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Capacity Expansion; Sustained Margin Gains

Impressive Growth in LED Lighting & Strong PV Order Book: As of Q2FY26, the company’s order book stood at INR 18,400Mn (~54% of FY25 sales), with the passenger vehicle segment contributing 67%. In Q2FY26, LUMX launched lighting systems for Maruti Suzuki, TVS, Honda and Hero. The LED segment made up 85% of the order book and accounted for 61% of revenue in Q2FY26, up from 49% in Q2FY25. We expect the LED share to reach 65-70% in FY26E and believe higher LED penetration and an increase in contribution by the PV segment will drive future growth, as these areas have higher content value per vehicle.

Setting Up a New Manufacturing Facility: LUMX is setting up a manufacturing facility in Bengaluru, Karnataka, with a capital investment of approximately INR 1,400 Mn. This plant will cater to newly secured orders from Maruti Suzuki and Toyota. It is expected to achieve a peak annualized turnover of around INR 4,500 Mn once fully ramped up and is targeted for commissioning by Q4FY27E.

View and Valuation: We revise our FY26/27E EPS estimate by (5.5)%/0.5% and arrive at a revised target price of INR 5,175. We value the company at 20x (previously 18x) on the average FY27/28E EPS and maintain our ‘ADD' rating on the stock. We assign a higher multiple to the company, supported by the capacity expansion at Bengaluru as well as improvement in EBITDA margin through operating leverage and localization efforts.

Revenue, EBITDA Better; PAT Lower Compared to Estimate

* Revenue was up 24.2% YoY and up 9.3% QoQ to INR 10,086 Mn (vs CIE est. at INR 9,728 Mn).

* EBITDA was up 48.4% YoY and up 8.4% QoQ to INR 887 Mn (vs CIE est. at INR 837 Mn).

EBITDA margin was up 143 bps YoY and down 7 bps QoQ to 8.8% (vs CIE est. at 8.4%).

* PAT was up 26.0% YoY and down 1.5% QoQ to INR 356 Mn (vs CIE est. at INR 384 Mn).

LUMX Mitigating Margin Pressure through Operating Leverage and Localisation Efforts: LUMX saw an improvement in EBITDA margin in Q2FY26 on YoY basis. Higher utilisation at the new Chakan plant Phase-1 helped with improved operating leverage. It was further aided by the localisation efforts undertaken by the company for some of the components for LED lighting which are imported (currently achieved localisation at 20–25% and going forward, expected at 50–55%). We expect EBITDA margin to improve, going forward, driven by operating leverage and increasing localisation efforts to source components for the LED segment.

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