LG commands one of the largest in-house manufacturing capacities in white goods in India and its in-house manufactured goods as a percentage of net sales increased from 84.2% in FY22 to 86.1% in FY25.
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ICICI Securities Report
We initiate coverage on LG Electronics India Ltd. with a Buy rating as:
It has developed strong competitive advantages such as LG brand with premium positioning, established distribution network, and multiple manufacturing units in India with strong backward integration capabilities.
Its share-of-voice is higher than that of peers, indicating potential for market share gains. LG is also investing in strengthening its distribution network and we model this to act as a key competitive advantage and growth driver.
It has generated strong return ratios and free-cash-flow over FY14-25. Core RoE (ex-cash and tax adjusted other income) is >90%.
It is market leader in most white goods it operates in and is beneficiary of premiumisation trend.
Revenue contribution of LG India to parent’s revenue rose from 3.5% in CY21 to 4.3% in CY24, highlighting the growing importance of the Indian business to the parent.
We also believe recent reduction in GST rates, income tax and interest rates augurs well for growth of most categories in FY27-28E and model LG to be a beneficiary.
We model LG India to report revenue/PAT CAGR of 9.3%/7.9% over FY25–28E.
We initiate coverage on the stock with a BUY rating and a DCF-based target price of Rs 1,700 (implying 45x FY27E and 42x FY28E earnings).
Key risks:
Steep competition, delay/ failure in launch of new products, and rapid technological changes.
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