LUMAXINDNSEMarch 31, 2023

Lumax Industries Limited

7,488words
112turns
8analyst exchanges
8executives
Management on call
Deepak Jain
CHAIRMAN AND MANAGING
Anmol Jain
JOINT MANAGING DIRECTOR – LUMAX INDUSTRIES LIMITED
Vishnu Johri
CHIEF EXECUTIVE OFFICER – LUMAX INDUSTRIES LIMITED
Sanjay Mehta
GROUP CHIEF FINANCIAL
Ravi Teltia
CHIEF FINANCIAL OFFICER – LUMAX INDUSTRIES LIMITED
Ankit Thakral
CORPORATE FINANCE – LUMAX INDUSTRIES LIMITED
Naval Khanna
CORPORATE HEAD, TAXATION
Priyanka Sharma
HEAD CORPORATE
Key numbers — 40 extracted
6.5%
frastructure, logistics and the business ecosystem, it is anticipated that the GDP will expand to 6.5% in FY 2024, making it one of the fastest-growing major economies in the world. Talking about the
rs,
ate policy interventions has produced a vibrant competitive market and attracted several new players, resulting in expansion of auto industry, production capacity and capability. India is now the th
INR1,300 crore
share as well. I am happy to share that your company has a healthy confirmed order book of around INR1,300 crores. 85% to 90% of it is new business, and out of which, 40% is from the EV models. With this, I w
85%
am happy to share that your company has a healthy confirmed order book of around INR1,300 crores. 85% to 90% of it is new business, and out of which, 40% is from the EV models. With this, I would n
90%
y to share that your company has a healthy confirmed order book of around INR1,300 crores. 85% to 90% of it is new business, and out of which, 40% is from the EV models. With this, I would now hand
40%
nfirmed order book of around INR1,300 crores. 85% to 90% of it is new business, and out of which, 40% is from the EV models. With this, I would now hand over the call to Mr. Sanjay Mehta, Group CFO,
35%
nd financial performance for financial year '23. The share of LED lighting for the year stands at 35% and conventional lighting is 65%. With respect to segment mix, FY '23 as a percentage to revenue,
65%
ncial year '23. The share of LED lighting for the year stands at 35% and conventional lighting is 65%. With respect to segment mix, FY '23 as a percentage to revenue, 67% is from passenger vehicles,
67%
and conventional lighting is 65%. With respect to segment mix, FY '23 as a percentage to revenue, 67% is from passenger vehicles, 27% from 2-wheelers and 7% from commercial vehicles. With respect to
27%
. With respect to segment mix, FY '23 as a percentage to revenue, 67% is from passenger vehicles, 27% from 2-wheelers and 7% from commercial vehicles. With respect to product mix
7%
t mix, FY '23 as a percentage to revenue, 67% is from passenger vehicles, 27% from 2-wheelers and 7% from commercial vehicles. With respect to product mix of the tota
66%
rcial vehicles. With respect to product mix of the total revenue, 66% of revenues from the front lighting, 25% from rear lighting and 9% is from others. On financial
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Guidance — 20 items
Deepak Jain
opening
“On the back of the government measures to develop transportation, infrastructure, logistics and the business ecosystem, it is anticipated that the GDP will expand to 6.5% in FY 2024, making it one of the fastest-growing major economies in the world.”
Deepak Jain
opening
“The growth of EV will be led by 2-wheeler and 3-wheeler.”
Deepak Jain
opening
“Entering into FY '24, we expect the growth momentum to continue after the robust demand seen in FY '23 supported by favourable demand sentiments and various government initiatives for rural and urban development.”
Deepak Jain
opening
“With the high opportunities in the EV market, premiumization of vehicles and changes in the regulatory environment, it will be proving to be key growth drivers for the automotive industry.”
Sanjay Mehta
opening
“EBITDA was also impacted due to a decrease in mould business profitability due to the deferment of tooling sales to the next year.”
Sanjay Mehta
opening
“The greenfield project at Pune is as per schedule and production is expected to commence in Q3 of the current financial year.”
Aashin Modi
qa
“So, what sort of gross margin do we see going forward, sir?”
Sanjay Mehta
qa
“I think it will be improved way forward in the Q2 at least.”
Sanjay Mehta
qa
“Because whatever the high-cost inventory is there, it will be -- I mean by June or July, it will be spread up.”
