Lumax Auto Technologies Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Lumax Auto Technologies Limited (LUMAXTECH) Q2 FY23 Earnings Concall

Management Update:

• [00:05:04] LUMAXTECH recorded its highest ever quarterly and six monthly revenue at INR487 crores and INR909 crores respectively.

Q&A Highlights:

• [00:10:48] Abhishek Jain of Dolat Capital asked about the driver of plastic integrated part having strong growth in 2Q23. Anmol Jain Joint MD answered that the major reason has been the growth of Honda 2-wheeler that’s about 35% on a 1Q to 2Q basis. Also the volume increase of HMSI has been in line with this growth.

• [00:12:12] Abhishek Jain of Dolat Capital enquired about the contribution of the 4-wheeler plastic out of the total plastic integrated. Anmol Jain Joint MD answered that right now the four-wheeler contribution is about 10-15%. And almost close to 85% would be from the two-wheeler plastic. However, the strategic intent is to grow the 4-wheeler plastics business in future.

• [00:14:37] Abhishek Jain of Dolat Capital asked about the sharp drop in revenue in lighting business in 2Q23, despite Bajaj Auto volume growth being higher. Anmol Jain Joint MD replied that the drop is mainly driven by one specific plant, the Pantnagar and Chakan facility that saw a drop in volume.

• [00:15:48] Abhishek Jain of Dolat Capital asked that after market, LUMAXTECH saw strong growth with quarterly run rate of around INR92-93 crores and if it’s sustainable. Anmol Jain Joint MD answered that the company is very bullish on after-market. For 1H23, the company saw 50% growth in aftermarket and is in line with the mid-term strategy of doubling the after-market revenue in 3-4 years.

• [00:17:24] Abhishek Jain of Dolat Capital enquired about acquisitions in near future. Anmol Jain Joint MD said that company is not looking at any acquisition. And INR400 crores was a resolution to see that as and when LUMAXTECH needs funding, it’s able to use debt instruments in terms of leveraging the books.

• [00:18:48] Anup Shah from Srinath Securities asked about the focus increasing in passenger car segment and where does LUMAXTECH see the segment in next 2 years. Anmol Jain Joint MD answered that the long term strategy is to have 2,3 wheeler segment at par with the passenger car. So perhaps 30-35% 2,3-wheelers, 30-35% passenger cars and remaining between aftermarket and commercial and other smaller players.

• [00:21:25] Anup Shah with Srinath Securities enquired about the capex guidance for FY23. Anmol Jain Joint MD answered that the capex guidance has been around INR75-80 crores. LUMAXTECH believes to be within that range and don’t expect to cross it.

• [00:22:18] Deepti Kothari from Kothari Capital and Securities asked about the drivers of product mix shift from 13% to 16% for 1H23. Anmol Jain Joint MD said it’s mainly driven in line with the growth of the customer and their higher contribution per vehicle as the automatic transmission penetration is increased YonY.

• [00:23:20] Deepti Kothari with Kothari Capital and Securities enquired about the share of business for gear shifters and urea tank. Vikas Marwah CEO replied that in gear shifters, the company is 100% into it. In commercial vehicle, the company is expanding on the Lumax Cornaglia portfolio with Urea tank. Anmol Jain Joint MD added that largely half of the growth would be pulled from new models that’s done reasonably well in the market.

• [00:28:31] Apurva Mehta from AM Investments asked about the breakup of the INR700 crore order book. Anmol Jain Joint MD answered that of INR700 crores, about 20% is replacement and about 80% is orders for newer models or customers. About 75-85% of INR700 crores will be on JV and subsidiaries and about 20-25% on standalone entity.

• [00:30:23] Apurva Mehta from AM Investments enquired when can the company reap benefits from the PLI scheme. Vikas Marwah CEO said that from a PLI incentivisation earnout point, FY24 is going to be the first year of reaping rewards.

• [00:37:49] Kanika Kothari from Kothari Capital asked if the company has started supplying to any e2-wheeler manufacturers. Anmol Jain Joint MD said the company is not yet supplying to any e2-wheeler manufacturers. LUMAXTECH has some orders in hand for the chassis of upcoming electric 2-wheelers.

• [00:40:33] Arun Agarwal with Kotak Securities asked about an update on the lighting business. Anmol Jain Joint MD answered that the lighting business is only limited to one customer, Bajaj Auto. So the business will grow in line with Bajaj Auto’s volume growth or tech shifts to higher LED penetration, though the wallet share remains consistent.

• [00:51:51] Aman Agarwal from Carnelian Capital asked about the opportunity in the Alps Alpine JV. Anmol Jain Joint MD answered Alps Alpine has wide range of product offerings. LUMAXTECH is currently discussing with OEMs on localizing these products for Indian market, like switches of power window, sunroof, power seat, engine start/stop etc., and sensors.