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Whirlpool pdf

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Whirlpool pdf

  1. 1. - 1 - INDUSTRY ANALYSIS OF HOME APPLIANCE SECTOR IN INDIA AND EQUITY ANALYSIS ON WHIRLPOOL OF INDIA LIMITED
  2. 2. - 2 - AUTHORIZATION To, The Director IBS Respected Sir, I the undersigned hereby declare that Industry analysis on Home Appliance Sector and Equity research on Whirlpool of India has been done by me in the academic year 2014. This research has been done under the guidance and supervision of Prof. Satyaki Ray, IBS Kolkata and Company guide, Mr. Ajay Jaiswal in total fulfillment of the requirements of the Post Graduate Program in Management (PGPM) at IBS, Bangalore. I declare that this project is the result of my own effort and has not been submitted to any other institution for the award of any degree or excellence. Date: 30/05/2014 Rahul Chitlangia Kolkata 13BSP0609
  3. 3. - 3 - ACKNOWLEDGEMENT I am greatly thankful to Mr. B.L Mittal Chairman of Microsec Ltd for inculcating in me the virtue of wisdom and hard work for MBA in general and life in particular. I would like to express my gratitude to Prof. Satyaki Ray for providing his valuable time & Mr. Ajay Jaiswal for providing challenging platform in order to sharpen my thought process and teaching me the concept of detailing. Lastly, I would like to thank ALMIGHTY, my grandmother Late Jetha Devi Chitlangia and my parents for their support.
  4. 4. - 4 - INDEX SR.NO PARTICULARS PAGE NO. 1. Executive summary 6 2. Consumer Durables – An overview 7-9 3. Key drivers towards the growth of the sector 10-13 4. Whirlpool Incorporation – A brief overview 14-20 5. Whirlpool and its global positioning 21-23 6. Whirlpool of India Ltd.- A brief overview 24-31 7. Peer Analysis 32-39 8. Valuation 40-48
  5. 5. - 5 - EXECUTIVE SUMMARY TITLE: Industry analysis on home appliance sector and Equity analysis of Whirlpool of India Ltd. OBJECTVE: The objective is to understand the home appliance sector giving primary focus to Whirlpool of India Ltd and then analysing its financials so as to find out the valuation of shares in order to recommend whether to buy or not and to find out whether the shares are overpriced or under priced. SCHDULE:  Week 1 : Study of Indian Home Appliances and Consumer Durable Sector.  Week 2 : Study of sector with respect to Global Markets.  Week 3 : Study Whirlpool Inc and its Poisoning in USA and India.  Week 4 : Study Whirlpool India Ltd  Week 5 : Preparation and Submission of Interim Report.  Week 6 : Study of the existing product line, New Products launched in the past two years and Products Scheduled to be launches in the next two years.  Week 7 : Study financial for the past 5 years so as to find out the change in Sales, Expenditure, Profits etc and the reason behind it.  Week 8 : Analyzing the stock trend of Whirlpool India.  Week 9 : Peer Analysis.  Week 10 : Valuation of shares and Recommendation for Whirlpool India.  Week 11 : Formulation of Final Report.  Week 12 : Preparation and Presentation. MEHTODOLOGY: I have been assigned the scope of wore and detailed schedule stated above which have to be followed strictly. The daily work has to be submitted to a junior Analyst who guides me on the daily work & then a weekly presentation has to be made to Mr Ajay Jaiswal Company guide.
  6. 6. - 6 - INDIAN CONSUMER DURABLE SECTOR The consumer durables market is divided into two segments – Consumer electronics and Consumer appliances (which includes Refrigerator, Air conditioner, Micro oven, Washing machine). In the initial years, the sector relied greatly on media and advertising for consumer penetration. Accessibility to high- end products was, however, low till mid 2000s. Last few years has seen high end and aspirational products like air conditioners and High Definition TVs gained stronghold in the market. The share of revenue from consumer durable sector in India is increasing due to government spending towards infrastructure and rural electrification programme. In 1992 the Indian market first began to open up post liberalisation. The penetration level of refrigerator was 18%, Washing machine was 6%, Air conditioners was less than 6% and Microwave oven was less than 1% translating a potential market for new customers and building respect of this sector among the others. Since then the entry of global players like LG, Samsung, Whirlpool and others started. Share of Consumer durable market in India: 35% 65% Market Share Rural Urban E-commerce is the fastest emerging business nowadays and currently the industry is worth $10 billion. According to a report by Google maximum online buying is in the hands of consumer durables which accounts to 34% of the total market. While 50% of the E-commerce sale happen in non metro city depicting the acceptance of E-commerce web city’s in tier 3 and 4 cities.
