Lumax Industries, a stop-to-give up lighting answer issuer throughout automobile segments, presents an excellent buying opportunity for investors. Lumax’s consciousness on LEDs will help it consolidate the management position in the car lighting fixtures area, in which it already has a 60 percentage marketplace proportion. The LED consciousness may also enhance margins and upload to the attraction of its thin balance sheet and strong return ratios.
Focus on LED lighting fixtures
Demand for LED lights continues to be very strong. Big authentic device producers (OEMs) are broadly adopting LEDs because they may be more electricity efficient and aesthetically appealing. The transfer to BS VI emission norms and growing adoption of electrical automobiles, that want to be extra electricity efficient will upload more heft to LED call for.
Thus, Lumax’s aggressive recognition of manufacturing and delivery of LED bulbs unlocks a massive capability for both sales boom and margin enlargement. The organization’s affiliation with Stanley Electric Company, an global chief in car lighting fixtures and the simplest firm to manufacture LEDs international, additionally gives it a technology side.
LEDs contributed 35 percent to Lumax’s topline inside the nine months ended December 2019 in comparison to just 5 percent in FY17. The management is targetting a LED contribution of forty-50 percent of general sales with the aid of 2020. The low penetration inside the commercial vehicle segment, wherein the company has eighty percentage marketplace proportion, might be a key component in achieving this goal.
Lumax has a solid footing inside the passenger automobile lighting area and serves almost all main OEMs in India. Maruti, the chief in PV section, is Lumax’s biggest client contributing 36 percent to overall sales followed through Honda Motorcycle and Scooter India (HMSI) with 14 percent share. The pinnacle three clients generate around sixty-one percentage of total revenues.
During the area long gone using, Lumax delivered new fashions including Ertiga, WagonR, Jawa, and Marrazo to its portfolio. These are expected to pressure increase within the close to-time period as new models benefit traction.
The promoters – the DK Jain circle of relatives and Stanley Electric Company – preserve 37.5 percentage every. The high promoter stake ought to lend comfort to investors.
Strong economic overall performance – lean balance sheet and better go back ratios
Lumax has advanced its financials over the years. It grew internet sales at a compounded annual growth price (CAGR) of 10 percent over FY14-18. Over the same period, running profitability, as measured through profits earlier than hobby, tax, depreciation, and amortization (EBITDA), has stepped forward 28 percentage and EBITDA margin multiplied 361 bps.
In truth, the margin maintains to extend further with growing contribution from LED products and stood at nine.61 percent on the stop of Q3 FY19. The business enterprise has additionally been able to enhance its cash glide position over the years and has now not best been capable of pay off its debt; however additionally fund its enlargement via internal accruals. This has brought about an improvement inside the return ratios as nicely.