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Performance for Q2FY25 was below the expectations on Margin front, where the margin came lowest since pandemic. Revenue during the quarter grew by 26.1%YoY/6.0% QoQ to Rs.8.1bn (vs est of Rs.7.6bn). EBITDA grew by (+8.8% YoY/+3.5% QoQ) to Rs.598mn and EBITDA margin came at 7.4% (-117bps YoY/-18bps QoQ) due to impact by lower capacity utilization in the new plant and higher fixed costs. RPAT stood at Rs.283mn, (+7.8% YoY/- 17.3% QoQ). Income from Associates grew by +49% YoY/+6.3%QoQ to Rs.199mn. The capacity utilization for the Chakan plant was 55-60% and expect to reach 80-85% by end of FY25 due to addition of new models.

* Management expects to have good growth on the back of increasing the share of LED lighting, expanding the business share with existing customers and new product launches. Margin expansion to be achieved by better capacity utilization.

* PV segment to continue to dominate the growth going forward: LIL revenue share from MISL is expected to improve led by increasing share of SUV in MSIL portfolio now and decent launch pipeline ahead with capacity expansion. Maruti Suzuki contributes to about 50% of the order book. The company has been awarded orders for all the five models to be launched by Maruti. The management expects revenue from its key customer like MSIL and M&M to improve in coming quarters. Further revenue share from M&M and Tata motors to also improve from FY25 onwards as new facility is largely dedicated for these two clients. Additionally, LIL’s largest client MSIL will be next growth engine once MISL’s kharkhoda plant will commission.

* Increasing LED share: In the last 5 years the share of LED for LIL has improved from 25% to 39% of total revenue and in H1FY25 stood at around 47%. Management expects this will help to improve the LED share to 50% in FY25. The current import content in 2W LED lighting is 25-30% and in PV 50% (depending upon headlamp and tail lamp) which is expected to reduce by half in the next couple of years.

View & Valuation: We continue to maintain our positive outlook on Lumax Ind led by 1) its strong relationship with the majority of auto OEMs; 2) new model additions in the PV segment; 3) increasing capacity in PV segment 4) localization of electronic facility levers for margin expansion; and 5) addition of new clients. We ascribe a TP of Rs.2,622 (15x of SepFY27E EPS) and recommend BUY.

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