Lu­max In­dus­tries Ltd

(BSE Code: 517206) (CMP: Rs.2035.30) (FV: Rs.10) (TGT: Rs.2450+)

Money Times - - Stock Watch - By Amit Ku­mar Gupta

In­cor­po­rated in 1945, New Delhi based Lu­max In­dus­tries Ltd (LIL) man­u­fac­tures and sup­plies auto com­po­nents. It has 9 man­u­fac­tur­ing plants that pri­mar­ily man­u­fac­ture au­to­mo­tive light­ing equip­ment as well as other re­lated prod­ucts and ac­ces­sories. Its prod­ucts find ap­pli­ca­tion in four and two wheel­ers, trucks, buses, earth-movers, trac­tors, etc. It sup­plies to var­i­ous orig­i­nal equip­ment man­u­fac­tur­ers (OEMs) in­clud­ing Maruti Suzuki In­dia (MSI), Honda Mo­tor­cy­cle & Scooter In­dia (HMSI), Hero Mo­toCorp, Mahin­dra & Mahin­dra (M&M), Tata Mo­tors, Honda Cars, etc. It has also served Hyundai through its as­so­ciate com­pany SL Lu­max (21.28% stake) in the au­to­mo­tive light­ing space. It has over 3 decades of strong part­ner­ship with Stan­ley Elec­tric Com­pany Ltd.

LIL de­rives 68% of its rev­enue from pas­sen­ger ve­hi­cles (PVs) and MSI’s var­i­ous mod­els of Notch­backs/Hatch­backs/SUVs that con­trib­uted ~32% of the to­tal light­en­ing rev­enue in FY18. We ex­pect do­mes­tic PV sales to grow at 12.87% CAGR over FY16-26.

The de­mand for LED lamps in up­per vari­ants of Mid, Com­pact and SPV seg­ments of PVs is ris­ing. More­over, in­creas­ing safety norms in the two-wheeler seg­ment that re­quire AHO (Au­to­matic Head­lamp On) fea­tures to in­stall on all new ve­hi­cles also boosts the de­mand for LED lamps, which pro­vides bet­ter rev­enue vis­i­bil­ity to LIL go­ing for­ward. Real­iza­tion in LED lamps is higher com­pared to non-LED lamps due to ad­di­tion of new tech­nol­ogy in the light­en­ing sys­tem. The share of LED lamps has im­proved from 8% in FY17 to 35% in Q1FY19 and the man­age­ment ex­pects this ra­tio to im­prove fur­ther go­ing for­ward.

LIL has strate­gi­cally lo­cated its plant near ma­jor OEMs for faster sup­ply of light­ing equip­ment. Re­cently, it com­mis­sioned a 3,00,000 car sets a year fa­cil­ity in Gu­jarat, from where it cur­rently serves MSI and will serve Tata Mo­tors and HMSI in fu­ture. The man­age­ment also guided for ca­pac­ity ad­di­tion and other rou­tine main­te­nance capex of Rs.80 crore in FY19 in some of the parts.

Strong re­la­tion­ship with ma­jor Auto OEMs, in­creas­ing sales of PVs, two-wheel­ers and com­mer­cial ve­hi­cles (CVs) and im­prov­ing rev­enue mix from Halo­gen lamps to LED lamps au­gur well for LIL. More­over, the man­age­ment plans to lo­cal­ize the man­u­fac­ture of LED lamps, which are cur­rently im­ported. The man­age­ment ex­pects this move to im­prove mar­gins up to 10% by FY20.

Tech­ni­cal Out­look: The stock looks very good on the daily chart for medium-term in­vest­ment. It has made a higher high and higher low for­ma­tion while form­ing a down­ward chan­nel pat­tern on the daily chart. A close above Rs.2175 will push the stock higher. The stock trades be­low all im­por­tant mov­ing av­er­ages like the 200 DMA level placed at Rs.2130 on the daily chart.

Start ac­cu­mu­lat­ing at this level of Rs.2035.30 and on dips to Rs.1945 for medium-to-long term in­vest­ment and a pos­si­ble price tar­get of Rs.2450+ in the next 12 months.

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