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4Q earnings below estimates; FY27 expected to be strong Guiding mid-teen revenue growth; early double-digit margin in FY27<\/p>\n
* LG Electronics India\u2019s (LGEIL) 4QFY26 earnings came in below our estimates due to lower margins in both home appliances & air solution (H&A) and home entertainment (HE) segments. Revenue grew ~8% YoY to INR80.5b (in line). EBITDA declined ~10% YoY to INR9.5b (~12% miss). OPM contracted 2.4pp YoY to 11.7% (est. 13.2%). Adj. PAT declined ~8% YoY to INR6.9b (~14% miss).<\/p>\n
* Management expects margin normalization in FY27, driven by calibrated price hikes, operating leverage, better product mix and higher localization. Demand outlook remains robust, supported by strong summer-led sellout, lean channel inventory and structural under-penetration in key categories like air conditioners. Premium segments of refrigerators and large-screen TVs continued to see healthy traction. It is guiding for mid-teen revenue growth and early double-digit EBITDA margins in FY27.<\/p>\n
* We largely maintain our estimates for FY27-FY28. The stock trades at 44x\/38x FY27\/FY28E EPS. We value LGEIL at 45x FY28E EPS to arrive at a TP of INR1,750. Reiterate BUY.<\/p>\n
H&A\/HE margin contracted 2.5pp\/2.8pp YoY to 11.9%\/13.4%<\/p>\n
* LGEIL\u2019s consol. revenue\/EBITDA\/adj. PAT stood at INR80.5b\/INR9.5b\/ INR6.9b (+8%\/-10%\/-8% YoY; -1%\/-12%\/-14% vs. our estimates) in 4QFY26. OPM contracted 2.4pp YoY to 11.7%. Depreciation and interest costs rose 5%\/59% YoY, while other income increased ~67% YoY.<\/p>\n
* Segmental highlights: a) H&A revenue increased 6% YoY to INR65.2b, and EBIT declined ~13% YoY to INR7.7b. Segment margin dipped 2.5pp YoY to 11.9% due to cost pressure. b) HE revenue rose ~20% YoY to INR15.4b; however, EBIT declined 1% YoY to INR2.1b and margin dipped 2.8pp YoY to 13.4%.<\/p>\n
* In FY26, revenue\/EBITDA\/adj. PAT stood at INR246b\/INR24.2b\/INR17.1b (+1%\/-22%\/-22% YoY). OPM contracted 2.9pp YoY to 9.8%. OCF stood at INR17.2b vs. INR16.5b in FY25. Capex stood at INR11.7b vs. INR3.4b in FY25. FCF stood at INR5.5b vs. INR13.1b in FY25.<\/p>\n
Valuation and view<\/p>\n
* Despite posting strong revenue and volume traction, mainly in RAC and premium segments, LGEIL saw margin pressure in 4QFY26 due to cost headwinds. The long-term outlook remains structurally favorable, led by low RAC penetration (~13%), rising premiumization, urbanization and increasing replacement demand, although near-term volatility from weather patterns, input costs and pricing actions may persist. LGEIL appears well-placed to outperform, supported by its strong brand equity, leadership in premium categories, and well-balanced portfolio spanning both mass (essential series) and high-end products. The ramp-up in exports, further improvement in localization and scale-up of AMC business remain key monitorables.<\/p>\n
* We estimate a CAGR of 10%\/24%\/25% in LGEIL\u2019s revenue\/EBITDA\/PAT over FY26-28. We estimate the H&A segment\u2019s revenue CAGR of ~11% over FY26-28E and margin at ~12%\/13% in FY27\/FY28 vs. ~10% in FY26. The HE segment\u2019s revenue CAGR of ~8% over FY26-28, and the margin is projected at ~14%\/15% in FY27\/ FY28 vs. ~13% in FY26. Net-cash balance is estimated to increase to INR57.3b by FY28 vs. INR44.8b in FY26. ROE\/ROCE are estimated to improve to ~27%\/28% in FY28 vs. 25%\/26% in FY26. The stock trades at 44x\/38x FY27E\/FY28E EPS. We value LGEIL at 45x FY28E EPS to arrive at a TP of INR1,750. Reiterate BUY.<\/p>\n
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