Whirlpool India Stock Tumbles! ICICI Securities Issues SHOCKING SELL Call Amidst Weak Sales & Parent Stake Sale Fears!

ICICI Securities has published a research report detailing a challenging quarter for Whirlpool of India. The company reported a 3.8% year-on-year decline in revenue for the second quarter of fiscal year 2026. This downturn is attributed to a high comparison base from the previous year, elevated inventory levels of refrigerators and Room Air Conditioners (RACs) in the channel, and softer demand for summer products.

A significant factor impacting performance was the 5-week gap between the announcement and implementation of the Goods and Services Tax (GST), which affected operations in Q2 FY26. Furthermore, profit margins appear to have been squeezed due to increased financial support provided to channel partners to help them liquidate excess inventory, coupled with negative operating leverage.

The company has entered into a 30-year brand and technology license agreement. While this secures long-term brand rights, it may lead to higher royalty payments in the future. Adding to investor concerns, the parent company intends to reduce its stake in Whirlpool of India to 20%, with a transaction expected by December 2025. This planned stake sale continues to cast a shadow on the company's valuation.

Outlook: ICICI Securities projects Whirlpool India to achieve revenue and Profit After Tax (PAT) Compound Annual Growth Rates (CAGRs) of 9.1% and 12.7%, respectively, between fiscal years 2025 and 2028. Despite these growth projections, the brokerage maintains its 'SELL' recommendation, setting an unchanged Discounted Cash Flow (DCF)-based target price of INR 1,100. This target price implies a Price-to-Earnings (P/E) multiple of 28 times the estimated FY28 Earnings Per Share (EPS).

Impact: This news is likely to have a negative impact on Whirlpool of India's stock price. The combination of weak quarterly results, ongoing inventory issues, potential increases in royalty payments, and the impending stake sale by the parent company creates a bearish outlook. Investors may react by selling shares, anticipating further price declines. The explicit 'SELL' rating from a prominent brokerage firm reinforces this sentiment.

Impact Rating: 7/10

Difficult Terms: Revenue Decline: A reduction in a company's total income generated from its primary business activities. YoY (Year-on-Year): A comparison of a specific period's performance with the same period in the previous year. High Base: When a period's performance is compared to a very strong performance in the corresponding period of the prior year, making current growth appear lower or declines more pronounced. Inventory: The stock of goods that a company holds for sale or uses in production but has not yet sold or consumed. Demand Softness: A situation where consumer demand for products or services is weaker than expected or has decreased. Channel Inventory: The amount of products held by intermediaries (like distributors, retailers) in the supply chain before they are sold to the end consumer. GST (Goods and Services Tax): A comprehensive indirect tax levied on the supply of goods and services across India. Operating Leverage: The extent to which a company relies on fixed costs in its operations. Higher fixed costs mean higher operating leverage, magnifying changes in profits with changes in sales. Royalty Payments: Fees paid by a licensee to a licensor for the ongoing use of intellectual property, such as patents, trademarks, or copyrighted material. Valuation Overhang: A situation where a stock's price is suppressed or expected to decline due to the anticipation of a large future sale of shares by existing major shareholders. CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period longer than one year. PAT (Profit After Tax): The net profit of a company after all expenses, interest, and taxes have been deducted from its total revenue. FY25–28E (Fiscal Years 2025-2028 Estimates): Projections for the financial years starting from April 1, 2025, to March 31, 2028. DCF (Discounted Cash Flow): A valuation method used to estimate the value of an investment based on its expected future cash flows, discounted back to their present value. Target Price: The price level at which a stock analyst or brokerage firm expects a stock to trade within a specific timeframe. Implied Target P/E (Price-to-Earnings): The Price-to-Earnings ratio that the market is expected to assign to a company's future earnings, based on its target stock price.