LG India’s strong product line to sustain margins, drive stock upside

ET Intelligence Group: LG Electronics India‘s shares have risen 8% over the past month, outperforming 5% drop in the BSE Consumer Durables index. Analysts have maintained ‘buy’ on the stock with 14-19% upside from Wednesday’s closing price of ₹1,592.3 on the BSE, citing steady growth in market share across categories driven by premiumisation, a wider AC portfolio, and targeted price increase.

LG aims to double overseas revenue contribution by FY27 by scaling US-specific refrigerator production and targeting export growth of microwave ovens in Europe.

The stock rallied despite a soft December quarter amid margin contraction due to higher input costs, currency volatility and one-off compliance expenses. However, it increased market share in categories such as refrigerators, ACs, TVs and maintained its leadership in the washing machine category. The March quarter is expected to be better as the company is likely to report double-digit revenue growth and improved margins. For FY26, LG has guided for single-digit revenue growth and double-digit Ebitda margin. It also anticipates double-digit revenue growth in FY27 with sustained margins driven by premium launches, diversified portfolio and strong brand equity.

While higher prices of inputs including copper and aluminium pose a risk to profitability, LG expects to reduce the pressure given its global scale, long-term vendor contracts and strong backward integration.

Stricter BEE norms kicked in from January, where most of the five-star refrigerators and air conditioners would be reduced to four stars unless tougher standards are met. To comply with new standards, LG improved product efficiency and raised prices on the new three and five star-rated ACs. It expects the recent GST cut to largely offset higher prices.

The company also benefits from a nine-year advance pricing agreement that cleared major transfer-pricing contingencies and a long-term Maharashtra incentive package of ₹706 crore that cushions capex and strengthens cash flows. Motilal Oswal has maintained ‘buy’ and estimates revenue and PAT to grow 10% and 23%, respectively, over FY26-28, and margins at 12.7% in FY28 from 10.3% in FY26.

YES Securities has initiated coverage with a ‘buy’ rating, citing rising export penetration, premiumisation-led domestic growth and better margins.