LG Electronics India in Jefferies’ ‘pole position’; bull case points to 21% upside
Jefferies retains a Buy rating on LG Electronics India with a Rs 1,895 target and sees Rs 2,000 in its bull case. Growth could come from premiumisation, exports, B2B expansion, higher in-house production and Sri City capacity expansion over time.
By Kumar Gaurav, ETMarkets.com |
Agencies
Jefferies sees 21% upside in LG Electronics India, citing premiumisation, exports, in-house production, Sri City expansion, B2B growth and strong three-year earnings growth potential overall.
LG Electronics India could rise as much as 21% from current levels to Rs 2,000 in Jefferies’ bull-case scenario, with the brokerage seeing scope for market-share gains, higher in-house production, further premiumisation and stronger exports and B2B growth. In its base case, Jefferies has a ‘Buy’ rating on the company with a target price of Rs 1,895, implying 15% upside.
LG Electronics shares ended at Rs 1,636.80 apiece, down 0.80% from the previous close of Rs 1,650 on the NSE on Friday.
Jefferies analysts Sonali Salgaonkar and Saurabh Kulkarni expect the company to deliver strong earnings growth over the next three financial years, with earnings per share (EPS) estimated to grow at a compound annual rate of 21% over FY26-29.
“Over FY26-29e, we estimate healthy +21% EPS CAGR aided by premium mix and utilization ramp-up in new capacities,” the analysts said in a report.
The brokerage expects annual capital expenditure of Rs 12-15 billion over FY26-29, largely towards the company’s Sri City facility. Despite the planned investment, it expects return on capital employed (RoCE) to remain at 30-33% and return on equity (RoE) at 24-25% during the period.
Jefferies has assigned a target price-to-earnings multiple of 46 times and rolled forward its target price to Rs 1,895.
Premiumisation, diversified portfolio to support growth
LG Electronics India has gained 25% from its April lows and is trading at around 45 times one-year forward earnings, Jefferies said. This compares with 43-47 times for Voltas and Blue Star, according to the report.
The brokerage highlighted the company’s diversified product portfolio, which spans multiple product categories and seasons. Price increases, particularly in air conditioners, are also supporting margins.
“Price hikes (~12% YTD in AC) are aiding industry leading margins,” Jefferies said.
The Essential Series, launched in October 2025, targets first-time buyers in Tier-2 and Tier-3 cities. The series recorded sales of around 0.5 million units in the first half of calendar 2026, according to the brokerage.
Jefferies expects the home appliances and cooling solutions division to report a 14% revenue CAGR over FY26-29, while the home entertainment division is expected to grow at an 11% CAGR.
Overall, the brokerage estimates LG Electronics India’s sales and profit after tax to grow at CAGRs of 13% and 21%, respectively, over FY26-29.
Exports gain momentum
Exports are emerging as another growth driver, with LG Electronics India’s exports rising 30% year-on-year in the June 2026 quarter despite global uncertainties, according to Jefferies.
The company currently exports to around 61 countries, with export margins higher than domestic margins. Exports account for about 6% of sales, and the company is targeting a share of around 10% over the next two to three years.
The Essential Series is also being exported to 22 countries across Asia, the Middle East and Africa, the brokerage said.
“Margins are comparable with rest of B2C portfolio - aided by value engineering and smart design,” Jefferies said.
Sri City expansion, backward integration
LG Electronics India is expanding its manufacturing footprint at Sri City, with Jefferies expecting the additional capacity to support growth.
The company is also increasing in-house production, currently at around 55%, by 2-3% annually, according to the report. Jefferies said greater in-house production, backed by the parent company’s technical know-how, could improve gross margins.
The company operates 1 million units of air-conditioner compressor capacity in North India and is adding another 2 million units in South Sri City. The brokerage said this backward integration could help mitigate supply disruptions and improve cost competitiveness.
India restricted compressor imports in May 2026, capping imports at up to 60% of FY25 levels for compressors used in refrigerators and around 70% for those used in air conditioners, according to the report.
Data centres seen as B2B opportunity
LG Electronics India sees data centres as a long-term opportunity within its business-to-business operations, Jefferies said.
The company has supplied variable refrigerant flow (VRF) and other heating, ventilation and air-conditioning products to several mid-sized data-centre sites. It remains at a preliminary stage in the hyperscaler segment and is evaluating partnerships with established data-centre distributors and integrators.
In B2B information displays, products such as Electronic Blackboard and Micro LED Magnet are also scaling up, according to the brokerage.
No dividend in FY26
LG Electronics India will not pay a dividend for FY26, according to the report, with the decision linked to planned capital expenditure at Sri City and the company’s focus on expanding manufacturing capacity and exports.
The Sri City investment is expected to almost double manufacturing capacity, while the capex is planned to be funded entirely through internal accruals.
Jefferies’ scenarios
In its base case, Jefferies has set a target price of Rs 1,895, implying 15% upside, based on a 46-times target PE multiple. The brokerage said this multiple represents a roughly 5% premium to LG Electronics India’s historical average.
In its upside scenario, Jefferies has set a target price of Rs 2,000, implying 21% upside. This scenario assumes market-share gains, higher in-house production, further premiumisation, stronger innovation and R&D spending, along with a stronger ramp-up in exports and B2B segments.
