Brokerages remain positive on LG Electronics India after the company reported its March quarter earnings, even as margin pressure from currency depreciation, higher commodity costs and promotional spending weighed on profitability.
Both Nomura and Emkay Global Financial Services have retained their ‘Buy’ ratings on the stock, citing strong demand in premium appliances, rising exports and growth in the B2B segment as long-term growth drivers.
LG Electronics India posted an 8 per cent year-on-year rise in revenue for Q4FY26 at Rs 80.5 billion, supported by improved demand across home appliances and home entertainment categories. However, operating performance remained under pressure as EBITDA declined around 10 per cent year-on-year due to higher input costs, rupee weakness and increased investments in distribution and channel promotions.
The home appliances segment recorded 6 per cent growth during the quarter, led by strong traction in premium categories such as French-door refrigerators, automatic washing machines and dishwashers. Room air conditioners also witnessed healthy demand during the summer season, helped by the launch of new star-rated models and GST-related benefits.
Meanwhile, the home entertainment business delivered robust 20 per cent growth, aided by rising demand for large-screen televisions and higher consumption linked to major cricket events. The 55-inch and above TV category continued to gain share in the company’s portfolio.
Despite healthy revenue growth, margins came under pressure during the quarter. Nuvama highlighted that profitability was impacted by commodity inflation, currency depreciation and strategic investments aimed at strengthening distribution reach and dealer relationships. Emkay also noted that gross margin compression and higher operating expenses affected earnings performance.
Management, however, remains optimistic about FY27 and has guided for mid-teen revenue growth along with early double-digit EBITDA margins. The company expects growth to be driven by domestic demand recovery, premiumisation, localisation efforts, exports and expansion of its B2B operations.
Exports are emerging as a major focus area for LG Electronics India. The company plans to expand its Essential Series products into more international markets while strengthening its premium product portfolio in developed economies such as the US and Europe. According to management, exports also provide a natural hedge against foreign exchange volatility.
The brokerage houses further pointed to the company’s growing B2B business as an additional growth engine. LG sees commercial air conditioning and institutional product offerings as a way to reduce dependence on the consumer business.
The company is also continuing work on its Sri City manufacturing facility, where air-conditioner compressor production is expected to begin in Q3FY27, followed by RAC assembly operations in Q4FY27. Additional washing machine and refrigerator production lines will be added in phases.
Following the earnings, both brokerages trimmed their earnings estimates slightly to factor in near-term margin headwinds. Nuvama reduced its FY27 and FY28 earnings estimates by 4 per cent and 3 per cent, respectively, while Emkay cut its projections by around 5 per cent and 4 per cent.
Nuvama has maintained a target price of Rs 1820 on the stock, while Emkay retained its target price of Rs 1900, keeping its positive outlook intact on expectations of stronger exports, premium product demand and improving scale in the B2B business.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions)
