Target: ₹1,750
CMP: ₹1,526.80
LG Electronics India (LGEL) expects FY26 revenue to be flat or grow at a modest pace of 2-3 per cent (9MFY26 revenue down 2 per cent year on year), in-line with its guidance. Thus, expect Q4 revenue to grow by high single- to double-digits. The company expects low double-digit margin in FY26, implying Q4FY26 margin within 12.5-13.5 per cent range, with price hikes of 7-9 per cent in room air conditioners (RACs) in January, led by a premium mix and good sales of non-RAC categories. LGEL had hiked price by 2 per cent for washing machines and refrigerators in Q3FY26.
Regarding raw material, it has sufficient LPG inventory until the first week of April, to be used for RACs and refrigerators. If LPG shortage persists, it would substitute a portion of manufacturing (about 30 per cent) with oxy acetylene brazing and PNG brazing. There is no impact on cost, as PNG is cheaper than LPG. The only drawback is longer brazing time and certain carbon and aluminium deposits left in the heat exchanger from acetylene brazing. Also, LPG shortage will not impact washing machines and TV manufacturing at all.
We maintain Accumulate with a TP of ₹1,750 on 45x FY28 P/E on account of market leadership in most durable categories, industry-leading margins, higher premium contribution versus peers and growth plans of raising exports, B2B and AMC contribution and foray into the economy segment. Key risks to our call are weather changes impacting RAC demand, and supply chain constraints.