Lumax Industries, an end-to-quit lighting fixtures solution issuer throughout car segments, gives a first buying possibility for buyers. Lumax’s awareness on LEDs will help it consolidate the leadership function in the vehicle lighting area, where it already has a 60 percentage marketplace proportion. The LED awareness will also improve margins and upload to the attraction of its thin balance sheet and strong return ratios.
Focus on LED lighting
Demand for LED lights remains very sturdy. Big original equipment manufacturers (OEMs) are extensively adopting LEDs due to the fact they’re extra energy green and aesthetically appealing. The transfer to BS VI emission norms and growing adoption of electrical motors, that need to be extra power green, will upload greater heft to LED call for.
Thus, Lumax’s competitive awareness on production and supply of LED bulbs unlocks a tremendous ability for both income increase and margin expansion. The business enterprise’s affiliation with Stanley Electric Company, a global chief in automobile lights and the only company to fabricate LEDs comprehensive, also gives it a technology area.
LEDs contributed 35 percentage to Lumax’s topline inside the nine months ended December 2019 in comparison to just 5 percent in FY17. The control is targetting a LED contribution of forty-50 percent of total sales by 2020. The low penetration in the business vehicle phase, wherein the company has 80 percent marketplace percentage, may be a key component in attaining this goal.
Strong patron base
Lumax has a firm footing within the passenger car lighting fixtures space and serves nearly all leading OEMs in India. Maruti, the leader in PV phase, is Lomax’s most significant consumer contributing 36 percent to general revenue accompanied by Honda Motorcycle and Scooter India (HMSI) with 14 percent share. The top 3 clients generate around 61 percent of general revenues.
During the region long past via, Lumax delivered new models consisting of Ertiga, WagonR, Jawa, and Marrazo to its portfolio. These are anticipated to power boom inside the near-time period as new models gain traction.
Skin in the game
The promoters – the DK Jain family and Stanley Electric Company – preserve 37.5 percent every. The high promoter stake should lend consolation to investors.
Strong monetary overall performance – lean balance sheet and better go back ratios
Lumax has improved its financials over the years. It grew internet revenues at a compounded annual boom charge (CAGR) of 10 percent over FY14-18. Over the equal length, working profitability, as measured with the aid of profits earlier than interest, tax, depreciation, and amortization (EBITDA), has progressed 28 percentage and EBITDA margin expanded 361 bps.
The margin continued to extend similarly with increasing contribution from LED products and stood at nine. Sixty-one percent on the stop of Q3 FY19. The organization has also been able to enhance its coins go with the flow function over the years and has no longer simplest been capable of pay off its debt; however, additionally fund its enlargement thru internal accruals. This has caused development in the return ratios as well.