CONSUMER DURABLES

MARKET ANALYSIS INDIA

The consumer durables sector raked in revenues worth US$ 7.3 billion in FY12. Growth has been healthy
over the years, recording a compounded annual growth rate (CAGR) of 10.8 per cent over FY03-12. The
consumer durables market is expected to double at 14.8 per cent CAGR to reach US$ 12.5 billion in
FY15 from US$ 6.3 billion in FY10.
Demand for consumer durables in India has been growing on the back of rising incomes. This trend is set
to continue even as other factors like rising rural incomes, increasing urbanisation, a growing middle
class, and changing lifestyles changes aid demand growth in the sector. Consequently, industry analysts
expect the sector to post a CAGR of 15 per cent over 2010-15. Increasing electrification of rural areas
and wide usability of online sales would also aid growth in demand.
Demand from rural and semi-urban areas is expected to expand at a CAGR of 25 per cent to reach US$
6.4 billion in FY15 from US$ 2.1 billion in FY10. By FY15, rural and semi-urban markets are likely to
contribute a majority of consumer durables sales.
The Government of India (GOI) has allowed 100 per cent foreign direct investment (FDI) in electronics
hardware-manufacturing under the automatic route. The government has also reduced the excise duty to
6 per cent on light-emitting diode (LED) lamps and LEDs required for manufacture of such lamps. Further,
Electronic Hardware Technology Park (EHTP) Scheme provides benefits, such as duty waivers and tax
incentives, to companies which replace certain imports with local manufacturing.

Urban markets account for the major share (65 percent) of total revenues in the
consumer durables sector in India. Demand in urban markets is likely to increase for
nonessential products such as LED TVs, laptops, split ACs, and beauty and wellness
products. In rural markets, durables like refrigerators as well as consumer electronic
goods are likely to witness growing demand in the coming years.

TELEVISION
India is the only country in the world with 88 million non TV households, indicating the potential for growth in the
market. Television industry is getting more and more localized in nature with the spurt of regional channels over
the last few years. With the media landscape changing day by day, the industry has immense opportunities to gather
huge subscriber base in India.

The television industry has witnessed aggressive growth as this medium overshadowed all the other available media
platforms. India is the worlds third largest TV market with close to 138 million TV households next to China and USA.
Television is projected to command half of the entertainment pie by 2015 as it is estimated to grow at a robust 14.5%
cumulatively over the next five years, from an estimated Rs 306 billion in 2010 to Rs 602.5 billion by 2015. The cable
television industry, which forms the backbone of television distribution in India, is well penetrated in urban regions. As
a consequence, it has established itself as a robust mass medium for entertainment and information and is available
to more than 94 million consumer households across India. As such, cable TV remains the most prolific means of
distributing television content in the country. Since the current medium of cable distribution is largely analogue in
nature, it leads to leakage of revenue through the value chain and digitization addressability remains the solution to
this.

LG ELECTRONICS INC.
EXECUTIVE SUMMARY
LG Electronics, Inc. is a global leader and technology innovator in consumer electronics, mobile communications and
home appliances, employing 87,000 people working in 113 locations around the world. With 2013 global sales of
USD 53.10 billion (KRW 58.14 trillion), LG comprises five business units - Home Entertainment, Mobile
Communications, Home Appliance, Air Conditioning & Energy Solution and Vehicle Components - and is one of the
worlds leading producers of flat panel TVs, mobile devices, air conditioners, washing machines and refrigerators. LG
Electronics is a 2013 ENERGY STAR Partner of the Year.

lifes good or LG company was originally established in 1958 from two Korean companies
( lucky and GoldStar). They produce radios, washing machines , TV , laptops and air
conditioners . in 1994 ,GoldStar gained sponsorship from The 3DO Company to make the first
3DO Interactive Multiplayer. In 1995 ,GoldStar was renamed LG electronics of the US. In 2007,
LG solar Energy allow LG to supply polyisicon to LG Electronics for more production .in 2008,
LG received its solar-panel manufacturing pool. Nowadays LG become an international leader
and technology in consumer electronics, TV and smart phones. And its one of the five business
units- Home Entertainment ,AC and etc.

