Strong growth momentum, bullishness reloaded…
About the stock: Lumax Auto Technologies (LAT), est. since 1981, is a leading auto ancillary player with diversified portfolio serving both OEMs and aftermarket. It has a history of successful JVs with 26 plants across 6 states in India.
• FY24 product mix – integrated plastic modules: 47%, Gear Shifter: 12%, After-market: 14%, Fabrication: 8%, Lighting: 5%
• FY24 OEM share of sales- M&M: 26%, Bajaj Auto: 15%, HMSI: 5%, MSIL:8% Q3FY25 Result: On consolidated basis, revenues for Q3FY25 came in at ₹ 906 crore (up 23.6% YoY). EBITDA in Q3FY25 stood at ₹118 crore with EBITDA margins at 13% (up 88 bps QoQ). Resultant PAT stood at ₹44.8 crore (up 23% YoY)
Investment Rationale:
• Prominent PV ancillary, levers for industry leading growth: Passenger Vehicle (PV) domain contributed the maximum ~50% of sales at Lumax Auto in 9MFY25. It has significant growth potential due to India’s low car penetration of ~30 per 1000 people, compared to China at ~200, US and Europe at ~500+ levels. LAT’s prominent presence in PV space is resultant of its recent acquisition of 75% stake in IAC, which has not only bolstered its product portfolio, particularly in plastic interior modules, but also expanded its business with OEMs like M&M (largest customer, contributing ~27% of sales), which is expected to outperform PV space domestically consequent to its impressive consumer response to new model launches. It is present across top selling models of M&M like XUV 700, XUV 3XO, Thar Roxx, & newly launched BE 6. Recent rationalisation of personal income tax regime is positive for auto space with Lumax Auto a key beneficiary
• Healthy 2-W exposure and ramp up in other JVs to support growth: Post healthy recovery in domestic auto volumes over FY21-24, growth outlook is tad muted for PV & CV space wherein these domains are expected to grow single digit over FY24-26E. 2-W space however is well poised to grow lower double digit in near-medium term amidst healthy government allocation towards rural development, various state government schemes promoting employment and impending export recovery. With ~25% sales coming from this segment and Bajaj Auto as its anchor client in this domain, we expect LAT to benefit from 2-W volume recovery. Furthermore, the company expects its other JVs for products such as on-broad antennas, telematic products, sensors, etc. to substantially grow over next 2-3 years. With growth levers in place, we have modelled in a topline growth of 18.5% CAGR over FY24-27E. It is supported by its current order book of ~₹ 1350 crore with EV contribution of the same pegged at ~40%.
Rating and Target Price
• With robust order book driving high double-digit sales growth, gradual improvement in margin profile and strong return ratios, we assign BUY rating to Lumax Auto Technologies, valuing it at ₹750 (20x PE on FY27E).
IDirect Lumax Auto Co Update Feb25
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