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LG India Navigates LPG Shortage, Eyes Growth
19 Mar
Summary
- LG Electronics India projects flat to modest 2-3% revenue growth for FY26.
- Company plans 7-9% price hikes on room air conditioners in January.
- LG Electronics India holds sufficient LPG inventory until early April.
LG Electronics India is forecasting flat revenue or a modest growth of 2-3% for the fiscal year 2026, aligning with its previous guidance. The company anticipates Q4 revenue to increase by high single- to double-digits. Projections for FY26 indicate low double-digit margins, with Q4FY26 margins expected between 12.5-13.5 percent, supported by price increases of 7-9 percent on room air conditioners implemented in January.
These price hikes are driven by a premium product mix and robust sales in non-air conditioner segments, following a 2 percent increase on washing machines and refrigerators in Q3FY26. Regarding raw material supply, LG has sufficient LPG inventory for room air conditioners and refrigerators until the first week of April.
In the event of a persistent LPG shortage, the company is prepared to substitute approximately 30 percent of its manufacturing with alternative brazing methods using PNG, which is cost-neutral as PNG is cheaper than LPG. Acetylene brazing is a potential substitute, though it requires longer processing times and may leave deposits. Importantly, this potential shortage will not affect the manufacturing of washing machines or televisions.
An 'Accumulate' rating is maintained with a target price (TP) of ₹1,750, based on a 45x FY28 P/E ratio. This valuation reflects LG's market leadership, industry-leading margins, a higher premium product contribution compared to competitors, and strategic growth initiatives including expanding exports, B2B sales, and AMC services, alongside an entry into the economy segment.
