Consumer Durables Q4FY20 Result Review

Praveen Sahay Research Analyst [email protected] June 2020 SECTORAL OVERVIEW

2 Consumer Durables Sector

● Revenue growth across the board was impacted as COVID-19 led lockdown impacted peak sales period. Our coverage space ( and Amber Enterprises) outperformed the sector.

● Coverage companies reported Revenue/EBITDA/PAT growth of 4.5%/13.8%/6.9% y-o-y against the industry change of (-)1.8%/(-)3.5%/6.7% y-o-y, respectively. The outperformance was led by strong revenue growth of Amber & margin improvement in Voltas.

● Gross profit margin for the quarter improved 230bps y-o-y. Margin expansion was seen across all the companies led by better product mix & sharp drop in raw material prices.

● EBITDA margins was almost flat y-o-y despite the expansion in the gross margin as operating deleverage negatively impacted. Symphony, Dixon, Voltas reported expansion while BlueStar, Amber reported contraction.

● PAT for the quarter grew 6.7% y-o-y for the sector mainly led by robust growth reported by Symphony, Dixon & Voltas with operating margin expansion and lower tax outgo. The remaining three companies reported a fall in PAT with reporting the highest fall.

● Superior performance by Dixon, Symphony & Voltas’ UCP segment & below par print of BlueStar were the key-highlights of the quarter.

● Outlook: The companies observed a strong growth in months of January & February but a washout in March, due to COVID-19. The inventory of seasonal products in the system is enough to meet the demand, which may come in rest of the season. The companies are expecting significate correction in yearly sales, looking at current situation, which shall change based on how the COVID-19 scenario pans out. Companies which have a strong presence in tier 3-4-5 markets, are comparatively better placed as those areas are relatively less impacted by COVID-19. Also, companies have floated aggressive promotional offers and expected to boost online channel. We remain cautious on FY21 as the lockdown has washed away most of the summer season – a major part of annual sales for industry. We remain long term positive on RAC segment and outsource manufacturing with ‘Vocal for Local’ campaign of GoI. Top BUY: Amber Enterprises and Voltas Ltd. 3 Impact of COVID-19

● A large portion of the consumer durable sector covered in the report is dominated by air-conditioners & other cooling products. ● With Covid-19 led lockdown, striking the peak demand season starting since 15th March till the month of May; we expect the earnings to get impacted severely in FY21. March to June period accounts for ~60% of the sales. ● However, we also expect the companies to undertake massive cost cutting measures to cushion the blow of COVID-19 led lockdown. ● We expect the sales to recover faster in smaller towns & rural part of the country led by lower impact of COVID-19. Thus, the companies, like Voltas & Symphony, which have a strong presence in tier 3-4-5 markets, are comparatively better placed and should see a faster recovery in sales. ● The phenomenon of “China plus one” has gained traction and initial signs of efforts to reduce concentration risk in manufacturing is visible. ● We have downward revised our estimates to bake in the impact of COVID-19 on FY21 & FY22 financials. However, with the gradual improvement in demand through unlock and change in consumer behavior towards discretionary spends, we expect demand improvement in H2FY21.

Q4FY20 Revenue Growth FY21E Change in estimates FY22E change in estimates Consumer Durable Jan & Feb Jan-Mar Revenue PAT Revenue PAT Voltas Ltd. NA 1% -8% 1% -6% -2% Amber Enterprises Ltd. 22% 10% -15% -23% -7% -7% Blue Star Ltd. NA -19% -17% -45% -13% -21% Whirlpool of India Ltd. NA 0% -18% -25% -10% -15% Symphony Ltd. 11% 6% -14% -12% -10% -7% (India) Ltd. 20% 0% -12% -11% -8% -1% Note: Estimates of Voltas & Amber are of EPIR; Whirlpool & Symphony of Edelweiss Institution; BlueStar & Dixon consensus 4 Latest Trends