Aashin Modi
qa
“So what sort of profit of SL Lumax do we expect in the next year?”
Risks & concerns — 5 flagged
Favourable policy initiatives such as the impact of the new PLI schemes reassuring pronouncements in the budget, forward-thinking logistics and foreign trade policies and the recently announced lowering of CNG prices would augment well in supporting the industry's growth.
— Deepak Jain
EBITDA for Q4 degrow by 12% from Q4 '22 due to increase in RM cost on account of product mix change and increase in other expenses.
— Sanjay Mehta
So, could you please explain that, what was the impact of higher mould sales on margin, and ex of mould sales what would have been a normalized margin?
— Aashin Modi
And sir, could you explain why is the margin decline quarter-on-quarter?
— Aashin Modi
Sir, despite a slowdown in 2-wheelers, our revenue growth was impressive around 30% Y-on- Y in FY '23.
— Abhishek
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Q&A — 8 exchanges
Q
Yes. Sir, my first question is on the margins during the quarter. So, the margins were missed because of gross margins. So, could you please explain that, what was the impact of higher mould sales on margin, and ex of mould sales what would have been a normalized margin?
Sanjay Mehta
So, margin in Q4 on the mould is around 17%. If I -- correspondingly, I will take Q4 of '22, it was 26%, largely because of the deferment of the mould sales to the next financial year. Okay. And sir, could you explain why is the margin decline quarter-on-quarter? On the mould sales? Overall margin? Overall, because of -- as mentioned, 0.5% -- because of the product mix, RM is higher by 0.5% around, and there is an increase in other expenses also, but that is in the PBT level. Okay. So, what sort of gross margin do we see going forward, sir? So Q4 '23 gross margin was almost around, I think the
Q
I wanted to ask what is the reason for closure of Gurugram plant? And what will be the impact of that?
Anmol Jain
The reason is very simple. Number one, it was a plant which was set up in the late mid-80s. So, in terms of the technology, in terms of the space, in terms of the infrastructure, it does not support the new technology lamps, and that's the reason we moved all the business to one of our current facilities in the NCR region. Number two, also was the cost of the manpower. There was a significant cost associated with the blue collar, and we've been able to service the same business now at a, let's say, a much lesser cost by moving the business. So that worked primarily as a part of a consolidation
Q
Yes. Sir, a couple of questions from my side. First is on margin. While we understand your reasoning for a low margin this quarter, but we have always mentioned that double-digit is something which we aspire and this - in this year also, 2 quarters, we had double-digit, 2 quarters, we had lower than that number. So, I mean, what I - I mean, I understand the drags to the margins, but some of the benefits in terms of operating leverage, some of the benefits of having a PCB plant in-house are somehow not visible or there is lot of volatility in the numbers. So, and again, you mentioned that maybe
Anmol Jain
I think there are 2, 3 aspects. Number one, clearly, the tooling, which Mr. Mehta mentioned, that is something which hugely differs. Overall, as a company, we continue to maintain a similar margin on an annualized basis, but because the tooling is not the same on all programs in terms of the margins, there are, in certain quarters, we get a better tooling advantage, and in certain quarters, we do not get that tooling advantage. So that is one reason why on a quarter-to-quarter, you see a variation of the overall margins because of tooling. Second, specifically in quarter 4, there was a raw mat
Q
Sir, despite a slowdown in 2-wheelers, our revenue growth was impressive around 30% Y-on- Y in FY '23. So, can you explain the key driver of this growth? And how is the share of business with the different OEMs?
Deepak Jain
Sorry, can you just -- Abhishek, can you just please repeat the question one more time? Sir, in our 2-wheeler space, revenue growth was quite impressive 30% Y-on-Y in FY '23. So, can you explain the -- what are the key drivers for this growth? And how is the share of business with the different OEMs in 2-wheelers? I think the 3 key customers for us in 2-wheeler segment, which have grown in FY '23 vis-a-vis FY '22, clearly, HMSI, where we've seen almost a 25% growth. TVS, which was a new customer, which also has seen a 25% growth. Now the customers, they may not have grown as much, but because
Q
Sir, we have done capex at the Bawal plant, which was supposed to be a sort of backward integration to aid gross margin expansion, but yet to see full benefits of that. And in the previous calls, you also mentioned that there's some incremental capex that we plan to do at Bawal. Can you just give us an update on that?
