LG Electronics India Ltd. Shares Can Zoom 58% Says Motilal Oswal As It Initiates Coverage
LG Electronics India Ltd. has consistently generated operating cash flows, with a cumulative OCF of Rs 154 billion over the past 10 years. Approximately 69% of this amount was used for dividend payout, showcasing the company’s commitment to rewarding its shareholders.
Strong Return Ratios and High Ebitda-to-OCF Conversion Ratio
The company boasts a high Ebitda-to-OCF conversion ratio, with an average of ~70% over FY19-25. This ratio is expected to reach ~74% over FY26-28, indicating the company’s ability to efficiently convert its earnings into cash flows. Stock market analysis suggests that such strong return ratios and high cash flow conversion make LG Electronics India Ltd. an attractive investment opportunity.
Planned Capex and Its Impact on FCF
LG Electronics India Ltd. has planned a capex of Rs 50 billion for the new plant in Sri City, spread over FY26-29E. This investment is expected to result in lower FCF, with a cumulative FCF of ~Rs 41 billion over FY26-28. However, this strategic investment is likely to drive long-term growth and strengthen the company’s position in the market.
Higher Multiples Expected
Motilal Oswal expects LG Electronics India Ltd. to trade at higher multiples, driven by its strong return ratios, higher operating cash flow conversion, and strategic focus on localization. The company’s targeted growth in high-margin B2B and AMC revenues, combined with its leadership position across key product categories, is expected to drive this upward momentum. Indian stock market trends suggest that companies with strong fundamentals and growth prospects tend to command higher valuations.
Investment Rationale
The investment rationale for LG Electronics India Ltd. is built around its strong financial performance, efficient cash flow conversion, and strategic growth initiatives. The company’s ability to generate consistent operating cash flows and its commitment to rewarding shareholders through dividend payouts make it an attractive investment opportunity. Additionally, the company’s focus on localization and targeted growth in high-margin revenues is expected to drive long-term growth and strengthen its market position.
Conclusion
In conclusion, LG Electronics India Ltd. shares are poised for a 58% surge, driven by its strong return ratios, high operating cash flow conversion, and strategic focus on localization. The company’s planned capex and expected lower FCF over FY26-28 are likely to be offset by its long-term growth prospects and strengthening market position. Stock market news India suggests that investors should keep a close eye on this stock, given its strong fundamentals and growth potential.