BUSINESS DIVISIONS AND MAIN PRODUCTS

Home Entertainment
TVs, Audio & Video, Monitors, PCs & Accessories, Commercial Products

Mobile Communications
G Series, Vu: Series, F Series, L Series

Home Appliance
Refrigerators, Washing Machines, Styler, Cooking and Cleaning, Built-in Appliances

Air Conditioning & Energy Solution

Residential Air Conditioners, System Air Conditioners, Lighting, Building Management Systems

Vehicle Components
In-Vehicle Infotainment, HVAC & Motor, Vehicle Engineering

LG Mission:
LG mission statements are to become a global digital leader who can make its customers happy
and satisfied through the new products.Its explains its goal to be innovate electronics company
in the world. Therefore they provide customers with utmost satisfaction through leadership. The
fundamental policy of development is to secure product leadership that the customers may have
the utmost satisfaction.
LG Vision:
LG electronics set its own vision into mid and long vision anew to rank among top three
electronics ,information, and telecommunication firm in the world people. LGs vision to deliver
innovative digital products and services that make its customers live better because its slogan
is lifes better.

Financial Analysis
GPRV

Financial analysis of Lg Electronics Inc (KR7066570003 - 066570) and its peers

Lg Electronics IncPeer group:

Lg Electronics Inc Peer group

Enterprise
Value

EV/EBIT
DA

(in thousands
USD)

Lg Electronics Inc
Sharp Corporation
Panasonic Corporation
TCL Corporation
Sony Corp
Sichuan Changhong
Electric Co. Ltd.
AB Electrolux

2014

Relevanc
e
next 12
mth

Score

19 084 906

5.31

5.12

11 697 940

5.51

5.48

100%

25 684 871

4.06

4.02

90%

6 888 954

7.91

7.51

79%

16 096 338

3.06

2.94

77%

5 143 906
9 010 624

N/A

N/A
7.72

68%
7.12

63%

Ratios based on Fri, 30 May 2014.

Lg Electronics Inc Benchmark

EV/EBITDA
next 12 mth
Company

Lg Electronics Inc

5.12

Peer group

Lg Electronics Inc excluded

4.61

Lg Electronics Inc included

4.7

Sector

Consumer Electronics

8.96

S&P 500

9.6

STOXX Europe 600

7.6

Country

KOR

6.27

Comments
The EV/EBITDA ratio is a relevant ratio for financial analysis. Lg Electronics Inc shows a EV/EBITDA ratio of 5.12
for the next 12 months.
This is higher than the median of its peer group: 4.61. According to this financial analysis Lg Electronics Inc's
valuation is above its peer group's.
This ratio is significantly lower than the average of its sector (Software): 8.96. According to this financial analysis
Lg Electronics Inc's valuation is way below its sector's.

Stock Performance of Lg Electronics Inc (KR7066570003 - 066570) compared to

its main competitors

Lg Electronics Inc Peer Group - Price Change Percentage

Lg Electronics Inc Peer Group

1
Month

3
Months

7.38%

25.04%

-0.47%

Sharp Corporation

12.99%

-12.46%

-40.88%

Panasonic Corporation
TCL Corporation
Sony Corp
Sichuan Changhong Electric Co. Ltd.
AB Electrolux

-1.90%

-14.34%

34.51%

-7.76%

0.11%

-15.86%

-20.35%

-1.09%

-8.81%

-8.59%

-19.79%

-7.96%

-0.19%

-11.89%

44.62%

1.94%

-8.73%

6.69%

-8.35%

-3.59%

Lg Electronics Inc

12
Months

Price Change Percentage

Lg Electronics Inc Benchmark
1
Mont
h

3
Months

12
Months

25.04%

-0.47%

10.69%

-12.18%

-14.07%

-5.68%

-11.89%

-8.35%

-3.59%

YTD

Compan
y

Lg Electronics Inc

7.38%

Peer
Group

Lg Electronics Inc
excluded
Lg Electronics Inc
included

1.04%
0.19%

Sector

Consumer Electronics

0.00%

-2.10%

0.00%

0.00%

Index

KOSPI Composite

1.69%

0.75%

-0.26%

-0.82%

Market Share

YTD
10.69
%
10.93
%

P/E

Ratios

Year over year, LG Electronics Inc. has been able to grow revenues from 55.1T KRW to 58.1T KRW. Most
impressively, the company has been able to reduce the percentage of sales devoted to selling, general
and administrative costs from 17.33% to 16.93%. This was a driver that led to a bottom line growth from
92.4BKRW to 176.8B KRW.

