JM Financial has initiated coverage on LG Electronics India with a ‘Buy’ rating and a price target of Rs 1,630, implying that the stock might see 19% lift over the next 12 months. The brokerage house said that LG Electronics’ market leadership, support from the parent company, breadth of manufacturing capabilities, and robust fundamentals are key factors behind starting coverage on the stock.
Market leadership across major categories
LG Electronics is a dominant player in the Indian consumer durables market, maintaining the top spot in offline channels across refrigerators, washing machines, and televisions, with a market share exceeding 25% (excluding ACs). It also holds a significant lead in the premium segment, such as a 63% market share in OLED TVs and a 43% share in side-by-side refrigerators.
Industry-leading profitability and margins
The company enjoys a superior margin profile compared to its peers. In FY25, LG Electronics reported an EBITDA margin of approximately 13%, whereas competitors like Samsung and Havells were at 10%, and others like Voltas and Whirlpool hovered around 7%. These high margins are attributed to a premium product mix and contributions from high-margin verticals like B2B products, service contracts, and exports.
LG Electronics has a proven track record of maintaining high return ratios, with an average RoE of 33% and RoCE of 29% delivered over the FY18-FY25 period.
Extensive in-house manufacturing capabilities
The company manufactures approximately 95% of its products in-house at its Noida and Pune facilities. This vertical integration provides the company with significant control over its supply chain, scale benefits, and the ability to localise its sourcing. This further protects LG Electronics’ margins. Additionally, a new Rs 5,000 crore plant in Sri City is expected to double capacities in key segments by FY27.
Strategic moat provided by strong parentage
JM Financial said that the company benefits significantly from its Korean parent company, LG Electronics Inc., which provides a competitive edge through technological innovation and R&D. While the company spends about 0.4% of its revenue on R&D, it draws on the parent company’s annual global R&D investment of approximately $2 billion, which is critical for staying ahead of aggressive competition and evolving consumer preferences.