  7. 7. - 7 - The Industry Size of consumer durables in India stands at 350 billion (as on 2012). The sector is marked by stiff competition between the players due to launch of new models, discounts and schemes. The top 5 states in India in this sector (revenue wise) are: 1. Maharashtra 2. West Bengal 3. Utter Pradesh 4. Kerala 5. Gujarat The market share of MNC’s is 65%.The primary target of the MNC’s is the lucrative middle class because products like Air conditioner, Washing machine and Microven are no longer considered as luxury item. Source : Euromonitor India Consumer Appliance Report 2013, http://www.adlittle.com/downloads/tx_adlreports/Consumer_appliances_report.pdf 31% 10% 6.80% 5% 0% 10% 20% 30% 40% Refregerator Washing Machine Air condioners Micro wave Penetration level of Consumer Durables
  8. 8. - 8 - WHITE GOODS SECTOR Air Conditioners: The Indian Air Conditioners market accounts to sale of 3.6 million units in 2013. Air Conditioners have a market penetration of 6.8% including window and split Air Conditioners. The segment has 13% market share in consumer appliance segment. The room Air Conditioners represents 50%of the total market and other 50% comprises of central and specialist Air Conditioners The room Air Conditioners is further divided into sub segment. On one hand residential segment which constitutes a majority 60% market Share and commercial segment constitutes a minority of 40%. Microwave Oven Due to convenience of mobility and ease of operations freestanding microwave oven continue to dominate the Indian markets. 89% 72% 53% 50% 8% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Household penetration of Air Condioners 4.8 5.8 7 8.6 10.6 13.3 15.5 0 5 10 15 20 2007 2008 2009 2010 2011 2012 2013 Market Size of Microven (in INR Billion)
  9. 9. - 9 - Refrigerator The refrigerator sales stood at 14 million units in 2013.this segment makes up 18% of consumer appliance market. The market share of frost free and direct cool are 76.4% and 23.7%. Fridges with capacity range of 143-340 litters dominate the market representing 74% of the total sales volume. 28.3 33.9 41.3 48.6 57.1 67.4 74.2 0 20 40 60 80 2007 2008 2009 2010 2011 2012 2013 Market Size of Refrigarators (In INR Billion) Washing Machine It is the second largest contributor to consumer appliance sector. In 2013 the sales of washing machine in India was 7.5 Million units. The major chunk of growth is seen because of household replacing the semi automatic machine with fully automatic machine. 6-9.9 Kg is the most popular category in India with 72.2% share. 23.6 29.4 36.9 47.3 58.5 73.1 87.4 0 20 40 60 80 100 2007 2008 2009 2010 2011 2012 2013 Market Size of Washing Machine (in INR Billion) Source : http://www.adlittle.com/downloads/tx_adlreports/Consumer_appliances_report.pdf
  10. 10. - 10 - GROWTH DRIVERS OF THE SECTOR Increase in organized retail According to Aranca research report on Winning in Indiasretail sector currently India constitutes only 8% of organized retail and remaining 92% is left unorganized organised but the organised reatil is expected to grow to 20% by 2020. Growth in various reatil formats are shoen below: Source: http://www.ibef.org/download/Retail-March-2014.pdf Favourable demographics: According to CIA world fact book the age structure of India are as follows 0-14 years- 28.9% 15-24years-18.2% 24-54 years-40.4% 55-64 years-6.9% 65& above – 5.7% This shows that approximately 68% of the total population is in working class category which would certainly drive growth in the sector because consumer durables are emerging as a necessity rather than a luxury. So as India’s major population is under working class they would fulfil the demands of the necessary consumer durables leading to show a boom in the sector. With this favourable dynamics India is one among the largest consumer markets in the world. Source: http://www.indexmundi.com/india/demographics_profile.html
  11. 11. - 11 - Consumption Expenditure According to BCG India consumer survey 2010 the expenditure on consumer durables is between 4- 5% of the total consumption irrespective of the diversity of income. This shows the potential of the sector & its long term growth opportunity Source: The Marketing White book. E-commerce- Apart from tradional & organised retail, E-commerce is emerging retail format because the consumer gets the option of comparing and buying from the 24 hour open online retail store. Consumer durables accounted for 7.8% of the total 47349 crore E-commerce market in 2012. Source:http://yourstory.com//wp-content/uploads/2013/05/Digital-Commerce-Report_2013.pdf Increasing Urbanization Easy financing schemes
  12. 12. - 12 - Financing schemes It enable customers, especially those with lower income levels, to use future income streams to buy consumer products upfront and pay in installments over a period. Consumer durable goods purchased under financing schemes are shown below: Source:http://www.thehindu.com/business/consumer-durable-financing-interestfree-schemes-gain- popularity/article4253297.ece Source:http://www.thehindu.com/business/consumer-durable-financing-interestfree-schemes-gain- popularity/article4253297.ec
  13. 13. - 13 - More than 85% of growth is expected from Asia Pacific. www.mckinsey.com
  14. 14. - 14 - WHIRLPOOL INCORPORATION Brothers Fred and Lou Upton and their uncle, Emory Upton, founded the Upton Machine Company, manufacturer of electric motor-driven washing machines, in 1911 in St. Joseph, Michigan. Sears, Roebuck and Co. began buying their products five years later, and by 1925 the company was supplying all of Sears' washers. The Uptons combined their company with the Nineteen Hundred Washer Company in 1929 to form the Nineteen Hundred Corporation, the world's largest washing machine company. Sears and Nineteen Hundred prospered during the Great Depression and during WWII Nineteen Hundred's factories produced war materials. In 1948 it began selling its first automatic washing machine (introduced a year earlier) under the Whirlpool brand. In 1950 the company changed its name to Whirlpool following the success of the product and introduced its first automatic dryer. During the 1950s and 1960s, Whirlpool became a