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Performance for Q1FY25 was below the expectations on Margin front where it margin came lowest since pandemic. Revenue during the quarter grew by 23.8%YoY/3.1% QoQ to Rs.7.66bn (vs est of Rs.8.0bn) due to commissioning of new plant and winning new models. EBITDA grew by (+12.5% YoY/-12.3% QoQ) to Rs.578mn and EBITDA margin came at 7.5% (- 76bps YoY/-133bps QoQ) due to higher employee expenditure and due to increasing LED share as RM cost increased due to high import content for the LED. RPAT stood at Rs.342mn, (+48% YoY/-5.2% QoQ). Income from Associate grew by +72% YoY/-15.7% to Rs.187mn. The capacity utilization for the Chakan plant was 55-60% and expect to reach 80- 85% by Q4FY25 due to new programs like M&M Thar 5-door and Scorpio production to be moved to Chakan. In Q1 plant revenue is around Rs.85cr.

* Management expects to have better than industry 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. Management maintains long term target of achieving double digit margins with expectation of 11-13% by FY27-28.

* 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, management expect 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 Q1 stood at around 45%. 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. However, so far management is not able to meet the double digit margin trajectory despite increasing the local content.

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) healthy demand in the PV segment; 3) increasing capacity in PV segment (will add incremental annual revenue of Rs500-600cr from FY25 onwards); 4) localization of electronic facility levers for margin expansion; and 5) addition of new clients and models. We ascribe a TP of Rs.3310 (15x of FY26E EPS) and recommend BUY.

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