Whirlpool Of India’s share price falls 6% to 52-week low as Jefferies downgrades stock, sees 11% downside potential
Whirlpool Of India's share price falls 6 percent on Tuesday following a downgrade by global brokerage house Jefferies amid hypercompetitiveness in the consumer durables segment. The brokerage reduced the target price for the firm to ₹1,125 from ₹1,265.
Whirlpool Of India's share price falls 6 percent on Tuesday following a downgrade by global brokerage house Jefferies amid hypercompetitiveness in the consumer durables segment. The brokerage downgraded the stock to 'underperform' and reduced the target price for the firm to ₹1,125 from ₹1,265. The new target price implies a potential downside of 11 percent.
The firm's operating profit margin (OPM) has declined to 5 percent in the nine months ended FY24 against 9-12 percent in FY15-21, the brokerage said. It also cut its FY25/26E OPM estimates by 60-70 bps to 6.2 percent/6.7 percent, driving 8-10 percent EPS cuts.
Meanwhile, On February 20, Whirlpool Corporation, a prominent player in American home appliances, made a strategic move by divesting 24 percent of its ownership in Whirlpool of India, its Indian counterpart, which is another negative for the company.
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In intra-day deals, the stock fell as much as 5.9 percent to its 52-week low of ₹1186.85. It has already fallen 31.5 percent from its 52-week high of ₹1,733, hit on October 12, 2023.
The stock has lost 9 percent in February so far, extending losses for the fourth straight month, since November. Between November 2023 and January 2024, the stock has declined 28 percent. Meanwhile, in the last 1 year, the stock is down over 4 percent.
The stake sale, carried out through a block deal, saw Whirlpool Mauritius, a wholly-owned subsidiary of Whirlpool Corporation, selling 30.4 million equity shares of Whirlpool India in an on-market trade. The deal was valued at approximately $468 million in gross sales proceeds. The firm clarified that the funds raised from the transaction are earmarked for debt reduction. The move aligns with the company's strategic financial planning.
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After the sale, Whirlpool Mauritius, a subsidiary of Whirlpool Corporation, saw its stake in Whirlpool of India drop from 75 percent to 51 percent, according to a filing with the US Securities and Exchange Commission (SEC). This filing highlighted the subsidiary's role in executing the sale of equity shares on February 20, 2024.
Also, In an interview with CNBC, Whirlpool Corporation CEO Marc Bitzer has said that the company is “positive on India", adding that the 24 percent stake sale this month was a way to make the most of high valuations.
“We’ve taken down our stake to 51 percent. We’re positive on India long term but when our share is trading at 50 times multiple & we expect it to be much lower, then it’s an asset arbitrage," Bitzer added.
Read here: Positive on India, sold stake as valuations were high, says Whirlpool CEO
In the December quarter, Whirlpool of India Ltd posted a 12 percent growth in its consolidated net profit at ₹29.93 crore largely aided by volume growth. It had recorded a net profit of ₹26.71 crore in the corresponding quarter of the previous fiscal. Its consolidated total revenue from operations stood at ₹1,535.7 crore up by 17.9 percent YoY.
Whirlpool of India, a prominent player in the home appliances sector, boasts three manufacturing facilities in Faridabad, Puducherry, and Pune. Despite the stake sale, Whirlpool Corporation reiterated its commitment to India as a key growth market and an essential component of its expansion strategy.
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