Whirlpool shares have been underperformers but a darling of India's Mutual Funds
From around 8% at the end of 2021, India's Mutual Funds currently own 11% stake in the consumer durables manufacturer. During the same period, the stock has only given negative annual returns.
Shares of Whirlpool of India Ltd. have been underperformers over the last five years, having delivered negative annual returns over the last three years. It has also begun the new year on a negative note, declining 6% so far.
The underperformance has also come on the back of sluggish financials for the company. Whirlpool's revenue has remained nearly stagnant over the last four years. From around ₹6,000 crore topline in financial year 2020, the company only reported a topline of ₹6,600 crore at the end of financial year 2023.
While revenue growth for Whirlpool has been slow, their margins have been dwindling. From 12% in financial year 2019, the company's EBITDA margin has halved to 6% at the end of last year.
Despite this underperformance and slow earnings growth, the company continues to command a hefty premium. For financial year 2025, the stock is commanding a price-to-earnings multiple of 43 times.
However, India's Mutual Funds have continued to pile into the stock over the last few quarters. From around 8% at the end of 2021, India's Mutual Funds currently own 11% stake in the consumer durables manufacturer. In fact, they have consistently increased their stake in the company over the last six quarters.
Based on the December quarter shareholding pattern, over 28 Mutual Funds held a 11.1% stake in Whirlpool, the highest in at least the last five years. Among those, the Kotak Emerging Equity Scheme had a 4.4% stake, followed by SBI Magnum Global Fund and UTI Midcap Fund.
That number is only set to go higher after Tuesday's block deal, where the company's promoter entity sold a 24% stake worth over ₹4,000 crore.
Among the buyers in that transaction included SBI Mutual Fund, which picked up a 7.2% stake and has now become the largest public shareholder in Whirlpool. Other than SBI, other domestic funds and Societe Generale were also buyers in the block deal, picking up stake between 0.5% to 1%.
Even when compared to its peers, Whirlpool has mostly been an underperformer over the last 12 months and also trades at a premium valuation to most of them.
Brokerage firm Kotak Institutional Equities, post the company's December quarter results wrote that the company has laid out a plan to revive its sluggish sales growth by improving execution, product innovation, improved visibility, and premiumisation.
The management also guided for high single-digit revenue Compounded Annual Growth Rate (CAGR) and high single-digit PBT margin as their long-term target.
Kotak wrote in its note that the street needs to re-assess the multiples at which the stock trades.
Shares of Whirlpool of India are trading little changed on Wednesday and are absolutely flat over the last 12 months.
First Published: Feb 21, 2024 1:41 PM IST
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