Accumulate LG Electronics India Ltd For Target Rs.1,690 by Prabhudas Liladhar Capital Ltd
Premiumization drives growth while margins contracts
Home Appliances & Air Solutions revenue grew 5.7% YoY to Rs65.2bn, driven by broadbased demand recovery and premiumization across categories, with strong traction in fully automatic washing machines, while dishwashers also emerged as a key growth driver. Home Entertainment segment reported strong 19.6% YoY revenue growth to Rs15.4bn, led by healthy demand for large-screen premium TVs and strong growth in the Information Display business supported by robust commercial signage order inflows. EBITDA margin contracted by 250bps YoY, impacted by elevated commodity prices, rupee depreciation impacting ~1.0%, strategic channel investments impacting ~1.1% and higher e-waste compliance costs affecting margins by ~0.2%. We downward revise our FY27/FY28 earnings estimates by 8.0%/7.7%, factoring in continued pressure from elevated commodity prices, higher import-led input costs and increase in marketing expenses. We estimate FY26-28E revenue/EBITDA/PAT CAGR of 11.7%/22.3%/21.9%. We downgrade to ‘Accumulate’ from ‘BUY’ rating with revised TP of Rs1,690 (earlier Rs1,813) based on 45x FY28 EPS.
Q4FY26:
Revenues grew by 8.1% YoY to Rs80.5bn. Gross margins contracted by 190bps YoY to 28.6%. EBITDA declined by 10.4% YoY to Rs9.5bn. EBITDA margin contracted by 240bps YoY to 11.7%. Home Appliance and Air Solution revenue grew by 5.7% YoY to Rs65.2bn and EBIT margin came in at 11.9% (contracted by 250bps YoY). Home Entertainment revenue grew by 19.6% YoY to Rs15.4bn. EBIT margin contracted by 280bps YoY to 13.4%. PAT declined by 8.2% YoY to Rs6.9bn.
FY26:
Revenues grew by 1.0% YoY to Rs246.0bn. Gross margins contracted by 170bps YoY to 30.2%. EBITDA declined by 22.2% YoY to Rs24.2bn. EBITDA margin contracted by 290bps YoY to 9.8%. Home Appliance and Air Solution revenue grew by 0.6% YoY to Rs181.6bn and EBIT margin came in at 9.8% (contracted by 310bps YoY). Home Entertainment revenue grew by 5.7% YoY to Rs64.4bn. EBIT margin contracted by 240bps YoY to 12.8%. PAT declined by 23.5% YoY to Rs16.9bn.
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