BUY Lumax Auto Technologies Ltd. For Target Rs. 552 - Choice Broking
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* On the operational performance front, the company reported a revenue growth of 3.4% QoQ to Rs.7.6bn and operating profit for the quarter was down by 13.3% QoQ to Rs.919mn. Margin for the quarter came at 12.1% (+65bps YoY/-233bps QoQ). PAT for the quarter stood at Rs.442mn (+75% YoY/+21.3% QoQ). On the order book front, the company has an order book of around Rs.9bn which is executable over next 2-3 years of which 90% is new business and 30% to be executed in FY25, 55% in FY26 and balance in FY27. PV contributes around 40%.
* The management expects FY25 growth for IAC India to be in the range 20-25% with a sustainable margin of 15-16%. On the JV front, Lumax Ituran expects to see a growth around 50-55%, Alps India to grow more than 50%, Lumax Yokowo more than 50% (due to low base). Lumax ancillary company to achieve around Rs.150cr, expect to produce 130k units for Urea tank and 20k units fuel tank in FY25 and Aftermarket expects to grow by 20-25% led by launch of new product.
* Healthy order book:
LATL’s current order book stood around Rs.9.2bn of which 60% order is from the PV segment. IAC India is also looking to do brownfield expansion for M&M for new EV models. For FY25, total capex would be Rs.1.6bn, of which IAC's share would be around Rs.550mn, and the remaining for the rest of the entity.
* LATL’s new products such as Instrument Panels, Cockpits & Consoles, Headliner & Overhead Systems, Telematics, Gearshift Towers, and Antennas carry a healthy growth prospect in the medium to long term as these products are getting better traction in the market. Hence, OEM is also increasing the penetration of the latest features and technology in their new launches or refresh models.
* Outlook and Valuations:
We maintain our positive view on the LATL given: 1) its diversified product portfolio; 2) improving PV share post IAC India acquisition; 3) increasing demand for the automatic gear shifter; 4) increasing content value due to premiumisation; and 5) healthy growth prospectus of JV/associates. We value LATL based on 16x of FY26E EPS with a TP of Rs.552 and recommend BUY.
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