full-line appliance manufacturer while continuing as Sears' principal Kenmore appliance supplier. In 1955 the company bought Seeger Refrigerator Company and the stove and air-conditioning interests of RCA. Three years later it made its first investment in Multibras EletrodomÚsticos, an appliance maker in Brazil. (It has increased that investment over the years.) Other purchases included the gas refrigeration and ice-maker manufacturing facilities of Servel (1958); a majority interest in Heil-Quaker, makers of central heaters and space heaters (1964); Sears' major television set supplier, Warwick Electronics (1966); and 33% of Canadian appliance maker John Inglis Company (1969). It made a deal with Sony in 1973 for the distribution of Whirlpool-brand products in Japan. Whirlpool sold its TV manufacturing business to SANYO of Japan three years later. Institutio nal 91% Others, 9% Currentmarketprice $150 $160 $107.8 $11.63 Share holdingpattern MarketData 52Weekhigh 52weeklow Marketcap(billion) WhirlpoolCorp WHR WHR:US WHR.N 77Million $1 1.82 Consumer Durables Stock Scan Script Id Script Code(NYSE) Bloomberg Ticker Reuters Ticker Outstanding Share Face Value Beta Industry Meaningbehindthe Logo The ringencerclingthe logodenotesthe commitmenttowardsquality
  15. 15. - 15 - Between 1981 and 1991, despite a static US market, Whirlpool's sales tripled to almost $6.6 billion. In 1986 the firm bought top-end appliance manufacturer KitchenAid (from Dart and Kraft) and 65% of Italian cooling compressor manufacturer Aspera. Also that year it sold its Heil-Quaker central heating business. David Whitwam was appointed CEO in 1987. Whirlpool took over total ownership of Inglis in 1990. The company formed Whirlpool Europe, a joint venture with Philips Electronics, in 1989; in 1991 it bought out Philips. Two years later Whirlpool took control of appliance marketer SAGAD of Argentina and entered a joint venture with Slovakia's Tatramat (which it bought out in 1994). Whirlpool acquired control of Kelvinator of India in 1994 and formed a joint venture in China with Shenzhen Petrochemical Holdings in 1995 to produce air conditioners. The following year Whirlpool merged its Whirlpool Washing Machines and Kelvinator of India companies to form Whirlpool of India. The company's European division plunged into the red when competition and a recession kept consumers away from its higher-priced appliances. In 1997Whirlpool initiated a restructuring (due to losses from its foreign operations) that included plant closures and substantial layoffs (as much as 10% of its workforce). The next year Whirlpool sold its appliance financing subsidiary to Transamerica. The company also began using a new, more efficient product development model in 1998, similar to one used in the auto industry. In 2000 Whirlpool launched the Cielo Bath line of jetted tubs, and in 2001 it introduced the Calypso dishwasher and the Duet washer and dryer. Another global restructuring plan swept through the company in 2000, resulting in significant pretax charges ($373 million, incurred in 2001 and 2002) and the elimination of about 6,000 employees by October 2003. In February 2002 Whirlpool bought the remaining 51% of Vitromatic it didn't already own. (Vitromatic -- the second-largest appliance manufacturer in Mexico -- is now called Whirlpool Mexico.) In March the company purchased 95% of Polar, Poland's second-largest appliance maker. Whirlpool introduced Gladiator GarageWorks (modular storage systems for the garage) and Polara (the first electric range with cooking and refrigeration capabilities) in 2002. Whirlpool acquired Maytag in early 2006 for about $1.9 billion. The deal added several top brands to its already bulging portfolio, including Admiral, Amana, Jenn-Air, Magic Chef, and of course, the eponymous Maytag. Once the dust settled, Whirlpool sold several businesses, including Dixie-Narco, the Amana commercial business, its Hoover unit to Techtronic Industries, and its Jade unit to Middleby Corporation. Buying Maytag also spurred Whirlpool to streamline operations and purge staff. In 2006 it laid off some 4,500 employees, consolidated duplicate functions related to administration and manufacturing, and shuttered some offices, including a Maytag research and development center based in Newton, Illinois. Whirlpool shuttered Maytag's Iowa-based administrative offices and moved them to Michigan and other locations. The company cut 700 jobs at several Tennessee plants the following year. In 2007 Whirlpool acquired a minority stake in Elica Group in its effort to extend its reach into the global
  16. 16. - 16 - air ventilation market. The company formed a 50-50 joint venture in 2008 with China's Hisense-Kelon Electrical Holdings to make and sell home appliances there. In June 2010 Whirlpool closed its refrigerator factory in Evansville, Indiana; some 1,100 US jobs were lost as a result of the move. The Upton Family believed "there is no right way to do a wrong thing" which still exists in the Whirlpool roof leading to foundation of a 100 year old company. Whirlpool contributes to building unmatched levels of loyalty through lifelong relationships with its customers. Focused on embedding innovation as a core competency, Whirlpool Corporation has made a long-standing investment to build this competency. This investment includes redesigning business processes, training thousands of employees, building an innovation management system and changing the culture of the company The Whirlpool brand is the world’s no 1 Global Appliance Brand. Major customers of Whirlpool include retailers Lowe's, Home Depot, Sears, and Best Buy. Operations Whirlpool organizes its business segments by product line: Laundry Appliances, Refrigerators and Freezers, Cooking Appliances, and Other. To this end, net sales generated by each of these segments are well-distributed. North America accounts for more than half of its sales. Geographic Reach Whirlpool's largest markets are North America and Latin America. In North America, it sells some products to other manufacturers, distributors, and retailers for resale in North America under those manufacturers' and retailers' brand names. Whirlpool also boasts a significant presence in Europe and India. In 2012 Whirlpool opened a new $200 million manufacturing plant in Cleveland, Tennessee. The 1 million-sq.