Lumax Industries Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Lumax Industries Limited (LUMAXIND) Q1 FY23 Earnings Concall

Q&A Highlights:

• Asim with Equirus asked about the drivers of sequential decline in margin. Anmol Jain Joint MD replied that barring tooling, and from a manufacturing point of view, LUMAXIND was able to sustain the sequential margin. However, the small gaps might be due to some RM price escalations, which LUMAXIND is inspecting in subsequent quarters to be recovered from OEMs.

• Asim with Equirus also enquired if the company is seeing margins going to double digit from here. Anmol Jain Joint MD replied that that has been the endeavor and LUMAXIND believes double digit would be the guidance for the FY23. The company also expects the industry bouncing back to pre-pandemic level volumes resulting in double digit margin.

• Asim with Equirus asked about the INR1,000 crore order book, when it will go into production and peak out. Anmol Jain Joint MD answered that about 20-25% of this would probably get in the current fiscal as well. And 70-75% of the peak revenue would probably come in the next FY24 and in FY25 the company would have 100% revenue in the books.

• Abhishek Jain of Dolat Capital asked that due to gas supply constraints from Ukraine and Russia, if LUMAXIND is confident of improving gross margin in FY23. Anmol Jain Joint MD replied that the company is very confident of improving GM. In 1Q23, GM was steady vs. FY22.

• Abhishek Jain of Dolat Capital enquired, what are the key raw materials where the company is able to pass on the prices to the end consumer and where is the obstacle. Anmol Jain Joint MD answered that in plastic, the biggest consumption would be on polycarbonate as well as on PMMA. In all plastic, LUMAXIND is able to recover the cost escalations from its OEMs.

• Abhishek Jain of Dolat Capital asked about the loss from foreign exchange fluctuation. Anmol Jain Joint MD replied that the loss in absolute amount was INR2 crore and it’s more of a notional unrealized loss as per the accounting standard.

• Parag Someshwar with AG Securities asked that Maruti has launched two new models, New Brezza and Grand Vitara and if LUMAXIND will be supplying LED headlamps and tail lamps to these models. Anmol Jain Joint MD clarified the company is not on the head and tail of both these models. It’s because Maruti has given certain models specifically to LUMAXIND.

• Mahek Talati from YellowJersey Investment asked about kit value for LED and conventional lighting. Anmol Jain Joint MD replied that it depends on the segment. In two wheeler and in four wheeler it will hugely differ. It will also be different for a headlamp and a tail lamp. As a perspective, on a conventional two-wheeler headlamp to LED headlamp, the pricing goes up by almost 2.5-3 times.

• Mahek Talati from YellowJersey Investment enquired about percentage wise LED imported. Anmol Jain Joint MD said the imported content in two wheelers it will be about 25-30% and on a four-wheeler it would be plus minus 50%.

• Jiya Verma with MR Securities asked that with all the new launches planned, from this year to next year by OEM, if the company is seeing any increase in demand. Anmol Jain Joint MD answered that the order book of company is about INR1,000 crore. A significant chunk of it, about close to 60-70% of the order book is in the passenger car segment.

• Jiya Verma with MR Securities enquired  about the margin difference between LED and conventional lighting. Anmol Jain Joint MD answered that in terms of the margin, LEDs will have higher margin than conventional, but it won’t be at the GM level due to import dependability. EBITDA margin get better on a LED technology rather than a conventional one.

• Ashutosh Tiwari of Equirus asked that in the order book of INR1,000 crore, of which 30% is from EVs, which are the key OEMs. Anmol Jain Joint MD said there are multiple OEMs like Tata Motors, two wheeler markers, and other OEMs also but names cannot be divulged.