Prime Highlights:
- Goldman Sachs initiated coverage on LG Electronics India Ltd. with a “Buy” rating, indicating a potential upside of around 13%.
- The company is expected to outperform industry growth, driven by rising demand for premium products and strong market positioning.
Key Facts:
- Net profit fell 61.6% year-on-year to ₹89.6 crore, while revenue declined 6.4% to ₹4,114.3 crore in the December quarter.
- EBITDA dropped 42.6% to ₹195.7 crore, with margins narrowing to 4.8% due to lower demand, higher costs, and rupee depreciation.
Background:
Shares of LG Electronics India Ltd. moved higher on Wednesday after Goldman Sachs initiated coverage with a “Buy” rating, citing strong medium-term growth potential. The brokerage set a target price of ₹1,750 per share, implying an upside of about 13% from the previous closing level of ₹1,550.
Goldman Sachs expects the company to outperform industry growth, supported by rising consumer incomes and increasing demand for mid- and premium-segment products. The brokerage said LG Electronics India’s focus on innovation and premium products can help strengthen its position in the market. It also noted support from its parent, LG Electronics Inc., whose “Global South” strategy could help increase exports and expand manufacturing in India.
However, it also warned of some risks. Rising competition and higher raw material costs, especially copper and aluminium, may put pressure on the company’s margins.
This cautious view comes after weak December quarter results. The company’s net profit fell 61.6% to ₹89.6 crore, while revenue declined 6.4% to ₹4,114.3 crore. EBITDA dropped 42.6% to ₹195.7 crore, and margins narrowed to 4.8% from 7.8% a year ago.
LG Electronics India Ltd. said the decline was due to weaker demand after the festive season, especially for compressor-based products. Lower sales, higher input costs, and rupee depreciation also put pressure on margins during the quarter.
Market sentiment, however, remains largely positive. Around 21 analysts currently track the stock, with the majority maintaining a “Buy” rating and only two recommending a “Sell.” The stock has gained modestly in recent sessions but remains about 11% below its post-listing high of ₹1,749.