As of today, things look evenly poised for LG. It has grown at a CAGR of roughly 24% since 2000.
And according to the GFK-Nielsen data for 2010, LG had a 30% market share in refrigerators,
27.7% in washing machines, 35.2% in microwave ovens, 27.3% in CTVs and 28% in air
conditioners.
The company recently reported a healthy turnover of Rs 16 billion for 2010-11 fiscal, with home
appliances and home entertainment together contributing 70%. The rest 30% came from three
other product verticals: air conditioners 15%, LG Mobile 10%, and business-to-business solutions
5%.
LG has set an ambitious revenue target of Rs. 20 billion for the current fiscal, banking on rising
incomes and growing urban households. Besides, the company is aiming to double its revenue to $9
billion by 2015, by growing at more than 25% year-on-year. This is more than the industry growth
rate, which hovers around the 15% mark. If its able to do so, LG India will overtake LG Korea,
which has sales of $7 billion but has to operate in a saturated market.
All these years, LG has been quite bull-headed in its approach to achieving stated targets with
accuracy, following its strategy with a razor sharp precision. Its next target is to double the
contribution of its Indian operations in global revenue from the current 6% to 12% by 2015. The big
question: how will it go about doing this? And given LGs open call to make India a $10 billion
market by 2015, does India have it to give LG that much?
The character of the consumer durables industry has changed dramatically. New technologies like
mobile and computing devices have taken precedence over household goods. Around 2006-07, LG
had started well in these segments. It was the third-largest mobile manufacturer in India after Nokia
and Samsung. Things looked on course. But, probably due to its intense focus on its core home
appliances business and a lack of hit products in the mobile space, it lost ground to domestic Indian
manufacturers and to rival Samsung, which has over 20% market of mobile sales compared to sub10% for LG.
As things stand today, Samsungs revenues are on a par with LG, and is likely to surpass it by the
current fiscal. A Capitaline Neo data says LG Indias total income grew from Rs 5.6 billion in 2004-05
to Rs 10 billion in 2009-10, with a CAGR of 13.76%. On the other hand, Samsung had a higher
CAGR of over 20%, and with an income upwards of Rs 11 billion it has already exceeded that of LG.
Domestic durables players such as Videocon, Mirc Electronics (Onida brand), Godrej, have upped
their ante too. They have technologically improved and expanded their product lines, and with
competitive pricing and an aggressive marketing strategy are looking good to nibble away market
share from international players like LG and Samsung.
Specialised players such as Voltas and Hitachi in ACs and Whirlpool in refrigerators are another
deterrent to LGs rapid growth. Its because of them that LG even after having aggressively upped
its market share across segments, has barely been able to keep its share of the market intact over

the past five years. In fact, in the crucial colour TV space, Samsung and Sony have stolen a march
in the high-end LCD and Plasma segments, according to Crisil Research data. In air conditioners too,
LGs market share has come down to about 28% today, from a high of 35% in 2006-07. In the
refrigerator segment, it has flattened out from 26.6% in 2006-07 to 26.4% in 2009-10 with a
marginal drop. The story with the washing machine segment is no different.
What is even more worrisome for LG is the fact that Samsung and Sony have been consistently
gaining market share in all the segments they operate in. Add to it, Samsungs glorious success in
the mobile phones and tablet segment, which has helped it to improve its overall brand recall and
consumer touch-points. So has Sony with its enviable digicams and Vaio laptops, not to forget the
Bravia TVs and PlayStations. So, does it mean that after reaching the glorious highs in the K.R. Kim
era, all that LG has been doing is fire-fighting to protect its turf over the past five years? And has
Kims successor Moon B Shins going premium strategy not worked to the plan? That probably
could be the reason why LG promptly brought in fresh thinking in the person of Kwon. Kwon was
earlier heading LG Electronics Business Solutions arm. With B2B supplies contributing only 5% to
LG India sales, it could be the next focus area for LG, especially as India is poised to become a
major global economy, which will spurt B2B demand.