-ft. facility, which is the world's largest premium cooking plant, produces cooking products, including ranges, ovens, and cook tops. Previously, the company reopened a 500,000-sq.-ft. factory in Ottawa, Ohio, that it had acquired from defunct Canadian appliance maker W.C. Wood. Whirlpool also sells home appliances in China through a strategic alliance with Suning Appliance Co., Ltd. Financial Performance Thanks to the unfavorable impact of foreign currency and lower unit shipments, Whirlpool logged a 2% revenue decrease in fiscal 2012 as compared to 2011. These declines were not offset, however, by favorable pricing and product mix. During the same reporting period, the company generated 48% of its sales from outside North America, including 27% in Latin America, 16% in EMEA, and 5% in Asia. Revenue in these three regions caused declines for Whirlpool due to the impact of unfavorable foreign currency. Profits rose nearly 3% in 2012 vs. 2011 as a result of the company's aggressive 2011 initiative to reduce costs and improve productivity. Whirlpool was further boosted by a $133 million income tax benefit it received during 2012. Strategy The company is looking to improve its operating margins and earnings by implementing cost-based price increases, initiating cost reduction efforts, and making productivity improvements. The company shuttered its refrigeration manufacturing facility in Fort Smith, Arkansas, in mid-2012. In Germany, Whirlpool relocated its dishwasher production facility to lower-cost Poland in 2012. These two closures are expected to result in
  17. 17. - 17 - $400 million in annual cost savings by the end of 2013. At the same time, these cost savings are intended to give the company some flexibility as itmakes continued investments in new product innovation. Capital expenditures for R&D related to new product innovation and improvement of existing products are now holding steady after a few years of incremental increases, reaching approximately $553 million in 2012, compared to $578 million in 2011, $532 million in 2010, and $500 million in 2009. Whirlpool is looking for longer-term growth to come from certain emerging markets -- China and India in particular. In 2012 it entered into a strategic alliance with China's Suning Appliance Co. to sell home appliances there. As part of the agreement, Whirlpool enjoys access to some of China's smaller, fast-growing cities through Suning's national distribution network of 1,700 retail outlets. In 2013 it's also buyin Sanyo Electric's 29% stake in joint venture Hefei Rongshida Sanyo Electric Co.Ltd., based in Hefei, China. The move makes Whirlpool a 51% shareholder and further strengthens its presence in sought-after China. Sales and Marketing Whirlpool counts several big-name customers among its list of clients. It serves Meritage Homes, Lowe's, Sears, Home Depot, Best Buy, Casas Bahia, IKEA, and Alno. In North America, the company sells products to other manufacturers, distributors, and retailers for resale under those manufacturers' and retailers' brand names.
  18. 18. - 18 - Source: Bloomberg, Hoovers Inc Source: www.whirlpool.com BRAND PORTFOLIO OF WHIRLPOOL CORPORATION
  19. 19. - 19 - WHIRLPOOL & ITS GLOBAL PROSPECTI
  20. 20. - 20 - WHIRLPOOL & ITS GLOBAL POSITIONING In the late 1980’s Whirlpool began a series of acquisitions that gave the company the scale and resources to participate in global markets. In the process, it established new relationships with millions of customers globally. Whirlpool's global initiative focused on establishing its presence in North America, Latin America, Europe, and Asia. Whirlpool acquired the appliance business of Philips N.V., which gave the company a strong European operations base. Whirlpool expanded its long-time involvement in the Latin America market and established a presence in Mexico as an appliance joint venture partner. In order to cater to the needs of different markets, Innovation and new product development became the primary focus of the company. Thus, to serve a huge customer band the company decided to Rethink, Rework and Redesign so as to recognize the company into business units to create a more responsive environment to deal with the competitive dynamics of the global Industry. Whirlpool had success in refocusing a number of its key functions to the global approach. Procurement was the first function to go global, followed by technology and product development. The two functions led to significant savings. More important, the global focus has helped reduce the number of regional manufacturing platforms worldwide. The work of these two functions, combined with the company's manufacturing footprints in each region, has led to the development of truly global platforms - products that share common parts and technologies, but offer unique and innovative features and designs that appeal to regional consumer preferences. Procurement's Prerequisite: Procurement became the first function to be structured as a truly global organization. Because of the scale of operations Whirlpool became a very attractive customer for suppliers. A partnership with Whirlpool gave the suppliers an opportunity to sell globally and also gave them efficiencies within their operations. They don't have to design for different places in the world. The suppliers contacted with Whirlpool to serve all of Whirlpool’s global needs. This gave whirlpool an access to the best technology and to the best people globally. They obtained savings as a global player, as opposed to a company that had four separate
  21. 21. - 21 - businesses that come at a supplier in four different ways. Whirlpool's global procurement approach complements the global development process. They purposely placed procurement within the Corporate Technology Organization for two reasons:  First, to marry procurement with technology so that they could obtain value at the front end of design  Second, to operate as a global unit so as to drive global design from region to region, category to category, commodity to commodity.