Temperature in April Google Trends in India 50 120 120% 40 100% 30 100 80% 20 60% 10 80 40% 0 Delhi Chennai Bangalore Hyderabad Kolkata 60 20% 0% Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 40 -20% -40% 20 Temperature in May -60% 40 0 -80% 30 20

10

27-02-2019 27-03-2019 27-04-2019 27-05-2019 27-06-2019 27-07-2019 27-08-2019 27-09-2019 27-10-2019 27-11-2019 27-12-2019 27-01-2020 27-02-2020 27-03-2020 27-04-2020 27-05-2020 27-01-2019 0 Air conditioner % Change YoY Mumbai Delhi Chennai Bangalore Hyderabad Kolkata May-16 May-17 May-18 May-19 May-20

Google Trends show a sharp drop in the Average & Median temperature increase by month of April, whereas a sharp surge in (0.5-1)°C for the AMJ months of 2020 as the month of May & again a fall in the compared to AMJ months of 2019 as per first 2 weeks of June. IMD.

5 Latest Trends: Takeaways from Pine Labs report

Transaction count & amount (Ex Delhi & Mumbai) in Tier-I cities reached up to pre- COVID-19 levels led by sales of higher ticket items like AC & also pent-up demand. Continuity of the trend shall be a key monitorable

Home & Kitchen Appliances transactions in the Tier-II cities have picked-up to the pre-COVID 19 levels. However, one needs to monitor the data to determine the nature of demand.

6 Latest Trends: Aggressive Promotions to boost sales

7 Latest Trends: China Plus One can be the next big trigger

Import of AC & AC components Export of AC & AC component 9000 8344 120% 1400 100% 8000 103% 7496 7420 100% 1200 80% 7000 6387 80% 1000 6000 5372 5354 60% 5074 4969 800 5000 60% 4038 40% 3896 600 4000 40% 20% 3000 30% 400 1985 19% 17% 20% 0% 2000 8% 11% 200 0% 1000 -4% -2% 0% -11% 0 -20% 0 -20% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 AC & parts export Value (INR cr) % growth (YoY) AC & parts import Value (INR cr) % growth (YoY)

● Import of AC & AC components decreased in FY20 after being on a rising trend for last several years.

● Export of AC & AC components however continued its rising trend.

● Interaction with the management team of Amber, suggested thatS there are initial signs of China plus one trend emerging

● Leading brands have also expressed their intent to reduce the dependency on imports & to increase outsourcing as well

● Amber has received interest from US based firms and have also delivered on a small order of AC components

8 Consumer Durables: Growth

Revenue Growth Consumer Durables Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Voltas 5% 7% 16% 1% 10% 37% 9% 1% 24% 0% 0% 1% Revenue Growth Amber 12% 13% 24% 53% 73% 75% 89% 52% 10% was impacted due Blue Star 23% -5% 2% -4% -3% 18% 18% 19% 6% 14% 7% -19% to COVID-19, Whirlpool 15% 37% 18% 24% 13% 2% 26% 8% 20% 18% 5% 0% BlueStar underperform the Symphony 25% 41% 22% -2% -23% 5% 10% 33% 100% 22% 21% 6% sector Dixon 58% 17% -1% -4% -15% -16% 17% 44% 94% 90% 25% 0%

PAT Growth Consumer Durables Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Voltas 18% 22% 23% -3% 0% 12% -22% -27% -11% 0% 13% 13% Despite lower Amber 47% 3% -209% NA 98% 143% 577% 524% -6% revenues, most of the companies Blue Star 16% 18% 169% -21% 40% -28% -178% 62% -13% -11% 95% -20% reported increase Whirlpool 9% 25% -4% 23% 23% 7% 14% 14% 17% 59% 21% -11% in profits led by Symphony 23% 18% 18% -14% -49% -30% -43% -41% 65% 66% 38% 91% cost-saving Dixon 15% 33% 23% -39% 18% -21% 16% 17% 85% 162% 49% 67% actions and lower tax outgo

