LG Electronics, Polycab among picks as premiumisation and infrastructure demand drive growth: Siddhartha Khemka

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LG Electronics, Polycab emerge as potential market winners

After a sluggish start during Ganesh Chaturthi and Pitru Paksha, demand improved with the onset of Navratri, with sales growing 25-30% year-on-year.

However, the recovery remains concentrated in select categories rather than reflecting a broad-based improvement in consumer spending.

Air conditioners have seen a sharp pickup, with volumes rising over 60% YoY in recent weeks, supported by higher temperatures. The sustainability of this momentum remains uncertain, given its dependence on weather conditions.

Television sales are also holding up, driven by a shift towards larger screens, with select premium categories recording volume growth of 60-100% YoY, albeit on a lower base.

However, panel shortages and limited chip availability have pushed television prices up by 22-25%, affecting affordability and delaying replacement purchases.

The smartphone market presents a similar trend. While volumes are estimated to have declined by 10-15%, average selling prices have increased by 35-40%, reflecting frequent price hikes and a shift towards higher-value devices.

This divergence highlights how premiumisation is supporting value growth despite weak underlying volumes. In contrast, refrigerators and washing machines continue to face subdued demand, as consumers defer purchases or repair existing appliances rather than replace them.

The exchange ratio at retail counters has fallen to around 12%, from approximately 30% a year ago, underscoring the weakness in replacement-led demand.

Rising prices have also made affordability a key consideration across categories. Manufacturers are responding with zero-cost EMI schemes, cashback offers and dealer incentives to support festive purchases.

While these measures can improve conversion rates, sustained demand will depend on consumers' willingness to commit to higher-value discretionary purchases.

Competitive positioning is increasingly influenced not just by pricing and product features, but also by product availability, retail presence, dealer support and after-sales service.

Beyond conventional appliances, kitchen chimneys and hobs are gaining traction, with the chimney market reportedly expanding by 40-50%, supported by greater awareness and adoption of modular kitchens.

Energy-efficient BLDC fans are also benefiting from changing consumer preferences, while premium appliances continue to find buyers despite pressure on mass-market segments.

The medium-term opportunity lies in premiumisation, product innovation and underpenetrated appliance categories. However, the near-term outlook remains mixed.

A sustained recovery will require improvement in replacement demand and consumer affordability, rather than relying solely on weather-led sales, festive promotions and price-driven growth in premium categories.

LG Electronics TP: Rs 2,075

LG is well-positioned to sustain its ~20% growth trajectory, backed by a well-diversified portfolio across home appliances, air solutions and home entertainment.

Broad-based double-digit growth, rising premiumisation, strong backward integration in compressors, expanding B2B (HVAC, Information Display) and record export momentum (now serving 61 countries) support the long-term outlook, with the upcoming Sri City facility set to deepen localisation and scale benefits.

Management remains confident of sustaining ~20% growth, with washing machines and TVs expected to drive 2HFY27 while refrigerators and ACs benefit from premiumisation and replacement demand; the Sri City ramp-up is expected to further aid scale. We expect 13%/30%/32% revenue/EBITDA/PAT CAGR over FY26-28.

Polycab TP: Rs 10,600

Polycab delivered a strong 2QFY27, with revenue/EBITDA growing 53%/44% YoY, led by ~50% domestic C&W growth. Healthy infrastructure, real estate and industrial demand, strong channel execution and favourable realisations should sustain growth, with management targeting 1.5x industry growth.

FMEG revenue grew 2.2x YoY, led by solar inverters, while EBIT margin expanded 9.6 percentage points to 10.1%. This marked the seventh consecutive profitable quarter, and management targets 1.5x-2x industry growth and 8-10% EBITDA margin by FY30.

Combined with long-term optionality from data centres and a new EHV plant due in 1QFY28, the company is building multiple levers beyond its core franchise.

Healthy C&W demand, a strong export order pipeline and opportunities in data centres provide visibility for sustained growth. We estimate 24%/24%/23% revenue/EBITDA/PAT CAGR over FY26-28.

(The author is Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)