Buy LG Electronics India Ltd for the Target Rs 2,080 by Motilal Oswal Financial Services Ltd
Diversified portfolio; TV, washing machine leading growth
* Our recent interaction with LG Electronics India (LGEIL) management suggests healthy revenue growth momentum across key segments, aided by healthy consumer demand and its premiumization strategy. Television (TV), washing machine and air conditioner (AC) segments are estimated to clock double-digit growth, while refrigerator growth is estimated in low-single digits. Margin is likely to improve on a YoY basis, backed by a richer product mix, premiumization and increased localizations.
* The company has announced a ~5-6% price hike in AC, effective 1st Oct’26, to mitigate higher input cost pressure. No price hikes have been announced so far in other product categories, in which prices are expected to remain largely stable. New product launches and increasing SKUs in the value-driven Essential series should support portfolio expansion and market penetration.
* Over the medium term, localization, Sri City capacity, B2B expansion and exports should provide additional growth levers. At Sri City, compressor production is expected to commence in 3QFY27, followed by AC manufacturing from 4QFY27 and washing machine/refrigerator over the subsequent 18 months. It expects the facility to eventually manufacture products for the mass, premium and Essential portfolios.
* We introduce FY29 earnings estimates in this note. We estimate LGEIL’s revenue/EBITDA/PAT CAGR at ~14%/24%/25% over FY26-29. We estimate mid-teen revenue growth in Home Appliances & Air Solution and Home Entertainment, and a gradual margin expansion in FY28/29 by 70bp/40bp to 13% (similar to FY25). We reiterate BUY with a TP of INR2,080, based on 45x Sep’28E EPS. At CMP, the stock trades at 40x FY28E EPS.
Healthy growth across key categories supported by premiumization
* Management indicated that the festive season has been delayed by around one month this year, implying that the full benefit of festive demand should largely reflect in the next quarter. Despite the timing shift, underlying consumer demand is healthy, with premiumization continuing across consumer electronics categories.
* TV demand remains strong, with growth estimated at ~20%, largely led by large-screen products. The 55-inch-and-above segment is growing by ~50% YoY, while smaller screen sizes remain broadly flat. LGEIL indicated that this trend has continued in the past two quarters, with large-screen TVs continuing to account for a disproportionate share of revenue growth. The shift toward larger screens reflects ongoing premiumization within the TV category and should support LGEIL value growth even if overall unit growth moderates.
* Washing machine growth is estimated at ~12-15%, backed by healthy demand for the core portfolio and LG Essential. The company is increasingly using Essential to address the mass segment while retaining its premium positioning in higher-end fully automatic washing machines.
* Refrigerator growth is subdued and is expected to be in low single digits. However, LGEIL’s new lineup of French-door refrigerator portfolio continues to witness strong consumer traction, with management indicating that it had emerged as the segment leader by Aug’26 end, overtaking Haier and Samsung within 3-6 months of launch. The category is witnessing a significant expansion of its addressable market, as products are available in the range of INR1.2-1.6 lakh. Its continued product launches in this category, including its latest 574- 610L French-door range, indicate the company’s intent to further develop the premium refrigerator segment.
* In RAC, growth is estimated at ~12-15%, largely reflecting price increases taken to pass on higher input cost pressure. It indicated that AC demand remains relatively subdued in 2Q and 3Q due to seasonality. The upcoming Sri City capacity for compressor and RAC should strengthen the company’s localization and supply-chain flexibility in the category.
Valuation and view
* We maintain our positive view on LGEIL, supported by its diversified product portfolio, strong brand franchise, multiple avenues for sustainable revenue growth and better margin profile vs. peers. The company is well placed to benefit from structural premiumization across TVs, refrigerators, washing machines and ACs, while the expanding LG Essential portfolio provides an additional growth factor by broadening its addressable market. Recent trends across large-screen TVs, French-door refrigerators and fully automatic washing machines highlight LGEIL’s ability to drive value growth even in a mixed demand environment. Over the medium term, we expect Sri City capacity expansion, deeper localization and increasing exports to further strengthen the growth and profitability profile.
* We estimate a CAGR of ~14%/24%/25% in revenue/EBITDA/PAT over FY26-29. We estimate OPM to expand to 11.9%/12.6%/12.9% by FY27/FY28/FY29 vs. 9.8% in FY26. It has consistently generated positive operating cash flows over the years. We estimate cumulative OCF of INR83b during FY27-29; however, its capex plans for the Sri City plant (INR43b to be spent during FY27-29E) are expected to moderate its FCF. Cumulative FCF during FY26-28 is estimated at INR40b. Net cash balance is estimated to increase to INR66.4b by FY29 vs. INR44.8b in FY26.
* The stock trades at 40x FY28E EPS. We value LGEIL at 45x Sep’28E EPS to arrive at a TP of INR2,080. Reiterate BUY.
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