LG Electronics India, the industry leader in consumer durables segment, was listed on October 10, 2025. We recommended investors subscribe to the issue, primarily based on valuations. At the upper end of the price band, the IPO was valued at 35 times FY25 earnings compared to peer valuation range of 42-65 times FY25 earnings. The stock has returned 38 per cent since then and has closed the valuation gap with peers.But the company reported a muted performance in FY26, as the consumer durables industry was impacted by weak Summer sales and geopolitical events. The upcoming season looks strong with a hot Summer and weak base of sales last year. The company has lined up several growth initiatives, which should further support growth. But considering the high valuations and execution risks, we recommend investors hold the stock.LG Electronics reports two segments: Home Appliances – HA (74 per cent of FY26 revenues) that includes washing machines, RACs (room air conditioners), refrigerators and now even dishwashers; Home Entertainment – HE accounts for the rest and includes TVs, information displays and soundbars. The company has built leading market shares in several categories: 33 per cent in washing machines, 30 per cent in refrigerators and 43 per cent in premium refrigerators, 17 per cent in RACs for year-to-date December 2025. The company’s strengths include the leading market share and a well-diversified portfolio. It will be supplementing its strength with several other drivers to support growth.Growth driversThe primary driver is the company’s third plant, being developed at Sri City, Andhra Pradesh, at a cost of ₹5,000 crore over the next three-four years, which should double capacity. The company has deployed ₹657 crore by March 2026 and expects to start production of compressor units by Q3FY27 and RACs by Q4FY27. In a phase-wise development, washing machine and refrigerator production facilities will be added later.But the facility development should also support the company’s Essential series line and export targets as well.LG Electronics primarily serves premium markets in most segments. It is adding a mass-premium segment, which includes affordable products in its Essential series. This is aimed at increasing its market share and positioning on a wider price range. The launches so far under Essential series include 8-kg top loader washing machines, 225-litre refrigerators, air fryers/ovens and sub-1 tonne RACs; the company has reported satisfactory traction so far. The mass-premium segment should improve the operating leverage and increase the company’s market share in the long term, further strengthening its market position.The company has an export revenue of 5-6 per cent in FY26, which it plans on doubling in the short term of one-two years. The existing Pune facility is designed to cater to export markets, and the upcoming Sri City facility will be as well. This includes side-by-side refrigerators, top freezers and front-loading washing machines on the product side and a dedicated team on the administrative side. The export strategy will also be dual focused. The company looks to initiate premium markets, with exports to the US and Europe supported by the free trade agreements. The mass-premium segments served by the Essential series will be targeted towards 22 of the 53 countries it already has a presence in. Even at the time of IPO, the Indian arm and South Korean parent were intent on developing India as the global export hub and post-IPO the company is executing this plan.Apart from mass-premium and export expansion, the company will also be increasing its institutional focus through annual maintenance contracts. Its information display product development segment government support from Make in India initiative. The HVAC segment focusing on corporate and hospitality segments, IT Parks and government infrastructure projects has a strong order-book as well.Financials, valuationThe company reported a 1 per cent revenue growth in FY26. A delayed and a milder Summer in the year and geopolitical uncertainty impacted growth in several segments, including RACs. This performance was despite the GST revision in H2FY26, which provided strong tailwinds to the consumer durables industry.The margin impact was even higher. The lower scale of operations and additional impact from rupee depreciation (import cost of materials), higher commodity costs (copper and aluminium) and recycling costs (increased to 70 per cent from 60 per cent) impacted the margins. The company also compensated its channel partners with additional promotional schemes to sustain its leading market share as well. The EBITDA margins in FY26 at 9.8 per cent was 300 bps lower than the previous year.The company targets a mid-teen revenue growth and early double-digit EBITDA margin in FY27. While the revenue drivers are as discussed, the margins levers follow from the same. A higher-margin product mix from exports and BEE (Bureau of Energy Efficiency)-transitioned portfolio, which is 10-12 per cent higher on prices (already implemented), is a strong support. The company will improve the locally-sourced material (55 per cent currently) by 150 bps every year, which will also aid margins. The higher operating leverage from the Essential series, Sri City and exports will also have an impact on margins.While the FY26 performance was weak, despite GST-related tailwinds, the growth levers going into FY27 (which already reported a strong Summer) seem promising. With one-year forward valuations at 45 times earnings, the positives are factored in. We recommend investors track the Summer sales in H1FY27 and hold the stock to gain from earnings growth.Published on July 18, 2026