Release Date: February 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lumax Industries Ltd (BOM:517206, Financial) reported a 9% year-on-year revenue growth in Q3 FY24, reaching INR632 crores.
- The company has a healthy order book of INR2,200 crores, with 64% being new business.
- The new manufacturing facility at Chakan, Maharashtra, started commercial production on November 1, 2023, and is expected to significantly contribute to the company's top and bottom lines.
- The company is optimistic about strong demand in the passenger vehicles and 2-wheeler segments, driven by the adoption of electric vehicles (EVs) and government incentives.
- Lumax Industries Ltd (BOM:517206) expects a 20% to 25% revenue growth in Q4 FY24 compared to the previous year's Q4, driven by the new plant's production and more working days.
Negative Points
- The company's profit after tax for Q3 FY24 stood at INR26 crores, down from INR30 crores in Q3 FY23.
- The effective tax rate for nine months is high at 41%, excluding exempted dividend income.
- Employee costs have seen a sharp increase due to the new plant, impacting margins.
- The commercial vehicle sales saw subdued growth due to price hikes from emission regulations, and tractors faced challenges due to delayed monsoons.
- The company faces risks and uncertainties in predicting future performance, as highlighted by the variability in OEM production plans and potential delays in model launches.
Q & A Highlights
Q: Could you provide an update on the revenue from the new plant and its current utilization?
A: The new plant started commercial production on November 1. In Q3, the revenue from the new facility was around INR20 crores. For Q4, we expect the revenue to stabilize at about INR30 crores per month, totaling around INR90 crores to INR100 crores for the quarter. The plant is currently operating at 70% to 75% utilization and will likely expand further to meet the order book demands.
Q: There has been a sharp increase in employee costs over the last few quarters. Is this due to the new plant, and will it stabilize?
A: Yes, the increase in employee costs is partly due to the new facility. The employee cost for the quarter is about 13.5%, similar to Q1. As the new facility ramps up to its full potential, we expect the employee costs to stabilize and improve in subsequent quarters.
Q: Can Lumax Industries participate in Hyundai's growth journey, given their significant investment plans?
A: We have a clear understanding with our joint venture partner that the Korean business of Hyundai will continue to be catered by SL Lumax, while Lumax Industries will cater to other OEMs. There are no immediate plans to cater to Hyundai from Lumax Industries.
Q: What is the outlook for revenue growth and margins for the current and next fiscal year?
A: For FY24, we expect around 15% top-line growth. For FY25, despite industry analysts predicting single-digit growth, we are optimistic about achieving stronger double-digit growth due to our order book. We aim to achieve double-digit EBITDA margins in FY25, potentially hitting the 10% mark.
Q: What is the peak revenue potential for the Chakan plant at full utilization?
A: At full capacity, Phase 1 of the Chakan plant can generate monthly revenues of INR45 crores to INR50 crores, translating to an annual revenue of INR500 crores to INR600 crores. With Phase 2, the total annual revenue from the plant could reach around INR900 crores by FY26.
Q: Can you provide details on the revenue and PAT of SL Lumax for the nine months?
A: For the nine months, SL Lumax reported revenues of INR1,933 crores and a PAT of INR170 crores.
Q: What is the status of the EV development with Maruti Suzuki?
A: Maruti Suzuki plans to launch several EVs by 2030. We have confirmed orders for the first EV, which will launch later this year, and are in discussions for the second EV slated for FY26. We also have confirmed orders for Mahindra's first-born electric vehicle, expected later this year.
Q: What is the outlook for the automotive industry, specifically for 4-wheelers, 2-wheelers, and 3-wheelers, for the next year?
A: The industry is expected to see positive growth, although the momentum may slow down compared to this year. Capacity constraints and upcoming general elections may lead to subdued growth in H1 FY25. However, we are optimistic about our growth prospects due to new model launches.
Q: What caused the increase in interest costs, and can anything be done to stabilize or reduce it?
A: The increase in interest costs is due to long-term loans for the new Chakan facility and higher working capital utilization. We are repaying the loans as per the schedule, and the total debt is expected to remain below INR600 crores for the year.
Q: Was there any impact of mold sales on gross margins during the quarter?
A: There was negligible impact from mold sales in Q3. However, we expect a decent amount of mold sales in the subsequent quarters, which could positively impact margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