9 Consumer Durables: Margins

Gross Margin Consumer Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Durables Voltas 29% 36% 31% 27% 28% 32% 30% 27% 27% 28% 27% 23% 25% 28% 29% 29% Gross Margins Amber 16% 15% 18% 16% 17% 16% 17% 14% 16% 16% 18% 17% 17% improved across the companies as Blue Star 28% 30% 31% 28% 26% 35% 28% 26% 26% 25% 24% 24% 25% 25% 24% 25% RM prices Whirlpool 38% 44% 43% 42% 36% 39% 41% 36% 38% 38% 37% 38% 38% 42% 40% 38% primarily Copper

Symphony 58% 52% 54% 50% 48% 51% 55% 53% 49% 48% 46% 43% 46% 47% 48% 48% reduced

Dixon 14% 11% 13% 14% 13% 11% 13% 14% 13% 13% 12% 12% 11% 10% 13% 16%

EBITDA Margin Consumer Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Durables Voltas 11% 7% 8% 11% 11% 8% 8% 12% 11% 8% 8% 7% 11% 7% 7% 9% Operating

Amber 9% 9% 8% 7% 10% 8% 4% 6% 9% 9% 6% 7% 8% deleverage played out across Blue Star 7% 4% 3% 5% 7% 6% 4% 4% 9% 5% 0% 6% 7% 4% 3% 3% the companies Whirlpool 15% 11% 10% 12% 14% 10% 9% 11% 15% 9% 8% 13% 15% 10% 7% 10% leading to fall in

Symphony 26% 34% 37% 27% 15% 30% 36% 28% 12% 19% 18% 12% 13% 23% 23% 17% EBITDA Margin

Dixon 4% 4% 4% 3% 3% 4% 4% 5% 4% 4% 5% 4% 5% 4% 5% 7%

10 Segmental Performance

UCP Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Segment Revenues (INR cr) 2509 1205 1375 2417 2876 1265 1515 2469 3600 1355 1611 2502 Gross Margins improved across Segment Growth (%) 20% 51% 51% 26% 15% 5% 10% 2% 25% 7% 6% 1% the companies as Segment EBIT (INR cr) 269 133 152 324 305 70 87 197 339 104 121 199 RM prices primarily Copper Segment EBIT Margin (%) 11% 11% 11% 13% 11% 6% 6% 8% 9% 8% 7% 8% reduced

UCP Revenue Growth % Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Voltas 1% 15% 32% -2% -2% 8% -3% -6% 47% 19% 14% 20% Voltas continued Blue Star 13% 8% 1% -9% -1% 9% 22% 19% 9% 10% 7% -15% its stellar Symphony 25% 41% 22% -2% -23% 5% 10% 33% 100% 22% 21% 6% performance & continued to gain Lloyd 165% -4% 22% -9% -8% -30% -16% -14% market share Amber -9% -23% 19% 43% 83% 109% 37% 2%

UCP EBIT Margin% Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Except Voltas, Voltas 13% 10% 10% 16% 11% 4% 7% 9% 12% 7% 8% 13% both the players reported fall in Blue Star 10% 5% 5% 7% 11% 2% 2% 10% 11% 3% 2% 1% margin due to Symphony 14% 29% 35% 27% 10% 18% 17% 11% 11% 21% 22% 15% operating Lloyd 3% 6% 1% 11% 9% 1% 0% 2% 0% 0% 0% 0% deleverage

Note: UCP Revenue/EBIT: taken number of Voltas, Lloyd, Symphony & Blue Star 11 Segmental Performance

EMPS Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Segment Revenues (INR cr) 1236 1054 1319 1573 1485 1532 1531 1818 1448 1592 1567 1406 EMPS has been under pressure led Segment Growth (%) 21% -4% 5% 4% 20% 45% 16% 16% -3% 4% 2% -23% by lower oil prices Segment EBIT (INR cr) 48 51 64 86 117 102 84 63 88 84 59 43 & slower execution Segment EBIT Margin 4% 5% 5% 5% 8% 7% 5% 3% 6% 5% 4% 3%

