โ๐๐ฟ๐ผ๐๐ป๐ฑ-๐น๐ฒ๐๐ฒ๐น ๐ฟ๐ฒ๐๐ฒ๐ฎ๐ฟ๐ฐ๐ต ๐ฎ๐น๐๐ฎ๐๐ ๐ฝ๐ฟ๐ผ๐๐ถ๐ฑ๐ฒ๐ ๐๐ต๐ฎ๐ฟ๐ฝ๐ฒ๐ฟ ๐ฎ๐ป๐ฑ ๐บ๐ผ๐ฟ๐ฒ ๐ฝ๐ฟ๐ฎ๐ฐ๐๐ถ๐ฐ๐ฎ๐น ๐ถ๐ป๐๐ถ๐ด๐ต๐๐ ๐๐ต๐ฎ๐ป ๐ท๐๐๐ ๐ฑ๐ฒ๐๐ธ ๐ฎ๐ป๐ฎ๐น๐๐๐ถ๐.โ
Executive Summary
We conducted a plant visit at LG Electronicsโ Pune manufacturing facility and interacted with
senior management. The visit highlighted strong manufacturing capabilities, high backward
integration, improving localization, and a clear focus on premiumisation across product
categories. The company continues to maintain leadership in key segments such as front-load
washing machines and flexible refrigerator manufacturing, supported by operational efficiency
and scale.
Pune Plant Overview
โ Established in 2004; multi-product facility with A, B, and C blocks
โ Key products: Refrigerators, Televisions, Air Conditioners (RAC), and Front-load Washing
Machines
โ ~90% in-house production, with limited dependence on imports (~5%) and OEM/ODM
(~5%)
โ Localization currently at ~55-58%, with a target of ~80%.
Refrigerator Division (C Block)
Manufacturing & Efficiency
โ 100% in-house end-to-end manufacturing
โ Two parallel production lines; no night shifts required
โ High efficiency: ~1 refrigerator produced every 9 seconds
Product Mix
โ Frost-free: ~50%
โ Single-door: ~35%
โ Side-by-side & others: ~15%
Capability & Quality
โ Ability to manufacture multiple formats on a single line (rare in India)
โ Multi-stage quality checks (PR1 + downstream inspections)
โ Warehouse capacity: ~8,000โ10,000 units
Sourcing
โ Critical components manufactured in-house
โ Non-critical parts sourced from vendors in India only
Television Division (B Block)
Operations
โ Products: Televisions and monitors
โ Capacity: ~3.5 million units annually
Product Mix
โ ~50%: 32-inch TVs
โ ~20-25%: Mid-size (43-50 inch)
โ Balance: Premium large TVs
Supply Chain
โ Motherboards sourced from LG ecosystem
โ Open cell panels:
โ ~50% internal ecosystem
โ Balance imports from China & Indonesia
Exports
โ TVs largely domestic-focused
โ ~20% of overall plant output exported (ACs, washing machines, refrigerators)
Air Conditioner (RAC) Division (A Block)
Backward Integration
โ In-house compressor capacity: ~1 million units
Capacity & Utilization
โ RAC: ~1.3 million capacity; ~80-85% utilization
โ Commercial AC: ~0.3 million capacity; ~70-74% utilization
โ Overall utilization: ~74-75%
Localization
โ Outdoor units: ~62% localized
โ Key imports: motors and copper components
Pricing Trends
โ 5-star ACs: ~9% price increase
โ 3-star ACs: ~7% price increase
Demand Outlook
โ Strong demand momentum
โ Double-digit growth observed in Jan-Feb
โ Positive outlook supported by seasonality and premiumisation
Washing Machine Division (Front Load)
Operations
โ Pune facility focused on front-load washing machines
Automation
โ Current automation: ~40%
โ Target: ~44%
Competitive Positioning
โ Strong positioning vs key competitors
โ Leadership in front-load segment driven by scale and capability
Input Costs & Margins
Cost Structure
โ LPG is a key input for refrigerators and ACs
โ Alternatives include PNF and acetylene
Trends
โ Costs have stabilized after recent increase
โ No sharp cost escalation expected
Margins
Supported by:
โ Premiumisation
โ Better product mix
โ Operating leverage
Demand, Exports & Seasonality
Demand Trends
โ JanโFeb: Double-digit growth in ACs and TVs
โ Refrigerators expected to benefit from summer demand
Exports
โ ~20% contribution to total output
โ Focus on developed markets (e.g., US)
โ No major disruption from Middle East markets
Premiumisation & Distribution
Strategy
Mix
โ OEM contribution: ~58โ60%
โ AC contribution: ~19โ20%
Distribution
โ ~30% revenue from distributors
โ Higher margins in distribution channel
โ Strong focus on premium segment expansion
Financial Outlook by the Management
Q4FY26: A stronger than last year; growth and margin would be in the double digit
FY26: Flattish growth, stable margins
FY27: Strong recovery expected; and the margin would be as similar as FY25
Key Takeaways and Our View
The recent factory visit to LG Electronics strengthens our conviction in the broader consumer
durables space. The company appears well-prepared to meet upcoming demand, with strong
control over inventory, supply chain, and working capital. The visit also reinforced LGโs
competitive positioning; while competition exists, it remains manageable and is well
acknowledged by the management.
