Buy Lumax Industries Ltd For Target Rs. 4,000 By Choice Broking Ltd
Business Overview: Lumax Industries Limited (LUMX) is a leading Indian manufacturer and supplier of automotive lighting systems for four-wheelers, two-wheelers, and commercial vehicles, serving both domestic and international markets. Their product portfolio includes front and rear lighting, with a strong strategic focus on LED technology. For FY25, LUMX reported a strong financial performance with revenue of INR 34,004 Mn, achieving a significant YoY growth of 29.0%. EBITDA reached INR 2,794 Mn, an increase of 21.3% over the previous year, with an EBITDA margin of 8.2%. PAT stood at INR 1,399 Mn, marking a 26.0% YoY growth, and a PAT margin of 4.1%.
How well is LUMX positioned to take advantage of the transitions in the Automobile industry?
* Shift to LED lighting: As of FY25, the LED segment made up 88% of the order book and accounted for 58% of revenue in FY25, up from 39% in FY24. LUMX has invested in R&D and manufacturing capabilities to support the shift to LED’s and is actively developing and launching innovative LED-based solutions. We expect the LED share to reach 65% in FY26 and believe this will drive future growth, as LED has higher value per vehicle.
* Shift to EVs: LUMX manufactures lighting components that are fuel-agnostic, meaning they are suitable for both conventional ICE vehicles and EVs. EV’s currently contribute to 37% of the total order book indicating the company is well-positioned to take advantage of the transition to EVs and LUMX is also developing EV-specific solutions like charging indicator lamps.
How will China’s export restrictions on rare earth magnets impact LUMX?
While the company’s products do not directly use rare earth magnets as a raw material, the export restrictions will have an impact on LUMX if the approvals do not come through and the auto OEM’s start seeing disruptions or production halts affecting the future order inflow as well as the current order book of the company (~ 37% from EVs). If the issue persists for a prolonged period we can see impact on revenue growth and profitability for FY26.
What makes LUMX an attractive investment?
* Strong financial performance: LUMX reported strong financial performance in FY25, and we expect the company to continue this growth, with an expected revenue CAGR of 16.6%, EBITDA CAGR of 17.2% and EPS CAGR of 22.5% over FY25–27.
* Healthy order book and strong relationship with the majority of the OEMs: LUMX's order book, which stood at approximately INR 22,750 Mn, is strategically composed to align with future market trends. A significant 88% of this order book is dedicated to LED lighting, while 37% is to Electric Vehicle (EV) applications and the PV segment accounts for 85% of the order book, indicating a strong and continued demand from key four-wheeler manufacturers. LUMX’s success is solidified by its long-standing and strong relationships with major OEM’s and is a market leader and preferred supplier to OEMs across various vehicle segments.
* Continuous innovation and strong R&D capability: LUMX leverages strong R&D and continuous innovation to advance automotive lighting technologies. With two certified R&D centers in India and design hubs in Taiwan and the Czech Republic, including the Lumax Europe Technical Center, the company enhances capabilities in optics, electronics, and software.
Recommendation: We maintain a positive outlook on LUMX, maintaining our ‘BUY’ rating, with a TP of INR 4,000.
Key Risks:
* Economic risk: Economic recession and a decline in market demand can adversely impact the company's performance and financial position, as vehicles are integral to its business and their demand is directly affected by economic situations.
* Technology Risk: The automotive industry's rapid technological transformation introduces inherent risks. Adapting new technologies is crucial for maintaining efficiency and market position.
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