EMPS Revenue Growth % Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Voltas’ EMPS business was Voltas 14% 3% 7% 5% 31% 62% 16% 12% -5% -10% -8% -18% under stress for entire FY20 albeit BlueStar 31% -11% 2% 3% 8% 27% 16% 20% 1% 24% 16% -29% on a larger base

EMPS EBIT Margin % Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Slower execution of projects along with Voltas 4% 3% 4% 6% 9% 6% 6% 3% 7% 5% 3% 0% higher impairment led to fall of margin Blue Star 4% 7% 5% 5% 6% 7% 5% 4% 5% 6% 5% 7% for Voltas

Note: EMPS Revenue/EBIT: taken number of Voltas & Blue Star 12 Raw Material Prices

Aluminium Prices fell by 8.4% YoY in Q4FY20 Copper Prices fell by 5.8% YoY in Q4FY20 200 30.0% 500 40.0% 20.0% 400 30.0% 150 20.0% 10.0% 300 10.0% 100 200 0.0% 0.0% -10.0% 50 -10.0% 100 -20.0%

0 -30.0% 0 -20.0%

Q4FY17 Q1FY18 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Last Price % YoY Change (RHS) Last Price % YoY Change (RHS)

Polypropylene Prices fell by 24.7% YoY in Q4FY20 Crude Oil Prices fell by 33% YoY in Q4FY20 12000 50.0% 100 80.0% 40.0% 60.0% 10000 80 30.0% 40.0% 8000 20.0% 60 10.0% 20.0% 6000 0.0% 40 0.0% 4000 -10.0% -20.0% -20.0% 2000 20 -30.0% -40.0%

0 -40.0% 0 -60.0%

Q2FY19 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Q4FY17 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Last Price % YoY Change (RHS) Last Price % YoY Change (RHS)

13 COMPANIES OVERVIEW

14 Q4FY20 Result Highlights

Voltas Ltd. Overall Result: HIT Key Highlights: • UCP business continued its strong growth traction and grew by 20.2% YoY which was much higher than all of its listed peers as it continued market share gain in both AC & Cooler segments.

• EMPS revenue de-grew by 17.6% YoY to INR 805cr in Q4FY20 mainly due slow pace of execution of projects. However, there is sharp increase in order-book (+56% YoY to a record high level of INR 7,788cr) which provides healthy revenue visibility.

• Share of profit from UCP business has increased to ~78% in FY20. With the continued traction in the segment for Voltas, we expect lesser impact on Voltas’s profits.

• We continue to maintain positive outlook on Voltas as we believe a) UCP segment is on a strong footing by gaining market share b) Deeper distribution network to help capture higher demand of Tier-II & Tier-III places & c) Strong balance-sheet to ease tide over COVID-19 disruption.

Revenue growth % (y-o-y) Adjusted EBIT margin (%) 60% 40.0% 40% 30.0% 20% 20.0% 0% 10.0% Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 -20% 0.0% Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 -40% -10.0% UCP EMPS EPS UCP EMPS EPS

15 INR 480 INR 15,882 cr. 23.7x Voltas Ltd (BUY) CMP Market Cap. FY22E P/E

Total Revenue EBITDA Margin PAT INR 191 cr. 9.1% INR160 cr. INR 2,090 cr. 210 bps YoY 13.2% YoY Flat YoY 32.1% YoY

Versus Estimates Key Monitorable

Revenue EBITDA Margin -4% -10 bps UCP growth UCP EBIT Margin Voltbek JV loss MEP orderbook +20.2% 14.6% INR 20 cr. 7,788 cr EBITDA PAT -4% 5% +420 bps YoY vs 19.3 cr. YoY +56% YoY

