Shares of LG Electronics India came under significant selling pressure during Friday's trading session on November 14, witnessing a sharp 5% decline to hit the day's low of ₹1,590 per share. This sell-off was primarily triggered by investor disappointment with the company's September-quarter financial results, which were announced after market hours on Thursday.
Quarterly Performance: A Deep Dive into the Numbers
The home appliances giant reported a substantial 27.3% year-on-year decline in net profit for the second quarter, with earnings dropping to ₹389 crore compared to ₹536 crore in the same period last year. The performance also showed a sequential deterioration from the ₹513 crore net profit reported in the first quarter of FY26.
On the revenue front, the company posted a modest 1% year-on-year increase to ₹6,174 crore. However, this represented a 0.7% sequential decline from the ₹6,263 crore revenue recorded in the preceding quarter.
Challenging Market Conditions and Segment Performance
The broader consumer durables sector faced significant headwinds during the quarter, with consumers postponing their spending until late September when a comprehensive consumption tax reduction came into effect. This policy change lowered prices across various items ranging from soaps to electronic products.
Specifically, LG's cooling appliances division was adversely affected by early rains and lower temperatures, despite implementing sharp price reductions following cuts in indirect taxes.
Analyzing the segment-wise performance:
- The Home Appliances and Air Solution segment revenue remained flat at ₹3,947 crore
- The Home Entertainment segment showed resilience with a 3% year-on-year revenue increase to ₹2,261 crore
Stock Performance Context and Market Sentiment
Today's decline has pushed the stock 10% lower from its listing-day high of ₹1,749. The company made a spectacular debut on Dalal Street on October 14, listing with an impressive 50% premium at ₹1,710 over its issue price of ₹1,140 per share. This marked the largest mainboard issue of over ₹10,000 crore to list with such a significant premium so far this year.
Following its market debut, domestic brokerage firms had issued optimistic outlooks for LG Electronics India, initiating coverage with positive ratings and upbeat price targets. Their confidence was based on strong industry tailwinds, the company's leadership position in the market, and its substantial export potential.
The current market reaction highlights the challenges facing consumer durable companies in India amid fluctuating demand patterns and changing weather conditions, despite earlier optimism from financial analysts about the company's long-term prospects.
