'Life’s Indeed Good' For LG Electronics: Jefferies Initiates Bullish Coverage — Check Target Price

LG Electronics India Ltd. is a one of the strongest plays on India’s growing discretionary consumption cycle, noted Jefferies as it initiates a 'Buy' coverage with 21% upside.

The brokerage describes LG’s India business as a “Life’s Indeed Good” opportunity, backed by diversified product exposure, entrenched industry leadership, robust financials and sizeable balance sheet cash to fund future expansion.

LG enjoys one of the most diversified product mixes in India’s consumer-durables industry. Refrigerators contribute around 27% of fiscal year 2025 sales, followed by washing machines at 21%, air conditioners at 22%, televisions at 20% and other categories at 10%.

Jefferies notes that the company holds market leadership in refrigerators (30% share as of September quarter) and washing machines (33%), while ranking second in room air-conditioners with a 17% share, especially strong in inverter models.

Jefferies believes LG Electronics' edge lies in its wide and deeply entrenched distribution network. With about 36,000 business-to-consumer touchpoints, higher than most domestic peers, the company has strong control over visibility and availability across regions and formats.

What also stands out is the marketing efforts made by the company. LG invests nearly 4% of revenue into retail infrastructure and promotions, one of the highest allocations in the sector both in absolute spending and as a percentage of sales.

This, coupled with consistent innovation supported by parent-company R&D and technological expertise, helps LG maintain strong consumer recall and sustain premium positioning.

LG's operating margin was 13% in fiscal year 2025 and 10% in the first half of this financial year as it was impacted by monsoons. This however exceeds most peers.

Jefferies attributes this to premiumisation and significant backward integration. LG dominates premium niches such as OLED TVs, where it enjoys a 63% share, and side-by-side refrigerators, where it commands around 43% share.

The brokerages also pointed that the company manufactures about 55% of its products in-house, including key components like compressors, enabling cost efficiencies and pricing power.

Return ratios are another key differentiator. LG’s fiscal 2025 RoE of 45% and RoCE of 55% are among the highest in the Indian durables industry. Capacity utilisation at its Noida and Pune plants also stands at 81% and 73% respectively.

In addition to this the company is now ramping up capacity with a new manufacturing facility at Sri City in South India, with expected investment of around Rs 5,000 crore over four to five years, entirely funded through internal accruals.

Jefferies expects annual capex of Rs 1,100–1,200 crore over financial year 2026–28, while RoCE is projected to remain strong at 40–45% and RoE at 30–35% during this period.

Operating margins saw pressure in September 2025 due to weaker seasonal categories, higher input costs and increased go-to-market spending, said the brokerage. With channel inventory normalising, rising premiumisation and price hikes of 1.5–2% in refrigerators and washing machines in October 2025, Jefferies expects performance to strengthen in the second half.

Over financial year 2026–2028, sales and profit are estimated to grow at a CAGR of 13% and 17% respectively, with operating margins improving by 100 basis points to 12.8% by fiscal 2028.

Despite its strong fundamentals, LG trades at 43x financial year 2027 estimated earnings, still at a 10–15% discount to peers Havells and Blue Star, and roughly in line with Voltas. Jefferies assigns a 47x target P/E multiple on December 2027 EPS, aligned with the peer group’s average.