Operational Segments

UCP revenue EMPS revenue EPS revenue INR 1199 cr. INR 805 cr. INR 95 cr. +20.2% YoY -17.6% YoY 5% YoY

EBIT margin EBIT margin EBIT margin 14.6% 1.4% 28.4% +420 bps YoY -310 bps YoY -650 bps YoY Financial Performance

Consistent Revenue Growth continues EBITDA Margin has been volatile PAT growth has been muted 9,000 12% 700 687 11% 600 35% 8,000 7,658 578 30% 7,124 680 580 10% 664 25% 7,000 6,404 10% 6,033 660 20% 6,000 8% 637 560 640 10% 15% 5,000 6% 620 540 10% 4,000 601 9% 520 521 5% 600 520 514 3,000 4% 0% 580 -5% 2,000 9% 500 2% 1,000 560 -10% 480 -15% 0 0% 540 8% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 PAT (INR Cr) PAT Growth % Revenue (INR Cr) Growth % (RHS) EBITDA (INR Cr) EBITDA Margin % (RHS) (RHS)

Both Payable & Receivable days have been stable Net Debt improved in FY20

128 121 124 122

94 88 89 87

-1006

-1695

-2179 -2273 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Payable Days Receiveable Days Net Debt (INR Cr) 17 Q4FY20 Result Highlights

Amber Enterprises India Ltd. Overall Result: Neutral Key Highlights: • Amber reported decent Q4FY20 result, however slightly below expectations (Revenue/EBITDA fell short by 2.8%/17%) due to weaker- than-estimated margin performance of the standalone business • Consolidated EBITDA margin adjusted for one off forex loss of INR 17cr. fell by 50 bps y-o-y to 9% in Q4FY20 primarily led by operating deleverage across business verticals. • For FY20: a. Amber has reported a revenue growth of 44% YoY on a consolidated basis with revenue at INR 3,963cr. b. EBITDA for the period has increased by 53% YoY to INR 326cr., with margin expanded by 50bps YoY to 8.2% c. PAT for the period has increased by 73% to INR 164cr. with NPM expanded by 70bps YoY to 4.1%. • Over the medium-term, we believe Amber is likely to be a clear beneficiary of a) rising share of outsourcing business in growing RAC market in India b) positive impact of increase in custom duty c) Foray in to commercial AC market d) China+1 story playing out. Standalone Revenue Growth moderated Volume growth & realization growth both moderated

971 996 160.0% 1,000 80.0% 127.0%

800 60.0% 110.0% 89.2% 568 600 389 393 40.0% 60.0% 43.1% 400 35.1% 4.4% 200 20.0% 10.0% 0 0.0% Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 -40.0% Volume growth (%) Realization growth (%) Revenue Revenue Growth % 18 INR 1,213 INR 3,814 cr. 17.5x Amber Enterprises India Ltd (BUY) CMP Market Cap. FY22E P/E

Total Revenue EBITDA Margin PAT INR 102 cr. 7.7% INR 63 cr. INR 1315 cr. -6.3%. YoY +9.9% YoY -10.2% YoY -170 bps YoY

Versus Estimates Key Monitorable (Standalone)

Revenue EBITDA Margin s -2.8% -130 bps Sales growth Gross Margin EBITDA margin +7.7% 15% 7.3% EBITDA PAT -17% 8.4% -160 bps YoY -330 bps YoY

Key Monitorable (Subsidiaries)

Gross Margin EBITDA margin NPM 23.1% 9.7% 3.7% Financial Performance

Robust Revenue Growth Continues Healthy EBITDA Growth continues PAT Growth has been robust 4,500 60% 3,963 350 9% 180 164 200% 4,000 309 50% 300 9% 160 3,500 150% 8% 140 3,000 2,752 40% 250 216 120 184 8% 95 100% 2,500 2,118 200 100 30% 8% 2,000 1,652 150 132 80 62 8% 50% 1,500 20% 60 100 1,000 8% 40 10% 22 0% 500 50 7% 20 0 0% 0 7% 0 -50% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue (INR Cr) Growth % (RHS) EBITDA (INR Cr) EBITDA Margin % (RHS) PAT (INR Cr) PAT Growth % (RHS)