  22. 22. - 22 - PRODUCT DEVELOPMENT The global product development structure and process allowed Whirlpool to rapidly migrate innovative consumer solutions from one part of the world to another. For example, the units in Brazil manufacture refrigerators with innovative features and designs that appeal to consumers worldwide. The region exported these refrigerators to Europe Before the globalization of product development took place there were multiple platforms in each product category, little feature leverage, multiple technologies with wide performance variations, significant technical resources to keep all of these platforms going, and long and costly product development. Today they manage 60 percent of the commodities globally with fewer platforms. Global product development cuts down the engineering costs considerably leading to consumer benefit. The goal in global product development was to evolve quickly from regional platforms to a global platform, while ensuring that they meet the unique set of needs of consumers in all the diverse markets they serve. Through a transfer of technology and knowledge around the globe - the product reached the marketplace faster. Source: www.geplcapital.com
  23. 23. - 23 - WHIRLPOOL OF INDIA LIMITED WIL was incorporated in 1960 by J R Desai in collaboration with Kelvinator International Corporation, USA. The company entered into a tie-up with Whirlpool Corporation USA whereby Whirlpool contracted to purchase from White Consolidated Industries Inc, USA. Also, Expo Machinery Ltd, a wholly owned subsidiary merged with the company. Whirlpool Washing Machines Ltd merged with the Kelvinator India Ltd and the company changed their name from Kelvinator of India Ltd to Whirlpool of India Ltd. Whirlpool of India Ltd (WIL) is an 82.3% subsidiary of Whirlpool Inc, US. In the year 2000, the company expanded their product range by launching Air conditioners and Microwave Ovens for the first time. WIL has its main plant at Faridabad in Haryana - to manufacture refrigerators and freezers. The washing machine unit is located at Pondicherry. In 1998, the company established yet another refrigeration plant at Ranjangaon near Pune. The main product offerings of Whirlpool are Refrigerators and Washing Machines. ACs and Microwaves are the two other products which form the basket of offerings from Whirlpool to the Indian market. WIL's export business has an excellent volume. It is the largest exporter of home appliances from India. The 4 main pillars of Whirlpool are communication, product, retail and service. It has been a pioneer in identifying innovations which are of operational excellence and lead to cost reduction and at the same time offer better quality. The offering of Whirlpool to the Indian market is its 6th Sense “Frost Control”: Refrigerators which have a unique property of having Frost Free features in a Direct Cool Refrigerator. This was a revolution in the Indian Market. The company exports their product to Russia and East European countries and exports small appliances to the USA. Today, Whirlpool is the most recognized brand in home appliances in India and holds a market share of over 25%.The brand ambassador of WHIL is Kajol and Ajay devgan. Source: ACE Equity Current market price 232 244 141 2842 Whirlpool of India Ltd WHIRLPOOL Script Code(BSE) 500238 WHIRL IN WHR.BO 126.87 Crore 10 0.91 Consumer Durables Bloomberg Ticker Reuters Ticker Share Capital (INR) Face Value(INR) Beta vs Sensex Industry Stock Scan Script Id Script Code(NSE) Market Data(INR) 52 Week high 52 week low Market cap (Cr) Share holding pattern Forigen promot ers, 75% FIIs, 7.01% DIIs, 5.45% Others, 12.54%
  24. 24. - 24 - PRODUCT LINE OF WHIRLPOOL OF INDIA LIMITED 1. Refrigerator 2. Washing machine 3. Air conditioners 4. Microwave Oven 5. Water Purifiers 6. Inverter 7. Induction Cook top CONTRIBUTION OF PRODUCTS TOWARS REVENUE 62% 21% 7% 10% Break up of Revenue Refrigarator Washing Machine Air condioners Others Source: Annual Report
  25. 25. - 25 - BUSINEES INSIGHT Whirlpool India Limited is revamping its product range with the highest ever launches in a year under implementation in Financial Year 2014. New products host unique features better exterior design and colours. WHIRL is reducing the revamp product life cycle (earlier a model used to be revamped every 3 years which has now been compressed to 1.5 years). It has also occurred an incremental expenditure of INR 400 million to upgrade the manufacturing capacity to cater to the new launches. The company expects to have dominance in Refrigerator and Washing Machine to continue in near term. While Air conditioners, Water Purifiers and Microwave Oven, which together accounts for 10% of the total revenue are future growth drivers. Whirlpool India Limited has revamped its branding strategy to communicate an International appeal. DISTRIBUTORS INITIATIVE STRUCTURE WHIRL has a strong distribution presence with a network of 3500 dealers across 150 towns. In line with mass market focus to increase its presence, WHIRL plans to penetrate into tier-2, 3 and 4 towns so as to increase the customer band. It in reworking on the distributor structure so as to provide trade margin’s in alignment with the other peers. It has hired Boston Consulting Group to restructure its distribution model which will be fully operative by the end of FY14. IMPACT OF RBI’S NORMS ON DURABLE FINANCING WHIRL’s revenue will not be much impacted by RBI’s new norms on consumer durable financing, which mandates to show true interest rates instead of specifying 0% interest rate. WHIRL sales through consumer finance route are only 7%, creating a very minimal impact.
