LUMAXIND - Lumax Industries Ltd. Share Price

Lumax Industries Limited's management provided a positive outlook during their Q1 FY 2025-26 earnings call. They noted a robust growth projection for India's economy, forecasting a real GDP growth rate of 6.5% for FY 2024-25 and a continuation of this momentum into FY 2025-26, despite sector-specific challenges in the automotive industry.

Key forward-looking points highlighted include:

1. The automotive industry, despite facing headwinds, is expected to gradually recover due to positive macroeconomic indicators and approaching festive seasonal demand.
2. Lumax recorded impressive revenue growth of 20.5% year-on-year, with consolidated revenue reaching INR 923 crores. They aim to maintain a growth trajectory of 15% to 20% for the full year.
3. EBITDA for Q1 stood at INR 84 crores, marking a 20.7% increase, with a margin improvement to 9.2%. The management expects EBITDA margins to increase by 30 to 50 basis points in Q2.
4. The company has a healthy order book of almost INR 2,000 crores, with expectations for around half of this to be realized in the current fiscal year and a significant portion (approximately 30%) anticipated in FY 2027.
5. The automotive lighting industry is increasingly skewed towards LED solutions, constituting 61% of total revenue in Q1, up from 45% year-on-year, and 84% of the current order book is LED-based.
6. The Chakan Phase 2 facility is set to commence operations, expected to generate peak revenue of INR 250-300 crores in FY 2027, focusing on Skoda and Volkswagen models.

Overall, the management remains optimistic about Lumax's positioning and growth potential in a recovering automotive market, driven by strategic product focus and robust collaborations with OEMs.

1. Question: "You have mentioned before customer price correction was impacting quarter 1 margins. Could you clarify the expected quantum of this correction in quarter 2 and whether there will be benefits?"

   Answer: We experienced price corrections amounting to approximately INR 1.3 crores in Q1, which were pending from Q4. We anticipate these corrections will continue into subsequent quarters, providing further realizations as we progress.

2. Question: "How do you see the competitive landscape shaping up given the recent JV between Tata AutoComp and another major player?"

   Answer: We don't foresee significant changes due to the JV's announcement. Despite a hypercompetitive environment, Lumax continues to maintain a leading market share and we're well-positioned to grow. Our ambient lighting segment is expanding; we've secured a deal for one of Honda's models.

3. Question: "Your order book is more skewed toward 4-wheelers despite having a fair representation of 2-wheelers. Is this due to TAM, or is it a conscious focus on 4-wheelers?"

   Answer: Currently, 65% of our revenue comes from passenger vehicles. The value per vehicle for lighting on passenger vehicles is significantly higher, nearly 7x that of 2-wheelers. Our order book predominantly reflects this focus, with 80% from passenger vehicles.

4. Question: "What is the status of your localization efforts amid rising raw material costs?"

   Answer: We've improved our raw material localization from 66.5% to 64.3%. Our efforts initiated last year are contributing positively, and we aim to maintain localized consumption around 64% to 65.5% moving forward.

5. Question: "Regarding SL Lumax, do you expect margins and profitability to continue similarly going forward?"

   Answer: SL Lumax remains a reliable partner for Hyundai, and while some fluctuations occur due to pricing adjustments, the long-term performance looks stable. I suggest monitoring its annual growth rather than quarterly for accuracy.

6. Question: "When do you expect Chakan Phase 2 to start operations and what will its revenue potential be?"

   Answer: We expect Chakan Phase 2 to start production by the end of this quarter or early next. We anticipate peak revenue around INR 250 crores to INR 300 crores from this facility primarily serving Skoda and Volkswagen.