Net Debt(INR cr.) increased to fund acquistions Working Capital Days has been volatile 125 361 104 98 99 102

246 79 230 69 65

FY17 FY18 FY19 FY20 -9 FY17 FY18 FY19 FY20 Payable Days Receiveable Days 20 Q4FY20 Result Highlights

Blue Star Ltd. Overall Result: MISS Key Highlights: ● Blue Star’s Q4FY20 top line came much below street expectation as the revenue fell 19% y-o-y vs a street estimate of 8% fall. ● Operating margins fell drastically to 2.9% (-400bps) because of the operating deleverage & additional provisions. ● Key segment highlights: (a) EMP segment – Revenue fell by 21.6% y-o-y to INR 660crore. EBIT came in at INR 3.2crore, with margins contracting by 380bps on a y-o-y basis to 0.5%. (b) UCP– Revenue fell by 15.3% on a y-o-y to INR 596crore. EBIT came in at INR 43.8crore, with margins contracting by 310bps y-o-y to 7.3%. ● Market share increased marginally by 20bps to 12.5%, due to focus on Tier 3/4/5 towns (55% of sales) and positioning the product portfolio more towards the affordable-premium range.

Revenue & Growth % EBITDA & EBITDA Margin % 1481 1471 140 126 10.0% 1600 1383 30.0% 120 110 1400 1244 1197 20.0% 8.0% 1200 997 1056 1063 100 87 923 10.0% 1000 80 6.0% 800 0.0% 51 60 43 41 4.0% 600 -10.0% 40 31 32 400 2.0% 20 200 -20.0% 0

0 -30.0% 0 0.0%

Q1FY19 Q4FY18 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Income from operations Growth % (RHS) EBITDA EBITDA margins (RHS)

21 Financial Performance

Revenue Growth has been modest EBITDA margin pre FY20 was on increasing trend PAT has been volatile

5,000 12% 300 6% 135 132 20% 4,784 4,787 256 5% 130 15% 4,800 10% 250 227 214 5% 4,600 199 125 122 8% 200 10% 5% 119 4,400 4,303 120 6% 150 5% 5% 4,200 4,110 115 112 5% 4% 100 0% 4,000 110 4% 2% 50 -5% 3,800 4% 105 3,600 0% 0 4% 100 -10% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue (INR Cr) Growth % (RHS) EBITDA (INR Cr) EBITDA Margin % (RHS) PAT (INR Cr) PAT Growth % (RHS)

Net Debt(INR cr.) has been on reducing trend Working Capital Days has been on improving trend

123 122 289 112 103 244

74 71 72 68 155 120

FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Net Debt (INR Cr) Payable Days Receiveable Days 22 Q4FY20 Result Highlights

Whirlpool Of India Ltd. Overall Result: Neutral Key Highlights:

● Whirlpool reported flat revenues for the quarter. However, for FY20 the revenue growth was decent at 11% despite COVID-19 led disruption in Q4FY20, driven by launches in and washing machines ● Gross margin for FY20 improved by 160bps led by better mix & lower RM cost. However, EBIDTA margin fell 70bps to 11.2% due to higher employee costs & other overheads. ● Whirlpool has planned frequent product launches in near future in refrigerators and washing machines, to maintain its market share. Also, its recent expansion at Pune provides adequate capacity in refrigerators and washing machines to meet demand for coming two–three years ● Balance sheet remains fairly strong with decent cash position to tide over the working capital needs in the short term.