  26. 26. - 26 - PRODUCT LINE OF WHIRLPOOL OF INDIA LIMITED Refrigerator  Single Door Refrigerator - MRP Ranging from 12150 -20875  Double door Refrigerator - MRP Ranging from 22050-57850  Multi door Refrigerator - MRP Ranging from 26625-55125  French Door Refrigerator - MRP 150000 Washing Machine  Fully Automatic(Top Load) - MRP Ranging from17250-24850  Fully Automatic(Front Load) - MRP Ranging from 25000-33500  Fully Automatic 360 - MRP Ranging from 28500-30100  Semi Automatic - MRP Ranging from 9500-14500 Air Conditioners  Window AC - MRP Ranging from 19000-33500  Split AC - MRP Ranging from 58800-340000 Microwave Oven  Crisp Range - MRP Ranging from 10290-19290  Magicook 1-2-3 - MRP 8490  Magicook Range - MRP Ranging from 5490-13890 Water Purifier  RO Purifier - MRP Ranging from 15500-17500  Non Electric Purifier - MRP Ranging from 5000- 6500
  27. 27. - 27 - Home Power  Platinum Series - MRP 880  Gold Series - MRP Ranging from 7000-11000  New Silver Series - MRP Ranging from 4200-5500 Induction Cook top - MRP Ranging from 3790-5790 Apart from these core products Whirlpool sells accessory for all the above listed products.
  28. 28. - 28 - FOCUS ON INNOVATION & COST CUTTING WPL concentrates on healthy margins rather than generating increased revenues. Only projects that will provide company healthy margins are taken up. This is reflected in its operating margins which have remained in the range of 7-9% last couple of years even after a tough 2012. WPL is tapping its core competencies by heavy capex in growth and innovation. It has got global technology support and local innovation through own design centre and has launched many innovative products like - next generation refrigerator claiming 40% faster cooling than any other machine in the same category. This product has got tremendous response from market. WPL follows a sensible approach toward advertising expenditure. The company follows an ideology of minimum advertising expenditure, as things such as AC, washing machines and refrigerators the consumers will only prefer buying the product after touching and having a sense of the product rather than watching the advertisement. It has maintained its advertising expenditure below 3% of sales in last 5 years. Having shown a major focus on cost cutting it has tremendously improved its working capital management. It has maintained its employee costs between 7.5%-8.3% in the last 4 years. 1511.6 1236.6 3123.4 3676.1 3499.2 0 1000 2000 3000 4000 2009 2010 2011 2012 2013 R&D Expenditure ( In lakhs) 2.65 2.85 2.8 1.85 1.67 0 0.5 1 1.5 2 2.5 3 2009 2010 2011 2012 2013 Advertisement Expense (as % of Sales) Source: Annual Report
  29. 29. - 29 - Whirlpool’s share price was Rs17 in 2005 went up to Rs60 in 2008 and went on to touch a record high of Rs338 in November 2010 due to continuous innovation brought into the products creating greater value add to customers. Whirlpool added new products from premium to mass straddling multiple price points. Whirlpools new innovative product line includes:  Magicook1-2-3 Microwave oven.  Frost free Refrigerators called Neo Ichill.  Direct cool Refrigerators Ice magic.  Line ups of Spilt Air Conditioners: 3D Cool and Chrome Turbo.  Kitchen products comprising Built-In Ovens, Barbeque, Hobs and Hood.  White Magic 1-2-3 nxt with new and advanced 6th Sense Washing Machine PROPOSED INNOVATION & ADAPTATION  Capacity expansion of Pondicherry plant.  Accquision of a new export market (Australia).  New energy requirements with minimal cost increases.  Lumia launch with 7SKUs helped to increase volume.  Use of environment friendly R-600a refrigerant in refrigerators.  Variety of color options of washing machines for wider consumer choice.  Introduction of French Door Bottom Mount Refrigerator for Indian markets.  New range of refrigerators (242L to 480L 2-Door Frost Free.
