Lumax Industries Ltd - Result Update Q4FY20

24th June 2020 By Edelweiss

Lumax Inds (Lumax) exceeded our topline expectation by ~4% to clock INR 387 cr for the quarter. Change in product mix towards LED helped to surpass industry volume growth. Although we believe demand scenario will continue to remain uncertain in near term, 1) Scope of margin improvement, 2) Increase in LED mix, 3) Order book of INR 450 cr and 4) entry into new product segments like HVAC provides good visibility of topline and profitability growth as automobile volumes revive. Hence we continue to maintain BUY rating for the stock with a Target Price of INR 1,350, valuing it at 16x on FY22 EPS estimates.

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Key Highlights
  • Focus on margin improvement and change in mix to drive profitability and valuation. Factors like 1) Scope of margin improvement still persists as management targets 15% and 5% increase in localization levels for PVs and 2W from current levels
  • 2) Increase in LED mix, 3) Order book of INR 450 cr and 4) entry into new product segments like HVAC through collaboration with Stanley Electric Co, provides good visibility of topline and profitability improvement as automobile volumes revive. Hence we continue to maintain BUY rating for the stock with a Target Price of INR 1,350, valuing it at 16x on FY22 EPS estimates.

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