Anmol Jain
Sure. So, we did invest in Bawal plant, you're absolutely right for backward integration of the electronics. We've still not got a full, let's say, the gross margin expansion because of -- on account of that. But I think in FY '24, a large chunk of it would be fully utilized. We are still in the electronics facility; we were still having a bit of outsourcing versus in-sourcing. So, in FY '24, you will start seeing the benefit of the backward integration of electronics for sure. Apart from that, as I mentioned, the FY '24, there is a 20%, 25% growth on the top line, which will further bring in
Q
Yes. So, if you look at SL Lumax, that seems to work at a 13% margin, which is significantly higher than ours. So, what explains this gap and what needs to happen for that gap to be bridged?
Deepak Jain
Well, actually, Rahul, SL Lumax and Lumax Industries would not be a very comparable kind of situation. It operates out of one location. It operates out of one customer. Pricing is basically delivered in fundamentally in Korea. It's right now at 13%. Historically, it has not been only just doing at 13%. It has also basically been doing at a higher, lower as well. It's been even at 6%, 7%. Those are also things. So, I think it's a very, very symbiotic relationship, which SL enjoys with Hyundai. And I think we continue to do it as Hyundai has also been now with -- along with Kia, been growing the
Q
Yes. Thanks for allowing me a follow-up question. Just wanted to understand, you did mention 20%, 25% revenue growth. But what would be the impact on bottom line? Can we expect even higher than 25% growth in bottom line?
Anmol Jain
Yes, absolutely. I think that's the only way the margins will expand, right? So, when I mentioned that the margin expansion will take place, then clearly, the operating margins and the bottom line will grow at a much faster and a much greater rate as the top line. So yes, we do expect a profit expansion of greater than 25% for FY '24. Okay. Any ballpark guidance number for bottom line? We would like to get into the double-digit for sure and would like to sustain that. I'm not -- I won't be able to give you an exact number. But definitely, if you see historically, we've operated at a 10% to 11%
Q
Well, I would like to thank everyone for joining on the call. We continue to remain confident and buoyant on the growing cost base of India and the automotive sector. I hope we've been able to respond to your queries adequately. And for further information, kindly request to get in touch with SGA our Relationship Advisers. Thank you, and stay safe.
Management
Speaking time
Anmol Jain
32
Saumil Shah
14
Sanjay Mehta
11
Moderator
10
Alisha Mahawla
10
Deepak Jain
9
Abhishek
9
Aashin Modi
8
Prolin Nandu
6
Rahul
2
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Opening remarks
Deepak Jain
A very good morning to everyone, and I hope everyone is doing well. Along with me on this call, I have Mr. Anmol Jain, the Joint Managing Director; Mr. Vishnu Johri, the CEO; Mr. Sanjay Mehta Group Chief Financial Officer, along with Mr. Ravi Teltia, the CFO of the company; Ankit Thakral from Corporate Finance; Mr. Naval Khanna as the Corporate Head Taxation; and Priyanka Sharma, the Head Corporate Communication. We also do have SGA, our Investor Relations Advisors on this call. The results and investor presentation were 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 would like to begin by giving some insights on the economy, followed by the current scenario in the auto industry and business. For over a decade, India has been one of the most prominent and robust economic growth. On the back of the government measures to develop transportation, infrastructure, logistics and the business ecosystem, it is
Sanjay Mehta
Good morning, everyone. I will take you through the operational and financial performance for financial year '23. The share of LED lighting for the year stands at 35% and conventional lighting is 65%. With respect to segment mix, FY '23 as a percentage to revenue, 67% is from passenger vehicles, 27% from 2-wheelers and 7% from commercial vehicles. With respect to product mix of the total revenue, 66% of revenues from the front lighting, 25% from rear lighting and 9% is from others. On financial performance, I'm delighted to say that Q4 FY '23, the company continued at its strong performance with quarterly revenue standing at INR608 crores, depicting a growth of 11% on a year-on-year basis. Revenue for FY '23 stood at INR2,320 crores as against INR1,751 crores, witnessing a stellar growth of 32%. Revenue for Q4 with -- from manufacturing business grew by 17% and for FY '23, it has grown by 34% year-on-year basis. The company reported consolidated EBITDA of INR222 crores with a margin of
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