Takeaways from the AGM:

AGM was well attended with many members asking detailed questions on the Kesar Multi-modal logistics project which is coming up at Pawarkheda in Madhya Pradesh.

Management was very forthcoming and H R Kilachand patiently answered queries from shareholders during and after the AGM. Members of the Board were also available to interact with shareholders after the event.

Kilachand indicated that the Pawarkheda facility will begin in the next 15-20 days as the railways are carrying out the work of installing signaling systems and equipment to move rakes into and out of the facility. He blamed the internal politics within the railways for the long delay in the project starting.

When fully operational, the facility will have the capacity to handle three rakes simultaneously. To begin with KMML will handle one rake a day and gradually scale up as demand grows. At present it has the capacity to handle two rakes simultaneously, but the management wants to construct capacity for the third rake right away as bureaucratic delays may hamper expansion at a later stage.

When the facility is fully operational, cargo like cement, fertilizers, textiles etc would be handled.

A big advantage would accrue to KMML if the railways go ahead with the proposal to halt goods handling operations at Itarsi. Because of
congestion, the railways seem to be keen that Itarsi station handles
only passenger traffic. Kilachand hoped that the goods traffic handled
by the railways would move to KMML.

Kilachand reminded investors that the warehousing business is competitive and there are many players. But KMML enjoys the advantages of having a goods rail line passing through its facility.

At present the cold storage facility has begun operations with fruits and vegetables being brought in for storage. Kilachand foresees big opportunity in handling agricultural produce since MP has become the country's biggest producer of wheat and one of the bigger producers of rice. He expects much of the cargo to move via KMML. Agriculture warehouse measures 16,000 sq mts.

As an aside, Kilachand said the company may look at food processing
business because of the location and availability of the facility. He
added that finance for food processing was available at 4 per cent
interest.

The management is expecting revenues of around Rs 16-17 cr in the first quarter of operations. Expected EBITDA margins at 60
per cent just like in the tankage business.

Company is paying a royalty of Rs 12.7 cr over the next 13 years or Rs 1.2 cr annually to the Madhya Pradesh Mandi Board.

So far company has incurred at debt of Rs 88 crores for the project. Some of the debt is also being paid back.

Kilachand says, KMML will benefit from the Goods and Services Tax.

As for the huge debt on its books, Kilachand says KMML may look at
offloading stake to investors at a later stage when it can get higher
valuations.

Regarding tankage business, company will begin work
on either the Kakinada or Pipavav project once first phase of KMML
begins operations. Company will have to reapply for permissions at
Pipavav, but it has all permissions in place for Kakinada. Company is
paying a rent of Rs 2 lakh per month for the land at Kakinada.

Red Flags

Management is expecting pricing pressure on its core tankage business at Kandla because of several facilities which are coming up at Pipavav and other places. But Kilachand says its tanks are priced competitively already and it would be able to maintain margins.

Tanks have a life of 30 years but they need to be maintained. Depending on what is stored in the tanks, they can even get damaged earlier.

Management is converting mild steel tanks into stainless steel tanks depending on demand.

others who attended are free to add anything i missed.

shiv kumar

They have a stated goal of "“3Cx15” (no Component, Customer or Country to represent more than 15% of turnover)" and from the recent management interview their VW exposure is not to be worried about. Their exposure to Maruti Suzuki is also not very significant. If you read some of the interviews/research reports/annual reports then you will find out that at one point 3/4th of revenue used to come from a single customer and from a single country. They have made great progress from there and the auto industry has almost always had something going on to worry about and Motherson has performed in spite of all these odds.

Also I think one should not make too much about VC Shegal's tone and attitude. The man has built an empire, made money for shareholders, hired professional management and has great track record.

To me Motherson Sumi and VW fiasco looks like a case of getting over influenced by extra vivid evidence.

Lumax Industries offers a wide array of complete Automobile Lighting Systems and Solutions, which includes; Head Lamps and Tail Lamps, Sundry and Auxiliary Lamps and other related products and accessories for Four Wheeler, Two Wheeler, Trucks, Buses, Earth-movers, Tractors and a variety of diverse applications.

Lumax signifies ‘LUMINOSITY MAXIMA’ for automobile users.

