Lumax Industries Ltd. (LIL) is a market leader in domestic automotive lighting industry, with market share close to around 30-35% on standalone
basis. However Lumax group (i.e. SL Lumax, lighting business of Lumax Auto Technologies Ltd and Lumax Industries Ltd) has ~50-55% combined
market share in domestic lighting business. Over the years LIL has presence across leading OEMs like Maruti Suzuki, Honda Cars, HMSI, Hero Moto
Corp, Tata Motors, M&M, Toyota, etc. on the back of its consistency in the product quality. During past 4-5 fiscals, company has focused on cost
reduction and process improvement that has helped it to improve profitability significantly.
Lumax’s products are unaffected by the EV disruption as EVs would require the vehicles to be more energy efficient, which would lead to the faster adoption of LEDs.
Recent quarterly performance of Lumax Industries was encouraging driven by 25.5 percent growth in net revenues on the back of 15 percent volume growth and improvement in realization. Lumax’s EBITDA witnessed a growth of 28.5 percent. It is noteworthy that the company launched new products for HMCL’s xPro and Super Splendor and Passion-Pro models during the quarter. Additionally, it added Morris Garages (MG) Motor India as its customer and received an order to supply tail lamps and headlamps for MG’s SUV.
It is focussing on increasing market share in commercial vehicles, tractors, and 2-wheeler.
1/3rd of the revenues come in from Maruti Suzuki which is also performing very well.
The company has set up a new plant in Gujarat, to cater the needs of Maruti Swift. This brings visibility to it’s volume expansion.
The company caters to 40% of Honda’s 2 wheeler demand. And going forward, they expect it to increase it’s market share as Honda looks to expand it’s product range.
BS-6 would be coming by 2020, which would make it necessary for all vehicles to be Energy Efficient. So auto-makers would have to switch from conventional lighting to LED for head and tail lamps.
Also, the sudden surge of Green Technology and E-Mobility, puts Lumax Industries in a driving seat to increase their market share, as well as business in the coming Fiscal Years.
The company has a partnership with Stanley Electric and Phillips for LED lighting. They will soon be starting phased electronic Localisation in India, which would cut the Import costs and lead to better
Its return matrix is expected to improve led by growth and margin expansion. Equirus expects revenue/EBITDA/net profit to grow at a CAGR of 15/24/27 percent over FY18-20.
EBITDA/net profit margins to improve by 200/250 bps by FY20. This would be driven by the high OPM which LED lighting offers, which stands anywhere between 2x-5x.
In 2014, 95% revenues of the companys revenues came in from conventional lighting and 5% from LED lighting.
Currently 75% come in from conventional lighting and 25% from LED.
By 2020, this figure is expected to reach 50-50.
The company expects to go debt free by March 2018, and they expect to remain cash positive so that they can invest in Future Technologies and R&D.
The promoter holding stands at a massive 73.53%, which shows their confidence in th company going forward.
Noted Investor Ashish Kacholia invested in the script in November 2017 and has been holding good amount of shares since then.
The company has been keeping in mind the best for the share-holders and has been paying Dividend Regularly. The dividend yield has doubled in the past one year.
Healthy demand from the auto sector, Market leadership, marquee clients in its kitty, its focus on developing technologically advanced products and adoption of LED-based products provide an improved earnings visibility for the company and hence looks attractive even at current levels.