LUMAXINDNSEQ3 FY 2023February 14, 2023

Lumax Industries Limited

8,729words

154turns

12analyst exchanges

7executives

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Management on call

Deepak Jain

CHAIRMAN AND MANAGING

Anmol Jain

JOINT MANAGING DIRECTOR – LUMAX INDUSTRIES LIMITED

Sanjay Mehta

GROUP CHIEF FINANCIAL

Shruti Kant Rustagi

CHIEF FINANCIAL

Ankit Thakral

CORPORATE FINANCE – LUMAX INDUSTRIES LIMITED

Naval Khanna

DIRECTOR - LMS

Priyanka Sharma

HEAD CORPORATE

Key numbers — 40 extracted

d much better than other global economies. India's GDP growth is forecasted to be in the range of 6% to 7% in the coming years and consistent growth in the economic activity is supported by local co

better than other global economies. India's GDP growth is forecasted to be in the range of 6% to 7% in the coming years and consistent growth in the economic activity is supported by local consumpt

33%

d on enhancing consumption by reducing direct income tax. And on the other hand, there was also a 33% enhancement on the capital outlay expenditure, which will directly benefit the overall expansion

rs,

um batteries are projected to increase demand for entry 2 level in pass cars, as well as lowering the price of EV purchasing. As prosperity and consumption increases, India's c

27 million

ng. As prosperity and consumption increases, India's consumer class is projected to increase from 27 million households in 2014 to 89 million households in 2025. And the auto industry is anticipated to pros

89 million

increases, India's consumer class is projected to increase from 27 million households in 2014 to 89 million households in 2025. And the auto industry is anticipated to prosper as well as the expanded consu

18.5 lakh

ly published by FADA showed an encouraging trend. The automotive retail sales stand approximately 18.5 lakh, up by 13.5% compared to the same period a year ago. All the categories show a robust growth year

13.5%

ADA showed an encouraging trend. The automotive retail sales stand approximately 18.5 lakh, up by 13.5% compared to the same period a year ago. All the categories show a robust growth year-on-year, wit

10%

go. All the categories show a robust growth year-on-year, with sales of 2-wheeler increasing by 10%, 3-wheeler by 59%, passenger vehicles by 22% and commercial vehicles also registered a growth of

59%

gories show a robust growth year-on-year, with sales of 2-wheeler increasing by 10%, 3-wheeler by 59%, passenger vehicles by 22% and commercial vehicles also registered a growth of 16%. The sentiment

22%

year-on-year, with sales of 2-wheeler increasing by 10%, 3-wheeler by 59%, passenger vehicles by 22% and commercial vehicles also registered a growth of 16%. The sentiments are better than last year

16%

, 3-wheeler by 59%, passenger vehicles by 22% and commercial vehicles also registered a growth of 16%. The sentiments are better than last year, but the rural market is yet to recover due to the rise

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Guidance — 20 items

Deepak Jain

opening

“However, with inflation coming down and supply chain stabilizing, we expect the rural markets to bounce back.”

Deepak Jain

opening

“The company is aligned to execute our order book of INR 1,000 crores plus in the next 3 years, and we have already commenced the construction of our Pune, Chakan plant, for which we expect the SOP to be in Q2 of FY 2024.”

Sanjay Mehta

opening

“We are optimistic of increasing our share of LED lighting going forward due to increase in demand for premium vehicles and increase in content per vehicle.”

Ashutosh Tiwari

“And can you provide the numbers like you mentioned 9-month capex of around INR 64 crores, what would the number of full year and next year guidance for capex?”

Anmol Jain

“And next year, we should be close to around between INR 225 crores to INR 250 crores, out of which the significant part of almost INR 175 crores is going towards the capacity expansion in Chakan.”

Anmol Jain

“So there are 2 phases of the new facilities, the Phase 1, which will be starting from Q2 of FY '24.”

Anmol Jain

“So there is only one model, which will be a shift from an existing facility to this facility.”

Anmol Jain

“However, most of the new order book and out of this INR 1,150 crores order book, 90% is new orders, which will be productionized and commissioned in this facility.”

Anmol Jain

“So for the most part, it will be new revenue for the company.”

Anmol Jain

“So that would be over and above the current order book, but it will be commissioned from the new facility in Chakan in FY '26 onwards.”

Risks & concerns — 3 flagged

And if you see whenever basically a supplier is at financial risk, the first thing the OEMs would do is basically derisk, so that they can actually secure their deliveries.

— Deepak Jain

We have faced so many tougher challenges and difficult time during the last 3, 4, 5 years.

— Sunil Kothari

So again, it's very difficult because EBITDA would be an outcome of multiple factors.

— Anmol Jain

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Q&A — 12 exchanges

Congrats on good set of numbers. Firstly, if I look at LED share at around 34% 9 months, is broadly stable on a Y-o-Y basis despite the fact that probably need more launches, we are seeing higher share of LEDs. And also you also mentioned I think a couple of calls back that, new Scorpio, the content is very high, and M&M is one of the drivers of growth in this year. So why is it LED share is not increasing despite all these things improve, basically pointing out towards improvement of LED numbers?

