With rapid urbanisation and increase in disposable income, white goods market is witnessing a steady growth and more players are expected to enter the industry soon. The market turnover in 2015 was estimated at US$9.7 bnand it rose to $12.5 bn in 2016, further to $15 bn in mid-2017. The market is expected to grow at a compounded annual growth rate of 13% from 2004-05 to 2019-20 to attain a turnover of $20.6 bn.Several consumer electricals players such as Havells, V Guard Industries Ltd, Bajaj Electricals Ltd, Finolex Cables Ltd are planning to enter white goods segment.
Refrigerators, Washing Machines, Microwave Ovens, Dishwashers, Air Conditioners and coolers are some of the popular products in white goods category.
In view of the big opportunities for growth in white goods, here is a look at the major listed players in this segment-
# Whirlpool India Ltd (BSE: 500238, NSE: WHIRLPOOL) Category: Large Cap
US based Whirlpool entered Indian market in the 1980’s and established a manufacturing facility in a joint venture with TVS. It entered the refrigeration market with the acquisition of Kelvinator in 1995 and also acquired majority shares of TVS in the joint venture. The company now has three state-of-the-art manufacturing facilities at Faridabad, Pondicherry and Pune.
The product range includes Refrigerators, Washing machines, air conditioners, purifiers, microwave oven, small domestic appliances. The company has won several awards for innovation and has been in the forefront in launching new products. Net profit for 2016-17 rose 15% to Rs 380.76 cr as against Rs 240.02 cr in 2015-16.
The company introduced innovations such as 6th Sense Intellifresh Technology, 6th Sense Fresh Control Technology in refrigerators, it launched premium inverter AC-the 3D Cool Inverter with IntelliComfort technology and introduced tandoor series in microwave category. The company also exports products to Middle East and South East Asia.
In September quarter net profit rose 25.09% on annualised basis to Rs 25.09 crwhile sales rose 47.21% to Rs 1,159.67 cr. Earnings per share has risen to 5.79. On a returns perspective, 18.44% monthly, 25.74% quarterly and 39.44% half-yearly is quite impressive. On financial ratios, it scores well on return on equity at 20.93%, on assets of 11.42%, net profit margin of 7.87% while it is below its peers in liquidity ratios. Cash flows are comfortable. It is trading at a Price Earnings (PE) multiple of 59.29 which is indicative of higher valuation by market.
On technical charts, Relative Strength Index (RSI) of 63.59 is bullish, while MACD line may witness a bullish crossover and Average Directional Index (ADX) of 38.41 is indicative of uptrend. Stochastic momentum indicators are bearish.
Target: 1600 Duration : 6 weeks Strategy: Hold/Sell
#IFB Industries Ltd ( BSE: 505726, NSE: IFBIND) Category: Mid Cap
IFB Industries started operations in 1974 under the name Indian Fine Blanks Ltd in collaboration with Hienrich Schmid AG of Switzerland. Factories were set up in Bangalore and Kolkatta. The company reported a net profit of Rs 50.97 cr in 2016-17 as against Rs 31.36 cr in 2015-16. Earnings per share also rose to 12.58. Sales revenue rose to 1751.87 cr from Rs 1514.25 crin 2015-16.
In September quarter, net profits rose 91.41% to Rs 35.64 cr while sales rose 40.12% to Rs 623 cr. On a returns perspective, 16.36% monthly, 91.45% quarterly and 108.01% half year is really impressive. On financial parameters, return on equity of 10.54%, on assets of 5.57%, net profit margin of 2.79 are slightly below that of peers in industry. Liquidity and cash flow ratios are a cause for concern. It is trading at a PE of 90.55 indicates high valuation by market.
On technical charts, RSI of 64.88 is bullish, MACD has witnessed a bearish crossover, ADX of 46,23 indicates uptrend while stochastic indicators are bearish.
Target: 1400 Duration: 7 weeks Strategy: Hold/Sell
#Mirc Electronics Ltd ( BSE: 500279, NSE: MIRCELECTR) Category: Small Cap
Mirc Electronics Ltd was set up in 1981 by GuluMirchandani, Vijay Mansukhani and SonuMirchandani and owns the brands Onida and IGO. The product portfolio includes LED TV, washing machines, microwave ovens, airconditions, mobile phones, projector systems among others. The company has been in the forefront introducing new product innovation and marketing innovation such as Onida TV-neighbours envy, owner’s pride.
In 2015-16, the company reported a net loss of Rs 19 cr and gross sales fell to Rs 767 cr from Rs 1070 cr the previous year. In September quarter, the company recorded a profit of Rs 12.04 cr while sales rose 36.75% to Rs 201.09 cr.
On a returns perspective, 56% monthly, 118% quarterly and 304.9% half yearly is quite attractive. Return on equity, assets, net profit margin are negative. It also doesn’t fare well on liquidity ratios but has sufficient cash flows. It is trading at a PE of 63 indicating higher valuation by market.
On technical charts, RSI of 73.49 is bullish moving to overbought territory, MACD has witnessed a bullish crossover and ADX of 43 indicates uptrend while stochastic indicators are bearish. Some correction is expected before the scrip can climb again.
The company board had approved raising of equity investment of Rs 144.12 cr from marquee investors to meet its long-term working capital and corporate requirements.
# Videocon Industries Ltd ( BSE: 511389, NSE: VIDEOIND) Category: Small Cap
Videocon Industries Ltd was incorporated in 1986 under the name Adhigam Trading Pvt Ltd and initially did business of paper tubes. It introduced televisions and washing machines in 1987 and later diversified into several activities.
The company has posted a net loss of Rs 885.82 cr in June quarter on a sales of Rs 1,524.81 cr. The group had a net loss of Rs 368.75 crore in the year- ago period. Videocon Group has debts to the extent of Rs 23000 cr and was close to insolvency proceedings. Banks decided to keep off from the proceedings as the group sold its Kenstar brand and corporate headquarters to repay loans.
The white goods market has plenty of space to grow in India due to on going urbanisation and growth in disposable income. Relaxation of licensing rules, allowing 51% foreign direct investment (FDI) in multi-brand retail and 100% in single brand retail are some of the factors promoting the industry. The industry has sought revision of Goods and Service Tax (GST) from the 28% slab to 18% or lower in the case of energy-efficient products that will make the industry quite competitive and help boost sales. Rural demand is expected to grow on good monsoon and resultant demand.Top players have maintained healthy margins and launch of innovative products will help in the growth of white goods in the next five years.