Whalesbook
LG Electronics India reported its highest-ever quarterly revenue of Rs 8,054 crore in Q4FY26, marking an 8.1% increase from the previous year. However, this top-line growth did not translate into higher profits, with net profit declining to Rs 693 crore from Rs 755 crore a year ago.
The company's struggle to maintain profitability is evident in its EBITDA margin, which fell to 11.7% from 14.1% year-over-year. This contraction suggests LG may be prioritizing market share over profits, a strategy that contrasts with competitors like Voltas and Havells who have different cost structures and revenue models.
Analysts point to structural macroeconomic challenges, including currency depreciation and rising global commodity prices, as key factors impacting LG's margins. The company's valuation, which is trading at approximately 38 times estimated FY28 earnings, may be too optimistic if these headwinds persist.
LG's significant investment of Rs 5,000 crore in its Sri City manufacturing facility, aimed at import substitution, is expected to lock up capital for some time, with compressor production not anticipated until Q3FY27. The company's reliance on imported components and parent-subsidized technology also exposes it to potential import policy changes.
Management has guided for mid-teen revenue growth and early-teen EBITDA margins in FY27, banking on increased efficiencies and a shift towards localized, high-margin manufacturing. An export initiative to 22 countries offers a potential growth avenue, but near-term profitability depends on navigating economic uncertainties while funding its large-scale expansion.