Deepak Jain

So I think you're right. I think if you look at it only from a pass car basis, as well as in terms of 2-wheeler, the pass car basically has enhanced. I mean, it has primarily been in terms of almost, you would say, 66-34, that's what it is. But I think the 2-wheeler base, which primarily one of the models that Activa before full LED, that basically is no more on full LED. And that's why you're probably seeing a reduction. But overall, I think we are still bullish and it remains that the LED will basically grow, hopefully trending up towards 50-50. But Activa, actually, if I remember correctly,

Congrats on good set of numbers. Sir, I have 2, 3 questions. One is on the 2-wheeler market. Now, if you look at the 2-wheeler market construct, most of the industry, the consensus seems to be that the peak of the volumes in industry for 2-wheelers seems to be there. So that 21 crores, 2 crores kind of volumes which we had sold in 2018, the industry might not see a peak beyond that. What's your view on that? And secondly, if we look at on the lighting side in the 2-wheeler, it's largely a 4-player market between SIAM, Lumax, Motherson Marelli and Unitech. Do you think any more competition woul

Deepak Jain

So first and foremost, I think we do remain optimistic on the India market. There is right now a commentary, which I agree what you are saying, going on in the industry that we have reached or saturated the peaks, which is 20 million. We don't see that. We feel that this will basically come up, given that if the urban or the rural markets rather start supporting the 2-wheeler transition, I think that should come. Also, of course, there is this whole 2-wheeler play, the EV, which by industry forecast itself, we talk about 6-7 million going forward. So definitely, we remain bullish on the 2-whee

Congratulations, sir, for good set of numbers. And sir, I just wanted to understand, our backward integration, which we did some time back in Bawal plant. So what was the investment? And what is the margin contribution? And how do we see that plant in the coming future contributing to your margin?

Anmol Jain

So this is Anmol Jain. So the investment we did in the Bawal electronic facility was close to about INR 100 - 105 crores, and the margin expansion is close to about 120 bps on account of the backward integration. And sir, where -- like how does this metrics flow in our P&L? Will we be able to see this margin expansion? And are the gross margins or it could come in our EBITDA margin? And how -- like where does the supply chain sits in our entire manufacturing percent? So clearly, it will come in the gross margin. The material consumption would go down. And of course, there will be certain opera

I just had a few questions. First, have you got any new clients in this quarter? And how much is it from EV and from traditional vehicles?

Anmol Jain

So we have not got any new client, specifically in this quarter. However, we are constantly in conversations with certain clients which are not currently our customers, and we hope to materialize some of it in the subsequent quarters. Your second question on the EV, out of the order book of about INR 1,150 crores, close to INR 475 crores would be on account of EV, largely driven by 4-wheeler and partially driven by 2- wheeler electric vehicles. Okay. And could you give a customer-wise revenue mix? About the INR 1,000 crores order book, I would not be able to give you a customer-wise breakup. B

Sir, just trying to understand, in Maruti, what would be the existing models that we supply to, say, in this quarter or in the last 9 months?

Anmol Jain

So on Maruti, we would be on the Swift platform, we would be on the Alto platform. We would be on the Wagon R platform. We would be on the XL6 platform. I think the easier would be the platform which we have not on. I think currently, we are not on the Brezza platform or the Baleno platform. These would be the 2 and also on the Grand Vitara platform. These are the 3 platforms we are not on. But we are in conversations to hopefully secure orders for their forthcoming new platforms in the coming years. Got it. And sir, what about Mahindra & Mahindra and Honda Motorcycle? So I'll take one by one.

Really commendable performance, sir, at least compared to many previous years where, I think, crossing. I would like to, sir, draw Deepak Ji’ attention on Page number 36, I mean, Slide number 36. I would like to understand from you, sir is, say, last 5 years whether revenue, EBITDA, PAT, everything I think I'm hopeful that we'll be crossing this peak of last 5 years now onwards. We have faced so many tougher challenges and difficult time during the last 3, 4, 5 years. We also moved from non-LED to LED during these 5 years. We are also talking about increasing content per vehicle, lighting per

Deepak Jain

Sunil ji, first and foremost, thank you very much, as always, for your appreciation and also more importantly, your consistent support. You're right, I think see for us over the last 4 to 5 years, the industry itself has been actually declined, but you see the lighting industry has actually grown. Lumax's today performance if you see, concurrently, we have been betting on technology. We have been betting on LEDs. We have invested actually over the last 2 years largely in these 2 areas. I think with this, we have got a very strong order book. I think a good order book of about almost INR 1,100

Sir, in 9 months revenue growth is around 42%. So how much volume versus realization growth?