In the downside scenario, the target price falls to Rs 1,200, implying 27% downside. Risks include weaker consumer spending on durable goods, unseasonal rains and lower temperatures affecting room air-conditioner sales, delays in the Sri City plant, increased competition, market-share losses and pricing pressure.
Jefferies identified demand slowdown, delays in the Sri City plant, loss of market share and raw-material and rupee volatility as key risks to its outlook.
This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.
LG Electronics shares ended at Rs 1,636.80 apiece, down 0.80% from the previous close of Rs 1,650 on the NSE on Friday.
Jefferies analysts Sonali Salgaonkar and Saurabh Kulkarni expect the company to deliver strong earnings growth over the next three financial years, with earnings per share (EPS) estimated to grow at a compound annual rate of 21% over FY26-29.
“Over FY26-29e, we estimate healthy +21% EPS CAGR aided by premium mix and utilization ramp-up in new capacities,” the analysts said in a report.
The brokerage expects annual capital expenditure of Rs 12-15 billion over FY26-29, largely towards the company’s Sri City facility. Despite the planned investment, it expects return on capital employed (RoCE) to remain at 30-33% and return on equity (RoE) at 24-25% during the period.
Jefferies has assigned a target price-to-earnings multiple of 46 times and rolled forward its target price to Rs 1,895.
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Premiumisation, diversified portfolio to support growth
LG Electronics India has gained 25% from its April lows and is trading at around 45 times one-year forward earnings, Jefferies said. This compares with 43-47 times for Voltas and Blue Star, according to the report.
The brokerage highlighted the company’s diversified product portfolio, which spans multiple product categories and seasons. Price increases, particularly in air conditioners, are also supporting margins.
“Price hikes (~12% YTD in AC) are aiding industry leading margins,” Jefferies said.
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The Essential Series, launched in October 2025, targets first-time buyers in Tier-2 and Tier-3 cities. The series recorded sales of around 0.5 million units in the first half of calendar 2026, according to the brokerage.
Jefferies expects the home appliances and cooling solutions division to report a 14% revenue CAGR over FY26-29, while the home entertainment division is expected to grow at an 11% CAGR.
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Overall, the brokerage estimates LG Electronics India’s sales and profit after tax to grow at CAGRs of 13% and 21%, respectively, over FY26-29.
Exports gain momentum
Exports are emerging as another growth driver, with LG Electronics India’s exports rising 30% year-on-year in the June 2026 quarter despite global uncertainties, according to Jefferies.
The company currently exports to around 61 countries, with export margins higher than domestic margins. Exports account for about 6% of sales, and the company is targeting a share of around 10% over the next two to three years.
The Essential Series is also being exported to 22 countries across Asia, the Middle East and Africa, the brokerage said.
“Margins are comparable with rest of B2C portfolio - aided by value engineering and smart design,” Jefferies said.
Sri City expansion, backward integration
LG Electronics India is expanding its manufacturing footprint at Sri City, with Jefferies expecting the additional capacity to support growth.
The company is also increasing in-house production, currently at around 55%, by 2-3% annually, according to the report. Jefferies said greater in-house production, backed by the parent company’s technical know-how, could improve gross margins.
The company operates 1 million units of air-conditioner compressor capacity in North India and is adding another 2 million units in South Sri City. The brokerage said this backward integration could help mitigate supply disruptions and improve cost competitiveness.
India restricted compressor imports in May 2026, capping imports at up to 60% of FY25 levels for compressors used in refrigerators and around 70% for those used in air conditioners, according to the report.
Data centres seen as B2B opportunity
LG Electronics India sees data centres as a long-term opportunity within its business-to-business operations, Jefferies said.
The company has supplied variable refrigerant flow (VRF) and other heating, ventilation and air-conditioning products to several mid-sized data-centre sites. It remains at a preliminary stage in the hyperscaler segment and is evaluating partnerships with established data-centre distributors and integrators.
In B2B information displays, products such as Electronic Blackboard and Micro LED Magnet are also scaling up, according to the brokerage.
No dividend in FY26
LG Electronics India will not pay a dividend for FY26, according to the report, with the decision linked to planned capital expenditure at Sri City and the company’s focus on expanding manufacturing capacity and exports.
The Sri City investment is expected to almost double manufacturing capacity, while the capex is planned to be funded entirely through internal accruals.
Jefferies’ scenarios
In its base case, Jefferies has set a target price of Rs 1,895, implying 15% upside, based on a 46-times target PE multiple. The brokerage said this multiple represents a roughly 5% premium to LG Electronics India’s historical average.
In its upside scenario, Jefferies has set a target price of Rs 2,000, implying 21% upside. This scenario assumes market-share gains, higher in-house production, further premiumisation, stronger innovation and R&D spending, along with a stronger ramp-up in exports and B2B segments.
In the downside scenario, the target price falls to Rs 1,200, implying 27% downside. Risks include weaker consumer spending on durable goods, unseasonal rains and lower temperatures affecting room air-conditioner sales, delays in the Sri City plant, increased competition, market-share losses and pricing pressure.
Jefferies identified demand slowdown, delays in the Sri City plant, loss of market share and raw-material and rupee volatility as key risks to its outlook.
This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.
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