Whirlpool India hits 6-year low; stock dips 6% on brokerage downgrade

Jefferies has downgraded the household appliance maker to 'underperform' from 'hold', cutting the target price to Rs 1,125 from Rs 1,265.

Shares of Whirlpool of India hit over six-year low of Rs 1,186.85, as they slipped 6 per cent on the BSE in Tuesday's intra-day trade after Jefferies downgraded the household appliance maker to 'underperform' from 'hold', cutting the target price to Rs 1,125 from Rs 1,265. The stock hit its lowest level since September 2017.

Since February 20, in the past six trading days, the market price of Whirlpool India has declined 11 per cent after Whirpool Mauritius, the promoter group company, offloaded nearly 24 per cent stake in the company for Rs 3,881 crore to reduce debt. It sold 30.39 million shares at Rs 1,227 apiece. Following the share sale, the promoter shareholding in the company was to drop to about 51 per cent.

Among the buyers in the stake sale, were SBI Mutual Fund (bought Rs 1,168 crore), Nippon India MF (Rs 102 crore), Aditya Birla Sun Life MF (Rs 114 crore) and ICICI Prudential MF (Rs 83 crore). 

At 11:08 am; Whirlpool India was quoting 2.5 per cent lower at Rs 1,230.05, as compared to 0.15 per cent rise in the S&P BSE Sensex. With today’s decline, the stock has corrected 32 per cent from its 52-week high of Rs 1,733 touched on October 12, 2023.

Whirlpool India is a leading manufacturer of home appliances. It is primarily engaged in manufacturing and trading of Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens, built in and Small appliances and caters to both domestic and international markets. The Company also provides services in the area of product development and procurement services to Whirlpool Corporation, USA and other group Companies.

The competition in the consumer durable industry is intensifying as there are many new local and international entrants in the industry and the established competitors are also increasingly expanding beyond their existing manufacturing footprints.

“Our competitors with low-cost sources of supply, vertically integrated business models, have aggressively priced their products and/or introduced new products to increase market share and expand into new geographies. In addition, with growing emphasis on sustainability and technological innovation, consumers continually look for new product features that save time, effort, water and energy,” the company had said in its FY23 annual report.

Meanwhile, considering steep competitive pressures and growth rates of white goods and durables sector, Whirlpool India believes it has the potential to grow in high single digits. It also believes there is scope to reach high-single-digit profit before tax (PBT) margin going ahead. Its performance was impacted by steep competitive pressures, commodity inflation and covid over the past three years. It has built in market share gains in single-digit revenue growth guidance.

Analysts at ICICI Securities believe that the company’s performance in terms of market share and margins is near its bottom and that there is potential for revival led by aggressive investments. The brokerage in it's Q3 results review said they remain constructive on the stock.