After nearly two years of consolidation, the sector now seems to be entering a gradual
recovery phase. We observed improving demand visibility, supported by better operational
efficiencies and a more stable supply environment; nevertheless, we canโt avoid the West Asia issues which can or can not affect the consumption sector, time will tell.
On the macro front, policy support through taxation and GST reforms is expected to act as a
structural tailwind for consumption. Additionally, the onset of a harsher summer-evidenced by
temperatures already reaching ~31ยฐC in early March-could serve as a near-term catalyst,
particularly for cooling categories such as air conditioners and refrigerators.
Overall, a combination of cyclical recovery and seasonal demand drivers positions the sector
favorably, reinforcing our positive stance.
๐ฟ๐๐จ๐๐ก๐๐๐ข๐๐ง: ๐ช๐ฒ, ๐ผ๐๐ฟ ๐ฐ๐น๐ถ๐ฒ๐ป๐๐, ๐ฎ๐ป๐ฑ ๐ผ๐๐ฟ ๐ฎ๐ป๐ฎ๐น๐๐๐๐ ๐บ๐ฎ๐ ๐ผ๐ฟ ๐บ๐ฎ๐ ๐ป๐ผ๐ ๐ต๐ผ๐น๐ฑ ๐ฝ๐ผ๐๐ถ๐๐ถ๐ผ๐ป๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ฐ๐ผ๐บ๐ฝ๐ฎ๐ป๐ถ๐ฒ๐ ๐บ๐ฒ๐ป๐๐ถ๐ผ๐ป๐ฒ๐ฑ. ๐๐๐ ๐ซ๐๐๐ฌ๐จ ๐๐ญ๐ฅ๐ง๐๐จ๐จ๐๐ ๐๐ง๐ ๐๐ค๐ง ๐๐ฃ๐๐ค๐ง๐ข๐๐ฉ๐๐ค๐ฃ๐๐ก ๐๐ฃ๐ ๐๐๐ช๐๐๐ฉ๐๐ค๐ฃ๐๐ก ๐ฅ๐ช๐ง๐ฅ๐ค๐จ๐๐จ ๐ค๐ฃ๐ก๐ฎ ๐๐ฃ๐ ๐จ๐๐ค๐ช๐ก๐ ๐ฃ๐ค๐ฉ ๐๐ ๐๐ค๐ฃ๐จ๐ฉ๐ง๐ช๐๐ ๐๐จ ๐๐ฃ๐ซ๐๐จ๐ฉ๐ข๐๐ฃ๐ฉ ๐๐๐ซ๐๐๐ ๐ค๐ง ๐ง๐๐๐ค๐ข๐ข๐๐ฃ๐๐๐ฉ๐๐ค๐ฃ๐จ ๐ผ๐ณ ๐ฏ๐๐/๐๐ฒ๐น๐น/๐ต๐ผ๐น๐ฑ.