Outperform Lumax Auto Technologies For Target Rs.457 - Choice Broking
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During Q2FY24, LATL reported slightly lower than expected performance on margin front which is a key parameter to watch as consolidation with IAC India was margin accretive. Further, going forward margin for IAC India would be slightly lower due to change in product mix. Post acquisition of IAC India, various benefit is coming such as sourcing and client addition, and wallet share is increasing
* On operational performance front, the company reported a revenue growth of 11% QoQ to Rs.7bn and operating profit for the for the quarter was up by 12.4% QoQ to Rs.901mn. Margin for the quarter came at 12.9% (+222bps YoY/+18bps QoQ). PAT for the quarter stood at Rs.274mn (-6% YoY/+24% QoQ). On the order book front, the company has an order book of around Rs.10.3bn which is executable over next 2-3 years of which 90% of order is new business and EV share is 40%.
* The management expect H2FY24 to be better than H1FY24 as it is expecting good offtake from OEM and for FY25 management expect IAC India and JV/associate to deliver healthy growth. Margin for LATL ex IAC would be in lower single digit and for IAC India, margin would be in the range of 17-18%. For JV/Associate margin could be around 15- 16%. and could grow in the range of 20-22% from FY25 onwards due to healthy order book in hand.
* Healthy order book: LATL’s current order book stood around Rs.10.3bn (Rs.6bn IAC India) of which 60% order is from PV segment. IAC India also looking to do brownfield expansion for M&M for new EV models. For FY24, total capex would be Rs.1.4bn, 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 17x of FY25E EPS with a TP of Rs.457 and recommend OUTPERFORM.
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