Deepak Jain

So basically, of the 42%, which is around INR 488 crores, you could say an INR 351 crores is volume based, INR 137 crores is diluted. And sir, in realization, how much is because of the product mix and what percent is for the RM inflation? I think there would be probably 100 bps, which basically has impacted in terms of the RM inflation which we probably are hoping to get with the customers, and we are still in negotiations with them, balance everything else would be basically our work. Okay. And sir, your current capacity utilization has reached to 85% to 90%. So what is your capex plan for t

Congratulations, sir, on good set of numbers. To just understand, sir, from the if I am not wrong, your quarter 4 is the best quarter among all the quarters, right? And just to understand, I didn't get about the expansion plan, etcetera. Just to understand so would it be right to say that we will be ending somewhere close to INR 2,300 - INR 2,400 crores revenue for this year and say roughly 15% growth for next 2 years considering your capex?

Anmol Jain

Yes, that would be fair to estimate. Okay. And since the Phase 1 of the capex and with the order book in visibility or visibility of the order book. So -- and with 50%, 50% LED and conventional. So what will be the change in EBITDA mix? Just to get an idea, what will be the type of improvement we might see in EBITDA mix? So again, it's very difficult because EBITDA would be an outcome of multiple factors. Product mix clearly being one technological shifts, but obviously, in order to the process technology, they're very different. So there may be certain incremental costs as well. But I think I

Sir, you mentioned that you will be second source in XUV700. What would be your share in that?

Anmol Jain

Well, right now, I would say that it would start at about 50-50. And maybe once we are in production, it could also get ramped up to perhaps the 60-40 or 70-30, depending on where the total volume of XUV700 go. But clearly, as a second source, we would be getting into a 50% volume wallet share. And this will start from second half next year, '24? This would start from somewhere in quarter 2 of FY '24, quarter 3 of FY '24 depending on the exact product development timelines and approvals. But yes, definitely in Q2, Q3 FY '24. And is it like several part of this INR 1,150 crores order book that

Sorry, sir, I just missed what -- which models in Tata do we supply, Tata Motors?

Anmol Jain

Could you repeat that question? In Tata Motors, sir, which are the models that we supply to? We are having Nexon and Punch platforms for the Phase 1 in Chakan.

Sir, I just wanted to ask the Bawal backward integration in which quarter did we started the facilities, which -- and how much investment do we plan to do in this same facility in the coming years?

Anmol Jain

Today, the Bawal facility was started in Q4 for FY '22. And going forward, you said how much expansion? I mean, I don't see a significant one. It will be part and parcel of the INR 60-odd crores capex apart from the new facility, which is planned for next year. INR 50-odd crores? No. I said total capex next year, ma'am, as I said, it will be about INR 225 crores to INR 250 crores, out of which INR 175 crores is the new Chakan facility. The remaining, which is around whatever, INR 50 - INR 70 crores, out of that, some part of it, I don't know the exact number, but not a significant one would be

Thank you, everyone, for joining on the call. I would also like to say that we do remain very confident on the growing prospects of India and the automotive sector. I hope that we have been able to respond to your queries adequately. And for any further information, I refer to you get in touch with SGA. Thank you very much, and stay safe.

Management

Speaking time

Anmol Jain

Deepak Jain

Ashutosh Tiwari

Moderator

Nidhi Babaria

Abhishek Shah

Abhishek

Sanjay Mehta

Nikhil

Sunil Kothari

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Opening remarks

Deepak Jain

A very good morning to everyone. I hope everyone is in good health. Today, along with me on this call, we have Mr. Anmol Jain, Joint Managing Director. From the finance team, we have Mr. Sanjay Mehta, Mr. Shruti Kant Rustagi and Ankit Thakral. We also have Mr. Naval Khanna, and Priyanka Sharma, our Head, Corporate Communications, along with SGA, Investor Relations Advisors The results and investor presentations are uploaded on the stock exchange and the company's website, and I do hope everybody has had an opportunity to go through the same. I'll start by giving some insights on the economy front, followed by industry and business updates. 2023 continues with volatility bases on climate changes, geopolitical tension, high inflation and also high interest rates. The mood in the World Economic Forum were sober. However, India seems to have a silver lining and placed much better than other global economies. India's GDP growth is forecasted to be in the range of 6% to 7% in the coming year

Sanjay Mehta

Good morning, everyone. Our share of LED lighting for 9 months FY '23 stood at 34% of total sales and the conventional lighting is 66%. We are optimistic of increasing our share of LED lighting going forward due to increase in demand for premium vehicles and increase in content per vehicle. With respect to segment mix for 9 months as a percentage of revenue, 66% is from passenger vehicles, 28% from 2-wheelers and 6% from commercial vehicle. With respect to product mix for 9 months as a percentage of total revenue, 67% of revenues from front lighting, 24% from rear lighting and 9% from others. Regarding financial performance in Q3, the revenue from operations grew by 33% on a year-on-year basis to INR 579 crores. For 9 months, revenue stood at INR 1,711 crores as compared to INR 1,202 crores, a growth of 42% on a year-on-year basis. Consolidated EBITDA stood at INR 57 crores as compared to INR 38 crores, a growth of 52% on a year-on-year basis. For 9 months, EBITDA grew by 92% on a year

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