Elara sees essential-led growth in LG Electronics; starts with 'Accumulate'

Elara Capital has initiated coverage on LG Electronics India with an Accumulate rating, citing the company’s undisputed leadership in India’s consumer durables market and its decade-long dominance in the segment.

 

The brokerage has set a target price of ₹1,750, based on 45x FY28E P/E, a 12.5 per cent premium to the durables industry average P/E of 40x, driven by its leadership position, higher margins versus peers, and strong return ratios of 32–35 per cent.  Amid this, LG Electronics shares were trading at ₹1,585.70 per share at 01:00 PM, up 3.36 per cent from the previous close of ₹1,534.20 per share on the NSE.  The assigned target price implies an upside of around 10.36 per cent from the current market price on the NSE.

 

 

The brokerage expects an earnings CAGR of 18 per cent, with average ROE and ROCE of 32 per cent and 33 per cent, respectively, over FY26E–FY28E.

 

“We expect LGEIL to see accelerated revenue growth of 14–16 per cent (upside case), led by the LG Essential series over the next five years, similar to the trend seen at Haier and Bluestar (driven by capex and re-entry into the economy segment) during FY20–25. We expect earnings to compound at a CAGR of 18 per cent in FY26E–FY28E, supported by rising localisation to 63 per cent, bridging product gaps through parental support, and continued leadership in premium categories,” said the brokerage in its report.

 

Elara added that LGEIL’s ₹5,000 crore capex plan over the next four years should provide revenue visibility of ₹20,000–25,000 crore and open up scope for the company to become an exporter.

Growth acceleration via LG Essential

Elara highlighted that the company is re-entering the economy segment through its LG Essential series in tier II and III markets and through the traditional channel—initially in refrigerators and washing machines, followed by room air conditioners and microwaves. The brokerage expects this strategy to support volume growth, market share gains, and operating leverage.

 

Elara believes LGEIL could see accelerated revenue growth of 14–16 per cent (upside case) during FY26E–FY30E from the current growth of around 11 per cent, if it mirrors Haier’s blueprint of aggressive pricing, higher capex, and increased localisation while maintaining a superior return profile.

 

Similarly, Bluestar ventured into the mass-premium segment in CY21, which accelerated its revenue CAGR to 32 per cent and helped it gain around 150 basis points of market share during FY20–25.

Engines of compounding — localisation and bridging product gaps

Elara said an earnings CAGR of 18 per cent in FY26E–FY28E would be supported by rising localisation and backward integration into components such as compressors and PCBs, unlike domestic peers, with a target to increase localisation to 63 per cent from the current 54 per cent over the next four years.

 

It also cited strong parental support for R&D and technology, enabling the company to bridge product gaps between its parent and India operations in areas such as data centre cooling, medical displays, and EV and mobility solutions, where the parent has a strong presence. A premium portfolio with leadership in high-value categories is also expected to aid growth.

 

“We expect Ebitda margin to rise to over 12 per cent in FY28E from 11.4 per cent in FY26E, compared with the industry margin of around 8 per cent. Doubling export share to 10–12 per cent over the next five years, aided by the reopening of the US market and supported by the new Sri City facility, is another sunrise area,” said the brokerage.

Massive capex plan to ensure revenue visibility

LGEIL is undertaking capex of ₹5,000 crore at Sri City, Tamil Nadu, over the next four years, about 3.7 times the cumulative capex incurred during FY22–FY25, to expand capacity in room air conditioners, washing machines, refrigerators, and compressors. This could translate into incremental revenue of ₹20,000–25,000 crore, assuming asset turnover of 4–4.5x once the capacities are fully ramped up, said Elara.    =============================== 

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