Lighting products have become an integral part of vehicle styling & design

Lighting products have become an integral part of vehicle styling & design of lamp is being upgraded continuously to enhance the appeal of the vehicle. Further, OEMs now demand lower wattage & higher luminosity lamps to save energy which has made these products more technologically advanced.

The role of lighting manufacturer has progressed from being merely a component supplier to collaborate with OEMs from the concept stage & work as a team.

The auto lighting products in India now seems to be heading towards integration of advanced features with improved design languages.

Collaboration with Stanley Electric has given it a strong technological footing, apart from enabling it to garner business from the Japanese OEMs

Lumax's technical collaboration with global automotive lighting leader Stanley Electric (which holds 35.77% equity stake in the company), has given it a strong technological footing, apart from enabling it to garner business from the Japanese OEMs. The company has been a preferred supplier for several models of the OEMs.

Lumax, which has collaboration with global lighting major Stanley Electric, is likely to be a beneficiary of this as apart from having its own established design & development team, it can procure latest technology from Stanley Electric, which has cutting-edge technology for automotive lights. Further aggressive adoption of LED by OEMs offer an opportunity to auto lighting suppliers like Lumax to expand its customer base as LED requires completely new expertise in the optical design to maximize the benefit from LED.

Hogs a huge 60% market share

Lumax accounts for over 60% market share in the Indian Automobile Lighting Business, catalyzed by its over two decades strong technical and financial collaboration with Stanley Electric Company Ltd, Japan, a world leader in Vehicle Lighting and illumination products for Automobiles.

Enjoys patronage of all major automobile companies

Its top five clients i.e. Maruti, M&M, Honda Cars, HMSI & Tata Motors account for ~79% of revenues, with Maruti alone accounting for around 35% of revenues.

In the passenger vehicle industry, while it has been supplying for most of the models of Maruti, it also supplies for models like Honda City, Jazz, Amaze, Brio, Zest, Etios, Etios Liva, Scorpio, Bolero, Sumo Victa, Safari, Nano, etc. For CVs & 2- wheelers, Lumax supplies to Tata motors, HMSI, Hero Motocorp, Yamaha, etc. In the luxury car market Lumax has been supplying for some models of Bentley, Audi & JLR.

Going forward too, the company is in agreement to supply for most new model programmes of OEMs for both cars & 2 wheelers. Maruti has contracted Lumax to supply lamps for all the new models till FY17. The company will also be supplying to HMSI, Toyota & Yamaha for the upcoming models. In the next 4-5 years, its PV & 2-Wheeler clients are expected to roll out around 30 models & 12 models respectively.

Yamaha is setting up a facility near Chennai & Lumax will supply for all types of lamps for several models including the facelifted Ray Scooter that will begin production in early 2015. Nissan's recently launched facelifted sedan, Sunny, also has Lumax's headlamps. It is also supplying small lamps to Nissan's Qashqai & Juke models in UK.

Plans Rs 300 crore Capex, to double turnover in 5 yrs

Lumax Industries plans to invest Rs 300 crore and double its turnover to Rs 2,500 crore in the next five years.
Over the time, the company has substantially increased its manufacturing capacity and R&D capabilities. Keeping in view the present order book the proposed investment would be around Rs 300 crore in green-field, brown-field and capacity expansion plans in next 5 years, to be funded through internal accruals.

During the past couple of years, the company has invested about Rs 160 crore in its Bawal and Bangalore facilities.

Financial : On equity of Rs 9.35 crore and face value of Rs 10 per share

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Motherson Sumi can't be clubbed with the likes of great companies for eg Gruh, HDFC, Bosch, Wabco. Nestle, P&G. Its no where near a great company. Its a good company though and featuring in Motilal Oswal does not account for anything otherwise its very easy to buy their MOST fund and do nothing.

Trust me any company whose business model is largely dependent upon a single product (exceptions where there is practically no competition or some kind of technology leadership / patent) or a large single client sometime or the other will face the brunt. The best money is made when you buy at moderate PE with an excellent growth outlook and there is complete perception change. I am pretty much sure people will make huge money by buying Page, Bosch, Eicher at current valuations. There is more downside risk then upside. When you buy a stock all one has to take care of is to know / restrict downside risk. The upside will take care of itself.