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In Q2 FY25, the company reported a revenue increase of 20.3% year-over-year (YoY) and 11.4% quarter-over-quarter (QoQ), reaching INR 8.42 billion, ahead of the expected INR 8.26 billion. This growth was attributed to the company's strategy of increasing content per vehicle, which boosted volumes and reflected robust demand. EBITDA came in at INR 1,022 million, marking a 13.4% YoY and 16.1% QoQ increase, slightly surpassing the estimate of INR 1,000 million. The EBITDA margin stood at 12.1%, a YoY drop of 74 basis points but an improvement of 49 basis points QoQ, aligning with projections. Reported profit after tax (PAT) rose by 37.9% YoY and 24.4% QoQ to INR 518 million, outperforming the estimated INR 444 million.

* As of September 2024, the company’s total order book stands at INR 1,050 crore, demonstrating strong demand across its core business segments. This order book is strategically distributed over the coming years, with 15% allocated to FY25, 40% to FY26, 30% to FY27, and the remaining 15% earmarked for FY28. The passenger vehicle (PV) segment plays a dominant role, making up 70% of the Advanced Plastics business and achieving a 17% growth in H1 FY25, with an order book of INR 650 crore. Mechatronics, though a smaller segment at 3% of total revenue, showed an impressive 76% growth in H1 FY25 and holds an order book of INR 175 crore. Structures & Control Systems, which contributes around 21% to total revenue, grew by 11% and has an order book valued at INR 225 crore, with 60% of this demand coming from the PV segment.

* The company’s capital expenditure (capex) plan reflects its focus on long-term growth and expanding capabilities in key areas. In H1 FY25, the company invested INR 32 crore in capex, and it has provided full-year FY25 guidance of INR 120-140 crore. This capex allocation will support ongoing projects, improve operational efficiencies, and enhance the company’s production capacity to meet increasing demand.

* Outlook and Valuations: We have a cautious outlook on LATL due to subdued demand in the automotive sector, with single-digit growth in H1, which signals a slower market recovery. Additionally, LATL's margins are being impacted by underutilized capacities and high fixed costs, which are putting pressure on profitability. Although the company benefits from a diversified product portfolio, the current market conditions and operational challenges present headwinds for growth. We value LATL based on 17x of Sep-FY27E EPS with a TP of Rs. 483 and recommend SELL.

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