helped. Even so, strong revenue growth in Q4FY21 has meant that revenue decline for FY21 was curtailed to just 1.5%.
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The scenario on the gross margin front though isn’t hunky dory. Gross margin contracted by 247 basis points y-o-y to 35.6% in Q4. One basis point is 0.01%. Note that this is the fourth continuous quarter of y-o-y drop in gross margin.
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“The noticeable impact on gross margins can be attributable to commodity inflation, delay in price hikes and unfavourable revenue mix," said Emkay Global Financial Services Ltd in a report on 15 June.
But it’s not as if the outlook is rosy going ahead.
“We believe margins might continue to be stressed for the next quarter as input cost headwinds remain and incremental import duties on AC compressors levied by the government come into effect," said analysts from Kotak Institutional Equities in a report on 15 June.
Nevertheless, Whirlpool did well on the Ebitda front with margin expanding by 54 basis points, helped by better operating leverage. Ebitda is earnings before interest, taxes, depreciation and amortization. The near-term path, of course, remains tough.
“Revenue growth in Q1FY22 will be impacted by the ongoing second covid wave-related disruption, and we expect recovery from Q2," point out Emkay’s analysts.
Note that the June quarter is a seasonally strong quarter for Whirlpool’s cooling products such as refrigerators.
Moreover, competition is a worry. “Competitive intensity across product categories, including refrigerators, washing machines and air conditioners, is on the rise," said the Kotak analysts.
To be sure, Whirlpool’s shares have declined by about 15% from their 52-week highs seen in January on the National Stock Exchange. But valuations are not particularly cheap. Currently, the stock trades at around 41 times estimated earnings for FY23, based on Bloomberg data.
Investors are likely to focus on revenue growth and gross margin recovery, going ahead.
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