A subdued performance notwithstanding, shares of Whirlpool of India Ltd gained 1.6% after its September quarter (Q2) results. Revenue rose just 1.9% while operating profit was little changed. Sluggish sales, partly impacted by the floods in Kerala and a delayed festive season, weighed on revenue and earnings.

Even then the management maintained a bullish tone on medium-term growth prospects at the analysts meet.

According to Kotak Institutional Equities, the management expects double-digit revenue growth over the next few years helped by expansion in product portfolio and distribution reach, strong brand recall and low penetration of household appliances.

“Management is bullish on medium-term growth pros-pects, investing in expanding manufacturing at Pune and Pondicherry for fridges and washing machines," Dolat Capital Market Pvt. Ltd said in a note.

Further, the management said sales have picked up over the last one week which should help the firm in the rest of the fiscal year. While the commentary is helping the Whirlpool stock, growing competition is making analysts wary. Entry of Voltas Beko and Lloyd into refrigerators and washing machines, the company’s core product categories, can impact the industry’s profitability and limit market share gains of the Whirlpool, warns Kotak. Citing these reasons Kotak reduced its FY19-21 earnings estimates by 6-12%.

The concerns are not confined to Whirlpool alone. Recently Centrum Broking Ltd warned that increasing competition could impact IFB Industries Ltd’s sales growth over the next two years. “We believe the competition is getting aggressive across categories with Voltas Beko launching washing products from Q3FY19 and Chinese manufacturers aggressively selling online," Centrum Broking said in a note on IFB Industries.

Sure, competition is nothing new for the home appliances makers. The market has seen regular entry of new firms. Also as one analyst with an institutional broking firm says, the market is big enough to accommodate new entrants especially given the low penetration and improving affordability.

But unlike earlier instances, competition this time is being driven by the established home-grown brands—Voltas and Lloyd backed by Havells India Ltd. While premium valuations are not helping—both Whirlpool and IFB stocks trade at about 38 times FY19 earnings estimates—raw material cost pressure accentuated by the rupee depreciation are adding to the profitability concerns. “Valuations are expensive and do not build in potential negative impact of increased competitive intensity in the industry," add the Kotak analysts.

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