Day 2 on D’Street, and ‘life’s good’ for LG Electronics India shareholders. The share price of LG Electronics is upbeat in trade today after the stunning listing yesterday (October 14). Most brokerages have given a Buy rating to the stocks on the back of attractive valuations. Nomura too has reiterated Buy with a target price of Rs 1,800 per share. This indicates room for another 5% upside after the 50% listing pop.
Nomura’s FY27-FY28 EPS estimate for LG Electronics India is at Rs 48 per share. “Considering its strong growth outlook, improving profitability and robust ROE (return on equity) of 31% in FY28F, we value the shares at 40x target P/E,” Nomura added. According to Nomura’s calculation, the stock is trading at “35x FY28 PE.”
Nomura on LG Electronics India: Betting on strong domestic franchise
Listing out the top triggers for initiating coverage with Buy recommendation, Nomura highlighted that “LG has a strong, domestic brand franchise positioned toward the premium segment.” The management’s focus on the “masstige segment will expand the addressable market and could potentially drive market share gains as well,” they added.
The international brokerage house highlighted that depending on execution, “there could be upside risks to our expectation of 10% revenue CAGR over FY25-FY28.”
Nomura on LG Electronics India: New product launches
Moreover, Nomura explained that the new product launches across ACs, refrigerator, microwave, washing machine, targets mass premium products and this also supports the Buy call on the stock. The brokerage house added that, “the LG Essential series is a step in that direction, with a focus on performance, durability, and accessibility.”
Nomura on LG Electronics India: Localisation benefits
On margins, Nomura pointed out that considering the high localisation levels in India, “strong salience of general trade channels (50 -75% depending on the product) and operating leverage benefit on higher scale, we believe there are sufficient levers to address any risks to margins in the medium term.”
Overall, they expect LG Electronics India to deliver a 10% revenue CAGR over FY25-FY28, driven by multiple products, exports and service initiatives. As per their estimates, the EBITDA margin is expected to “improve to 14.1% in FY28 from 12.8% in FY25, led by better mix, operating leverage and localisation.”
Nomura on LG Electronics India: Premium Vs volume
Speaking about LG’s current strategy is to make the premium products accessible to the volume segment, Nomura added that this “range was developed following feedback from 1,241 customers across cities and value engineered accordingly. The entire range will gradually be released from November onwards, mainly in Tier 2/3 cities.” Though the price range was not disclosed, they highlighted that the “management aims to launch at only a 10-15% premium to the volume category products (compared to 40-50% now).”
They do not see the move as margin-dilutive, “as products are value engineered to lower their cost as well.”
Overall, Nomura highlighted that LG Electronic India’s strategy of focusing on mass premium, exports and B2B initiatives will drive growth with improving profitability. The IPO of the company recently made history with one of the highest ever subscription numbers. The issue was subscribed over 55x and attracted bids worth nearly $50 billion.