Buy LG Electronics India Ltd for the Target Rs.1,900 by Emkay Global Financial Services Ltd
LG Electronics India’s (LGEIL) revenue growth turned positive at 8% YoY to Rs80.5bn after 3 quarters of weakness, below our estimate of Rs82.5bn, driven by category-wide pick-up in demand momentum (HA/HE revenues up 6%/20% YoY). EBITDA stood at Rs9.4bn with EBITDAM improving QoQ to 11.7% (below our expectation of 12.8%) impacted by rupee weakness (1% drag) and channel promotion spends (~1.1%). For FY27, LGEIL guides for mid-teens revenue growth (through domestic recovery, export scale-up via the Essential series, rising B2B) and early double-digit EBITDAM, driven by calibrated price hikes, localization, and rising exports/B2B product mix. While early indicators are encouraging, given strong heatwave-led demand in compressor-based products, management noted that mid-April rainfall disruptions dented early season momentum in primary markets. On pricing, it maintains a calibrated approach (no further hikes indicated yet) with a close ‘wait and watch’ stance (Refer to: Exports and B2B seen as incremental growth levers). To factor in near-term commodity headwinds, we trim FY27/28E EPS by ~5/4%. We rollfwd our TP to 50x Mar-28E PER (vs Dec-27E). Maintain BUY and TP of Rs1,900.
Growth steady; weaker-than-expected profitability
Revenue grew 8% YoY (2.4%/0.9% below our/street estimates of Rs82.6bn/Rs81.3n) to Rs80.5bn. EBITDA declined 10.4%, coming in 10.5/5.6% below our/street estimates (Rs10.6bn/Rs10bn) at Rs9.4bn, with EBITDAM at 11.7% largely due to GM compression (~400bps QoQ) and higher opex. APAT stood at Rs6.9bn, a 9.1% miss vs our estimate
Earnings call KTAs
1) The management guides for mid-teen revenue growth in FY27, with an EBITDA margin target in the early double-digit range (exports/B2B).
2) Early indicators from April/May are encouraging, driven by strong heatwave-driven demand for compressor-based products.
3) Exports are seen as one of the most important levers for growth/margin protection (given natural hedge against FX), For this, LG is pursuing a 2-pronged strategy of scaling the mass-premium Essential Series into new geographies (+22 countries), with a premium product focus (side-by-side Ref, front-load WM) in developed countries like US/Europe.
4) Heading into Q1FY27, RAC channel inventory levels were lean, with dealers cautious given weather-related uncertainties.
5) EBITDAM fell ~250bps YoY, driven by rupee depreciation (~1% impact on margins) and channel promotion investments (~1.1%), but they mentioned these were deliberate, time-bound spends to deepen channel partner relationships.
6) Market share of premium OLED TV stood at 60%, while the newly introduced French Door Ref has already captured 14% share by FY26 (targeting #1 spot soon).
7) TVs: 55-inch+ segment grew 47% YoY in Q4 (~49% of LG's total TV revenue now)
8) Sri City facility entails cumulative capex of Rs50bn in a phased manner, with AC compressor production to begin in Q3FY27, RAC assembly in Q4FY27, and WM/Ref lines coming onstream in phases thereafter.
9) LG views B2B as hedge from B2C business (CAC delivered strong growth in Q4), and the pipeline is being expanded (new 5-star SAC model seen as key enabler for government project bidding
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