Revenue & Growth % EBITDA & Margin % 2500 30.0% 350 18.0% 302 16.0% 1974 25.0% 300 2000 244 14.0% 1651 20.0% 250 12.0% 1393 1500 1355 1271 1354 1182 1212 15.0% 200 171 10.0% 142 137 10.0% 150 8.0% 1000 108 98 90 6.0% 5.0% 100 500 4.0% 0.0% 50 2.0% 0 -5.0% 0 0.0% Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Net Sales % Growth (RHS) EBITDA EBITDA Margin

23 Financial Performance

Consistency in revenue growth continues EBITDA growth remain stable PAT growth has been robust 7,000 25% 800 13% 600 20% 5,993 671 481 6,000 5,399 700 621 20% 500 4,839 553 407 15% 5,000 600 12% 489 400 351 3,941 500 4,000 15% 310 400 12% 300 10% 3,000 10% 300 200 2,000 200 11% 5% 5% 100 1,000 100 0 0% 0 11% 0 0% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue Growth % (RHS) EBITDA EBITDA Margin % (RHS) PAT PAT Growth % (RHS)

Net Debt (INR cr.) continues to improve Working Capital Days has remained stable

FY17 FY18 FY19 FY20 104 103 97 92

(982) (1,059) 14 14 14 13 (1,199)

FY17 FY18 FY19 FY20

(1,662) Payable Days Receiveable Days

24 Q4FY20 Result Highlights

Symphony Ltd. Overall Result: HIT Key Highlights: ● Symphony delivered a strong 12% growth on SA basis even as the sales were impacted due to COVID-19, missed ~15% sales due to COVID-19. OPMs also improved due to robust early stocking by channel. ● Subsidiaries’ revenue fell by 2% y-o-y due to COVID-19 led lockdown in China. The challenges at the Chinese subsidiary is continued, however, management targeting a breakeven in FY21. ● Standalone EBITDA margin expanded by 210bps y-o-y to 31.8% led by gross margin expansion & operating leverage ● As most of the summer has been lost in the lockdown, only a fraction of last year’s sales (maybe 20–25%) are likely this season. However, the management expected relatively better performance in H2FY21 across India due to channel de- stocking in anticipation of extended season and stable performance at key subsidiaries with cost control measures.

Revenue & Growth % EBITDA & EBITDA Margin % 350 120% 80 25% 292 290 68 300 272 70 63 249 100% 20% 250 235 60 80% 50 43 200 38 15% 60% 40 150 29 30 10% 40% 100 20 5% 50 20% 10 0 0% 0 0% Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20

Net Sales % Growth (RHS) EBITDA EBITDA Margin % (RHS)

25 Financial Performance

Revenue growth bounced after muted FY19 EBITDA Margin has been under pressure PAT growth has been muted

1,200 1,103 35% 250 35% 250 80% 220 207 212 1,000 30% 30% 193 60% 200 200 186 844 175 798 25% 25% 40% 800 664 150 20% 132 20% 150 20% 600 115 15% 15% 100 100 0% 400 10% 10% -20% 50 50 200 5% 5% -40%

0 0% 0 0% 0 -60% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue (INR Cr) Growth % (RHS) EBITDA (INR Cr) EBITDA Margin % (RHS) PAT (INR Cr) PAT Growth % (RHS)

B/S remains strong with Net Cash Working Capital days has been improving since FY18

56

45 38 40

29 28 25 27

(264)

(310) (324)

FY17 FY18 FY19 FY20 (419) FY17 FY18 FY19 FY20 Payable Days Receiveable Days 26 Q4FY20 Result Highlights

