LG Electronics India margin expansion supports growth outlook on premiumisation, exports and B2B

Investment View and Valuation

Motilal Oswal Financial Services Limited (MOFSL) retains its Buy rating on LG Electronics India following better-than-estimated operating performance in 1QFY27. The broker has raised its target price to Rs 2,000 from Rs 1,800, valuing the company at 45 times FY28E EPS.

MOFSL remains constructive on the long-term growth outlook, supported by LG Electronics India's diversified product portfolio, broad-based category growth, premiumisation, increasing localisation, strong brand positioning, and rising contributions from exports and B2B businesses.

1QFY27 Financial Performance

Consolidated 1QFY27 revenue rose approximately 15 per cent year on year to Rs 7,230 crore, in line with MOFSL's estimate. EBITDA increased approximately 26 per cent year on year to Rs 900 crore, around 8 per cent above the broker's estimate. Operating margin expanded 1.1 percentage points year on year to 12.5 per cent, compared with MOFSL's expectation of 11.8 per cent.

Adjusted PAT grew approximately 27 per cent year on year to Rs 650 crore, in line with the broker's estimate. Higher depreciation and interest costs, which increased 24 per cent and 7 per cent year on year respectively, were partly offset by approximately 27 per cent growth in other income.

Segment Performance

Home Appliances and Air Solutions

The Home Appliances and Air Solutions (H&A) segment reported 1QFY27 revenue growth of approximately 14 per cent year on year to Rs 5,580 crore and EBIT growth of approximately 15 per cent to Rs 650 crore, both in line with estimates. H&A EBIT margin was flat year on year at 11.6 per cent, below MOFSL's 12.0 per cent estimate.

Home Entertainment

Home Entertainment (HE) revenue rose approximately 22 per cent year on year to Rs 1,660 crore, 9 per cent above the broker's estimate. HE EBIT increased approximately 49 per cent to Rs 320 crore, around 39 per cent ahead of estimate. Segment margin expanded 3.4 percentage points year on year to 19.1 per cent, compared with the 15.0 per cent estimate.

Demand, Premiumisation and Business Drivers

Management was positive on demand, citing broad-based double-digit category growth in 1QFY27 and expecting to sustain its roughly 20 per cent growth trajectory. Margin expansion was attributed to a richer product mix, calibrated price increases and operating leverage.

• The Sri City expansion is expected to deliver scale and localisation benefits over time.
• Washing machines and televisions are expected to drive growth in 2HFY27.
• Refrigerators and room air conditioners should benefit from premiumisation and replacement demand.
• B2B growth was healthy, led by HVAC and Information Display.
• Exports rose approximately 30 per cent year on year to a record quarterly performance.
• Television revenue grew approximately 25 per cent year on year for the second consecutive quarter.

LG held approximately 36 per cent market share in Information Display, with a roughly 5 percentage point lead over the number two player. The Essential series sold over 0.5 million units during January to June 2026 and was exported to 22 countries across Asia, the Middle East and Africa.

Earnings Outlook and Estimates

MOFSL raised its FY27E and FY28E EPS estimates by approximately 7 per cent and 10 per cent respectively, reflecting higher revenue and margin assumptions. The broker forecasts FY26-FY28 revenue, EBITDA and PAT CAGR of 13 per cent, 30 per cent and 32 per cent respectively.

Cash Generation and Returns

Net cash is estimated to rise to Rs 5,970 crore by FY28E from Rs 4,480 crore in FY26. ROE and ROCE are forecast to improve to approximately 29 per cent and 30 per cent respectively.

Target Price

MOFSL values LG Electronics India at 45 times FY28E EPS and raises its target price to Rs 2,000 from Rs 1,800. The recommendation remains Buy.