LG Electronics India Limited (Subscribe)

Highlights

LG Electronics India Limited (LG) incorporated in 1997 backed by parent LG Electronics, is leading home appliances and consumer electronics players (excluding mobile phones) in India. LG’s activities are organized into two business segments – (i) Home Appliances and Air Solution; and (ii) Home Entertainment.

In Home Appliances and Air Solution segment they sell refrigerators, washing machines, water purifiers, dishwashers and microwave ovens, air conditioners, air purifiers and compressors. And in Home Entertainment segment they manufacture televisions, monitors, interactive displays, and information systems, and import products such as soundbars, audio systems, projectors, wireless speakers and earbuds, for sale in the domestic markets.

LG operates the largest distribution network which comprises of 35,640 B2C touch points (including Rural and Urban). They serviced consumers through a dedicated team 463 B2B trade partners. To promote their products, LG run promotion campaigns and have deployed sales promoters across distribution channels to actively engage with consumers and highlight the technical features of their products.,

Out of the total proceeds of Rs. 116,070 mn, ~Rs. 116,070 mn would be go towards existing promoter selling shareholders of the company as company expects that listing of the Equity Shares will enhance their visibility and brand image and provide liquidity.

Key Highlights

• The overall total addressable market (TAM) for the India appliances and electronics brands was estimated at approximately Rs. 3,245 bn in CY2024, having grown at a CAGR of ~12 pct from CY19 to CY24. As of the H1CY2025 (annualized), TAM stands at approximately Rs. 3,505 bn and it is projected to reach ~Rs. 6,190 bn by CY2029P, growing at a five-year CAGR of approximately 14 pct.
• LG has the one of the largest in-house production capacities in Noida and Pune with combined capacity of 14,510,000 products and 76.8 pct utilisation rate. Additionally, LG intends to construct a third manufacturing unit in Andhra Pradesh to expand manufacturing capacity with expected invest of Rs. 50.1 bn.
• Their manufacturing units are equipped with assembly lines where different products can be manufactured on a single line which enables them to quickly meet consumer demands. They have also developed in-house smart monitoring systems to lower incident rates.
• They have an extensive supplier network comprising 287 suppliers that have a relationship with LG for an average of 13.13 years. LG is committed to the Make in India philosophy, whereby they manufacture their products domestically and to the extent available source a significant amount of raw materials from domestic suppliers.
• LG derive significant benefits from the LG Electronics parentage including in technology and product development, manufacturing, quality control and brand marketing which helped LG to command 27.5 pct market share in Panel Television, 33.5 pct Market share in Washing Machine, 29.9 pct market share in Refrigerator, 20.6 pct market share in Inverter AC, 51.4 pct market share in Microwave Oven and 40.5 pct market share in water purifier.
• LG’s key growth strategies include (i) Build a strong foundation to capture long-term growth in India (ii) Continue to be a brand of choice for every Indian household across volume and premium market categories (iii) Diversify business model to create new consumer value.
• The sales of the company have grown by 10.7 pct CAGR Over FY23-25 and EBITDA/profit has grown 28.1 pct CAGR/28 pct CAGR over same year. In FY25 the company reported sales of Rs. 243,666 mn, which grew 14.12 pct YoY while EBITDA of the company rose 39.79 pct YoY to Rs. 31,101 mn. In FY25 the company posted profit of Rs. 22,033 mn which jumped 45.81 pct YoY. In Q1FY25, sales/EBITDA/profit fell 2.3 pct YoY/25.2 pct YoY/24.5 pct YoY.

Key Risk

• Under the license agreement LG need to pay a royalty of 2.30 pct of net sales for Authorized Products (other than LCD televisions and monitors) and 2.40 pct of net sales for LCD televisions and monitors. Any increase in royalty fee by parent company can impact LG financials.
• LG is subject to various outstanding tax claims amounting to Rs. 47,171 mn which is ~73.16 pct of LG’s net worth of Rs. 64,479 mn.

Financial Performance

Peer Comparison based on FY25 Financials

Valuation

LG Electronics India is the Indian subsidiary of South Korean tech giant LG Electronics, established in 1997 and known for its wide range of consumer electronics, home appliances, and innovative solutions. At the upper end of the price band of Rs. 1140, the issue is priced at a PE of 37.7x its FY26E post issue annualized earnings. The issue appears to be fairly priced. One can Subscribe this issue from a longer-term perspective, given tax cuts by government, falling interest rates, rising discretionary spends likely to fuel demand for electronics products and LG well placed to capitalize such opportunity.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Making an investment using the app is the investor’s sole decision, and the company or its communication cannot be held responsible for it.