Dixon Technologies (India) Ltd. Overall Result: HIT Key Highlights: ● Dixon Technologies (Dixon) reported Q4FY20 sales of INR 859crore, flat YoY, below consensus estimate due to around INR 1650crore loss of sales amid COVID-19 lockdown. ● Revenue of (LED TV) rose by 21.6% YoY to INR 393crore in 4QFY20 and 75.5% YoY to INR 2,095crore in FY20, segment revenue contribution increased to 47.6% in FY20 from 40% in FY19. Growth was led by strong order book from its anchor customer . Dixon reported volume sales of 2.1mn units in FY20, implying a 15% market share in LED TV industry. EBITDA margin stood at 2.5% in 4QFY20 (expanded by 120bps YoY and flat QoQ) and 2.4% in FY20 (expanded by 30bps YoY). ● Lighting sales fell 16.4% YoY to INR 255crore in 4QFY20 while it grew 24% YoY to INR 1140crore in FY20. Home Appliances (semi- automatic ) revenue fell 3% YoY to INR 90crore in 4QFY20, while it grew 6% YoY to INR 396crore in FY20. ● EBITDA grew 49% YoY to INR 56crore with an operating margin of 6.5% (expanded by 210bps YoY) in Q4FY20 and 5.1% (expanded by 60 bps) in FY20 even after increase in sales contribution from low margin consumer electronics segment. The margins were driven by operating leverage, improved sales mix, value engineering and feature phones of having high margin due to job work accounting. Revenue Growth has been robust Margin is on an improving trend 70 63 7.0% 1500 1402 100.0% 53 56 1147 80.0% 60 52 6.0% 994 859 857 60.0% 50 39 38 5.0% 1000 739 794 40 33 4.0% 593 40.0% 26 20.0% 30 3.0% 500 0.0% 20 2.0% -20.0% 10 1.0%

0 -40.0% 0 0.0%

Q3FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q4FY20

Net Sales % Growth (RHS) EBITDA EBITDA Margin % (RHS)

27 Financial Performance

Sharp increase in revenue in FY20 led by EBITDA rose sharply in FY20 led by high Robust PAT growth in FY20 Xiaomi partnership 5,000 50% 250 revenues 6% 140 100% 4,400 223 121 4,500 45% 90% 120 4,000 40% 200 5% 80% 100 3,500 2,984 35% 4% 70% 2,853 135 3,000 2,499 30% 150 80 60% 2,500 25% 112 3% 61 63 50% 90 2,000 20% 100 60 48 40% 2% 1,500 15% 40 30% 1,000 10% 50 20% 1% 20 500 5% 10% 0 0% 0 0% 0 0% FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue (INR Cr) Growth % (RHS) EBITDA (INR Cr) EBITDA Margin % (RHS) PAT (INR Cr) PAT Growth % (RHS)

Net Debt (INR Cr) became negative in FY20 due to strong CFO Working Capital Cycle has been stable 126 99 89 81 75 58 39 43 28 29

FY17 FY18 FY19 FY20 (3) FY17 FY18 FY19 FY20 (18) Payable Days Receiveable Days

28 Valuation Metrics

P/E (X) EV/EBITDA (X) RoCE (%) EPS (INR)

FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E

Voltas 32.6 37 27.4 23.7 25.9 19.3 39.8 32.7 26 16.8 14.8 20.1

Amber 28.9 35.5 22 16.2 16.4 12 17.3 15.1 19.8 52.2 42.6 68.7

Blue Star 33 43.9 27.2 17.3 22.5 15.7 13.6 7.2 14.6 15.3 11.5 18.6

Whirlpool 54.2 60.3 48.9 36.7 40.2 32.3 24.8 17 19.3 37.5 33.7 41.6

Symphony 34.2 38.2 32.2 29.9 30.6 25.6 27.1 22.8 23.6 26.6 23.8 28.3

Dixon 54.7 43.7 29.9 28 33.1 35.2 29.2 28.9 32.7 104 130 190

Note: Estimates of Voltas & Amber are of EPIR; Whirlpool & Symphony of Edelweiss Institution; BlueStar & Dixon consensus

29 Edelweiss Broking Limited, Edelweiss House, Off, CST Road, Kolivery Village, MMRDA Area, Kalina, Santacruz East, Mumbai, Maharashtra 400098

Vinay Khattar Head Research [email protected]

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