  30. 30. - 30 - INDUSTRY STRUCTURE & DEVELOPMENTS The long term growth opportunity that India offers is attracting a number of international appliance brands. Recent entrants include brands from Germany, New Zealand, Japan and China which is making the Indian appliance industry more international in character. Joint ventures and strategic alliances are being forged. Several new entrants are investing heavily behind brand, distribution and manufacturing. For the moment however, the home appliance industry is highly concentrated, with the top 4 brands accounting for more than 80 % of the appliance market. Category dynamics remain largely unchanged for refrigerators and washing machines, where single door and twin tub formats dominate. The Air Conditioner category has seen tremendous change with split air conditioners fast replacing windows. Indeed, several brands are exiting the window business altogether. In the Microwave category, more and more offerings are in the Convection and Grill models, which are more versatile products. An over arching phenomenon is that premium segment of all appliance categories is seeing a lot of action. Today, it is common to see multi-door refrigerators, sophisticated front-load washing machines, inverter technology air conditioners, and Built-in products growing in awareness and distribution.
  31. 31. - 31 - PEER ANALYSIS
  32. 32. - 32 - BLUE STAR LIMITED Blue star is the largest Central Air condoning company with an annual turnover of 2800 crore having 7 manufacturing facility, over 1800 dealers and 2700 employees. It fulfills the AC needs of large number of corporate, residential and commercial customers. Blue star has primary focus on CORPORATE & COMMERCIAL MARKET. Having acquired great success in the above segment it has penetrated into residential segment also. The company also manufactures and markets a wide range of refrigeration products which include water coolers, bottled water dispensers, deep freezers and cold storage. It has heavily invested in R&D to produce energy efficient products. Having set up strong R&D facility no technology has been imported in the last 5 years. BUSINEES SEGMENT Blue Star operates in three segments: 1. Electro mechanical projects. 2. Cooling products. 3. Professional Electronics. SEGMENT WISE REVENUE BREAK UP Source: ACE Equity Current market price 212.85 223.6 130.15 1419.2 Market Data(INR) 52 Week high 52 week low Market cap (billion) Share holding pattern 40% 32.85% 15.16% 9.04% 2.43% Directors Public Foreign institutionals Foreign holdings Blus Star Ltd BLUESTARCO BSE Code 500067 BLSTR:IN BLUS.NS 8.99 Cr 2 0.8 Consumer Durables Outstanding Share Face Value Beta vs Sensex Industry Stock Scan Script Id NSE Code Bloomberg Ticker Reuters Ticker 70% 23% 7% Electro mechanical project Cooling products Professonal Electronics Voltas vs Sensex 74.40 94.40 114.40 134.40 154.40 174.40 194.40 29-Apr-2013 29-May-2013 29-Jun-2013 29-Jul-2013 29-Aug-2013 29-Sep-2013 29-Oct-2013 29-Nov-2013 29-Dec-2013 29-Jan-2014 28-Feb-2014 31-Mar-2014 CLOSE(Voltas Ltd) CLOSE(SENSEX)
  33. 33. - 33 - VOLTAS LIMITED Voltas is one among India's largest air conditioning company, and one of the world's premier engineering solutions providers and project specialists. Voltas Limited offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain manufacturing units at Thane, Dadra and Pantnagar. Voltas established a clear lead in AC sold in multi brand outlets in 2012-13 possessing 20% share in these outlets. According to GFK Nelson market share of Voltas as per revenue in AC segment stand at 18%.The AC segment is the highest contributor towards profitability. It has plans to enter into Refrigerator and washing machine segment in next 5 years. BUSINEES SEGMENT Voltas operates in three segments: 1. Electro mechanical projects. 2. Engineering products. 3. Unitary cooling products. SEGMENT WISE REVENUE BREAK UP Source: ACE Equity Current market price 165.5 176.25 67.2 2495.48 Share holding pattern 52Week high 52week low Market cap (Cr) Market Data(INR) Promotrs 30% Institutio nal Investors 47% General Public 17% Others 6% Script Id Voltas Ltd NSE Code Voltas BSE Code 500575 Bloomberg Ticker VOLT:IN Reuters Ticker VOLT.NS Face Value 1 Beta vs Sensex 1.69 Industry Diversified Stock Scan Electromecha nl Projects, 40%Engeering products, 52% Cooling products, 8% VoltasvsSensex 74.40 94.40 114.40 134.40 154.40 174.40 194.40 29-Apr-2013 29-May-2013 29-Jun-2013 29-Jul-2013 29-Aug-2013 29-Sep-2013 29-Oct-2013 29-Nov-2013 29-Dec-2013 29-Jan-2014 28-Feb-2014 31-Mar-2014 CLOSE(Voltas Ltd) CLOSE(SENSEX)
