Whirlpool India has turned around after a series of hiccups. For 1HFY01, it has posted a net profit of Rs 192 m compared to a loss of Rs 72 m in 1HFY00. It has also planned to focus on microwaves and air conditioners market to create a separate niche for itself. How did it manage to make it?
When it entered into the Indian market it had two major issues on hand. It committed to set up a plant for global frost-free refrigerators at Rs 3.5 bn as a result of which Whirlpool had to make substantial investments. Simultaneously, it had to build its own brand too since the Kelvinator brand was slated to be passed on to Electrolux Kelvinator around the same time. Besides, it had to widen its distribution and increase the adspend, which are critical factors to push sales.
The company made rights issue, which helped it, fund its manufacturing facilities, repay high cost debt and build its brands. A successful positioning of it products ensured that Whirlpool got a top of the mind recall. This is reflective in the market share stats of the industry. For example, the market share has moved up from as low as 20% in FY98 to 29.3% in FY99 in refrigerator segment.
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Apart from its fully automatic washing machines, Whirlpool has launched semi-automatic machines (this enjoys the largest market among the washing machine category) recently, which is expected to boost its bottomline. The market share in washing machines, which currently is at 21%, is expected to go up to 24-25% with the launch of new variants. Moreover, as a part of its five-year plan to be the market leader, it has already launched air conditioners and microwaves in the market. With its increasing focus on exports market, it is expected to post better result in volume terms.
Needless to say that, the facet of the consumer durable industry has changed with the entry of Korean majors. Therefore, the realisations may come under extreme pressure in the future forcing Whirlpool to depend on higher volume growth.
The stock is currently trading at Rs 27.5 at a P/E multiple of 4.5x on the annualised 1QFY01 earnings
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