Lumax Auto Technologies Research Report By IndiaNivesh

Lumax Auto Technologies (LATL) is a supplier of key components to the two wheeler and the passenger car industries. Its key customers include Bajaj Auto, Piaggio, Honda Motorcycles and Scooters, Maruti Suzuki, Toyota and Tata Motors. Strong tie-ups with these OEMs will entail large business opportunities in the next few years. In spite of weak environment for auto OEMs, LATL’s revenues stayed flattish in the past couple of years. However, EBIT margin weakened due to impact of higher depreciation and interest costs related to new plants . From here on we expect strong volume growth coupled with margin expansion in the next couple of years. With comfortable D/E of 0.2x and robust ROCE of 17%+, we find current valuations attractive, hence we recommend to BUY LATL with target price of Rs. 352 (10xFY16e EPS)

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