LUMAXTECH - Lumax Auto Technologies Ltd. Share Price

In the Q1 FY 2025-26 earnings call, Lumax Auto Technologies management provided a positive outlook, noting steady performance in revenue and profitability aligned with internal budgets. Key forward-looking points included:

1. Revenue and EBITDA Guidance: Management expects EBITDA margins to range between 14% to 15% for the first half of FY 2025-26, with a consolidated revenue goal of INR 1,026 crores for Q1, reflecting a year-on-year growth of 36%.

2. Order Book Status: The company reported a robust order book of INR 1,500 crores, with 40% of this attributed to future and clean mobility solutions. It anticipates about 8% of this order book will materialize in the current fiscal year.

3. Segment Performance: The Advanced Plastics division achieved a revenue increase of 25% year-on-year, while Mechatronics saw nearly 100% growth. The aftermarket segment grew by 16%, further boosting overall performance.

4. Acquisitions and Subsidiaries: Lumax created two new wholly-owned subsidiaries, Lumax Auto Comp Private Ltd. and Lumax Auto Solutions Private Ltd., to target emerging growth opportunities. The full integration of IAC India, gained by acquiring the remaining 25% stake, is expected to enhance profitability.

5. Future Investments: The company is setting up a technology center in Bengaluru and establishing engineering and sourcing capabilities in China to align with market trends.

6. Capital Expenditure: A full-year capex guidance of INR 180 crores to INR 200 crores was reaffirmed, supporting ongoing growth strategies. Effective liquidity management is indicated with free cash reserves at INR 359 crores.

Management remains optimistic despite a broadly flat automotive environment, bolstered by macroeconomic improvement, diversified offerings, and successful engagement with leading OEMs, especially Mahindra and Tata Motors. Additionally, stable rural demand and personal income tax benefits are expected to enhance consumer sentiment in the upcoming festive season, which will support the overall business.

Here are the major questions and detailed answers from the Q&A section of the earnings transcript:

1. Question: "We have observed high growth in clients like Tata Motors and Mahindra. If you can please throw some color on this? Also, what's the plan for the new subsidiaries and any inorganic talks nearing completion?" Answer: We continue to pursue growth opportunities through inorganic routes, evaluating future strategies. As for client growth, Mahindra's revenue surged over 50%, boosted by their passenger vehicle segment's growth of 30-35%. Similarly, Tata Motors doubled its revenue due to Greenfuel's consolidation into our results.

2. Question: "Can you help us understand how the emerging subsidiaries performed in Q1 and if we have added any new customers or orders?" Answer: Our mechatronics subsidiaries saw revenue increase from INR 25-28 crores last Q1 to INR 55 crores. Notable growth came from Lumax Alps Alpine, which grew sharply due to new SOPs. We expect continued growth, aiming for INR 55-60 crores in Lumax FAE for FY '26.

3. Question: "Do you see any export opportunities for Indian auto component players?" Answer: We are engaged in indirect exports through OEMs but focus remains domestic. Our joint venture partners operate in ASEAN and North America. While there are no immediate midterm plans for export expansion, we aim to explore aftermarket export opportunities vigorously.

4. Question: "Has the commercial vehicle segment's sales growth been significantly driven by Tata Motors, and what does this mean for future price corrections?" Answer: Correct, the growth in the commercial vehicle segment originates largely from Tata Motors and Greenfuel. Concerning price corrections, we experienced a delay in actualizing new prices due to negotiations on Mahindra's BEV models. This delayed impact will be captured in Q2.

5. Question: "Will we see a decrease in minority interest this year due to IAC becoming a 100% subsidiary?" Answer: Yes, minority interest has decreased to around 15-17% from last year's 27-28%. This decline reflects IAC's acquisition impact, with Greenfuel pushing the minority interest higher due to its 40% minority stakes.

6. Question: "What capital requirements and asset turnover are we anticipating for our long-term business plan?" Answer: Looking towards FY '30, we project a tripling of revenues from INR 3,500 crores to around INR 10,000 crores, mainly through internal accruals and debt. We estimate a capex of INR 200-250 crores annually to meet this growth, with improved asset turnover expected.

7. Question: "What is the revenue from IAC in Q1, and do we have any pending RFPs?" Answer: IAC reported revenue of INR 317 crores in Q1, up nearly 50% year-on-year, driven primarily by Mahindra's growth. There are also 7 new Mahindra models launching over the next three years, with ongoing bids expected to materialize.

8. Question: "How are our non-Mahindra customers performing, and are we winning new orders?" Answer: While Mahindra remains our largest client, we have diversified our portfolio. Growth for other customers like Tata and Maruti is encouraging, and we are optimistic about securing more business across various OEMs.

9. Question: "What is our competitive stance on EBITDA margins by FY '28?" Answer: We aim for 16% EBITDA margins by FY '28, leveraging strong performances in our plastics and aftermarket segments. The growth in our clean mobility verticals also supports this margin expansion.

10. Question: "What risks do you see for our growth in a potentially declining auto industry?"

Answer: We are sensitive to industry cycles but believe our product diversity and customer portfolio will protect us against downturns. Our capex won't match previous levels due to improved asset turnover with less capital-intensive growth segments like Greenfuel.