  34. 34. - 34 - HITACHI HOME & LIFE SOLUTION INDIA LIMITED Hitachi home and life solution India is a subsidy of Hitachi Home appliance Inc, Japan. Hitachi India has a primary focus on B2B business. It is the market leader in telecom AC segment. In the refrigerator segment it is focusing on models with Inverter compressor. Hitachi India is constantly strengthening the after sales network having 35 exclusive service centers in 26 towns apart from 600 other service points including multi brand stores and service dealers. With this network it covers 317 towns across the country. BUSINEES SEGMENT Hitachi India operates in four segments: 1. Refrigerators. 2. Air Conditioners. 3. Spares. 4. After Sale Service SEGMENT WISE REVENUE BREAK UP SEGMENT WISE R EVENUE BREAK U SE GMENT WISE REVENUE BR Hitachi vs Sensex Source: ACE Equity Air Conditioners , 81% Refrigerators , 6% Spares, 5% Service, 8% 75.12 85.12 95.12 105.12 115.12 125.12 135.12 29-Apr-2013 29-May-2013 29-Jun-2013 29-Jul-2013 29-Aug-2013 29-Sep-2013 29-Oct-2013 29-Nov-2013 29-Dec-2013 29-Jan-2014 28-Feb-2014 31-Mar-2014 CLOSE(Hitachi Home & LifeSolutions CLOSE(SENSEX) Current market price 165 52 Week high 183 52 week low 99 Market cap (Cr) 295.95 Script Id Hitachi NSE Code HITACHIHOM BSE Code 523398 Bloomberg Ticker HTHL IN Reuters Ticker HITA.BO Face Value 10 Beta vs Sensex 0.74 Industry White Goods Stock Scan Hitachi vs Sensex Market Data(INR) Share holding pattern Promot ers, 74.45% Public, 15.25% Corpor ates, 9.31% Foreign Institut ion, 0.99%
  35. 35. - 35 - DETAILED PEER ANALYSIS Average collection Period The Average collection period of Whirlpool is unmatched in the industry PAT growth Whirlpool registered a very minimal increase on the PAT margins because summer accounts to 40% of the total sale of Whirlpool and due to slow onset of summer in most parts of India the summer sale of whirlpool was hit badly and GDP slipped down to 5% adding on to reduction in sales. Hitachi showed a dramatic PAT growth % wise by actual money wise it increased from 3 Crore to15.3 crore mainly due increase in refrigerator sale by 24% and its focus towards cost reduction lead to increase in operating profit. While blues star showed an increased growth in PAT because of Electro mechanical project turned around and showed a profit of 72 crores from a loss of 85 crore. Thus to sum up PAT margins of Whirlpool’s competitors increased mainly because of their presence in other sectors. With increase in the overall growth in India Whirlpool is expected to show better growth. Source: Annual report, Management discussion
  36. 36. - 36 - Sales per employee The average sales per employee at Whirlpool are highest among its peers which Shows its focus towards hiring and retaining skilled employees. In order to derive the best from the employees Whirlpool has taken up the following measure: Improving Managerial Effectiveness, a key management competency, continued to receive extraordinary focus from the HR team at Whirlpool. Specific feedback on one's managerial ability was gathered through a managerial skill survey, followed by a skill building workshop where Managers were trained to become better and more effective supervisors. The Critical Thinking and Communication Skills Workshop and Project Management Course were continued to enhance execution capability. Specific focus was applied on improving "Art of People Assessment Interviewing Capability”. The initiatives outlined above resulted in an increase in Employee Engagement Score to 83%, placing Whirlpool of India Limited, amongst the highest in the Whirlpool world. This created more growth oppurchnity which resulted in 80% more role changes than previous year.
  37. 37. - 37 - Operating Profit Margin Whirlpool’s operating margins are best in the industry because of its focus in cost cutting. According to Shantanu Das Gupta Vice-President (Corporate Affairs & Strategy Asia South) the company has become more judicious in hiring non- essential workforce in all divisions other than the sales and marketing team. Apart from this raw materials account to 65% of the total Sales. Also the company which imports 28% of total raw materials consumed has increased domestic sourcing to save itself from rupee depreciation and increasing cost PAT Margins .
  38. 38. - 38 - Whirlpools PAT margins are best among the peers because its top line is best among the peers and adding on to it the company is debt free which is major advantage it has which majorly influencing the PAT on the other hand the company paid short term interest of 3 crore which is bearable for Whirlpool. Export Whirlpool achieved a commendable export business because of neighbouring SAARC countries performing well accounting to 50 % of the total export. Whirlpool entered Thailand & Dubai with the launch of Neo I chill refrigerator. While in Nepal & Bangladesh Whirlpool has opened exclusive brand retail outlets to expand its retail coverage. In future to expand its overseas business Whirlpool has plans to penetrate into Australia & Sri lanka also. EPS
  39. 39. - 39 - Debt/ Equity ratio Among the listed players in White goods Whirlpool is the only debt free company because it does not wants to bear any king of fixed financial charges as the sector is very price sensitive and presence of fixed interest would hamper its PAT & in case of any additional cash requirement it gets support from its parent Whirlpool Corporation. On the other hand Videocon has a high debt whose interest cost it can’t bear has plans to sell 10% of its stake in Mozambique Gas field to raise 16300 crore to retire its debenture and cut down the interest cost which it can manage . Source: http://www.business-standard.com/article/companies/videocon-to-cut-debt-with-10-stake-sale- in-mozambique-ga
  40. 40. - 40 - VALUATION
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