Among India’s leading home appliances brands, the company retained pole position in the offline channel across categories, including refrigerators, ACs, washing machines and televisions. This dominance, JM believes, is driven by its robust brand recall, edge in technology and innovation, strong parentage and widespread distribution.
Further, the company’s close integration with its Korean parent, LG Electronics, remains a key differentiator and a critical factor in helping the company stay ahead of the competition. The partnership spans product innovation and design, with LG India’s own R&D spending at around 0.4% of revenue, complemented by the parent company’s significantly higher annual R&D investment of roughly $2 billion, or 3–4% of its revenue. This collaboration supports faster innovation cycles and helps the company consistently refresh its product portfolio. In addition, LGEIL benefits from access to advanced manufacturing technologies and technical know-how, as well as allocation of global exports.
The company’s extensive in-house manufacturing footprint, with nearly 95% of products manufactured internally at its Noida and Pune facilities, gives the company strong control over its supply chain while delivering meaningful scale efficiencies. Further strengthening this advantage, it has announced plans to set up a third manufacturing facility at Sri City in Andhra Pradesh, with a proposed investment of Rs 5,000 crore. The new unit, expected to become operational by FY27E, will initially focus on air conditioners and AC compressors, before expanding into washing machines and refrigerators. Once fully ramped up, the facility is expected to nearly double capacity across key segments and triple AC compressor capacity, reinforcing LGEIL’s long-term manufacturing and cost competitiveness, the brokerage added.
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JM Financial values LG at 45x December 2027E EPS. The valuation is underpinned by an EPS CAGR of 16% and an average RoE of 27% over FY26–FY28E.
Between FY18 and FY25, it has delivered a robust average RoE of 33% and RoCE of 29%, while consistently generating positive operating and free cash flows. Although its EPS growth trajectory is lower than that of some peers, JM does not apply a valuation discount. This is supported by its market leadership across categories, superior margin profile, strong backing from its parent company that enhances competitive positioning, deep manufacturing capabilities, and solid underlying fundamentals.The brokerage has also flagged a few risks. LG operates in an ultra-competitive industry, which could intensify pricing pressure and impact margins and market share. The company also remains highly dependent on its parent entity for several critical aspects of the business, including research and development, access to advanced technology, and allocation of export opportunities from India. Additionally, the parent company retains the right to increase royalty payments up to 5% without prior shareholder approval, which could affect profitability.
Another risk stems from supplier concentration, with the top 10 and top 5 suppliers accounting for 33% and 23% of total supplies in FY25, respectively. These suppliers provide key raw materials such as pre-coated and galvanised steel used to prevent rusting, resins for plastic components and packaging, and internally grooved tubes used in air conditioners for heat and air exchangers, making the company vulnerable to potential supply disruptions or cost fluctuations.
LG India shares are down 2% in today’s session, hitting an intraday low of Rs 1,348 per share.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)