Release Date: August 13, 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 24% year-on-year increase in revenues for Q1 FY25.
- EBITDA and PAT grew by 30% and 48%, respectively, indicating strong profitability.
- The share of LED lighting in revenue increased to 45%, up from 35% in Q1 FY24.
- The company has a robust order book of approximately INR2,300 crores, with 88% dedicated to LED lighting.
- The company has filed 18 patents, with four already awarded, showcasing a strong focus on R&D and innovation.
Negative Points
- EBITDA margins are under pressure due to higher employee expenses and significant pressure on gross margins.
- The new Chakan facility is operating at only 60% capacity utilization, impacting fixed cost absorption.
- The penetration of LED lighting, while increasing, has led to higher import content and pressure on material margins.
- The company is facing headwinds in demand, particularly in the passenger vehicle segment, affecting revenue growth.
- Localization of electronic components is expected to take time, with benefits likely to accrue only by FY26.
Q & A Highlights
Q: Sir, on the top line, the growth is very impressive. But on EBITDA margin, there is a pressure, and there is a significant decline of around 140...
A: (Anmol Jain, Joint Managing Director) There are three things to highlight. First, normalized EBITDA margins are hovering around 7% to 8%. The decline is due to increased fixed costs from the new Chakan facility and higher import content in LED lighting. The fixed costs increased due to lower-than-expected volumes for critical models like the XUV700.
Q: How much CapEx would be required for localization of the PCB?
A: (Anmol Jain, Joint Managing Director) For localization, we will not be investing directly. It will be a shift from imported to localized suppliers, so no significant CapEx from our side.
Q: Can you highlight the government subsidies for Sanand and Chakan plants?
A: (Unidentified Company Representative) We received the final eligibility certificate for the Sanand plant, with an annual subsidy of around INR10 crores until FY27-28. The Chakan subsidy is yet to be approved.
Q: What are the key efficiency improvements identified by Mr. Raju Ketkale?
A: (Raju Ketkale, CEO) We are focusing on manufacturing efficiency, productivity improvement, CapEx reduction, and fixed cost optimization. These initiatives have a clear road map and strategies in place.
Q: What is the revenue outlook for Maruti given their new launches?
A: (Anmol Jain, Joint Managing Director) We expect a growth of 15% to 20% for the full year, driven by new models like the Swift. We are also a single source for Maruti's first EV model, expected to launch in FY26.
Q: What is the CapEx plan for FY25?
A: (Anmol Jain, Joint Managing Director) We are looking at INR200 crores to INR250 crores for FY25, primarily for the Chakan Phase 2 expansion and the Sanand plant for Maruti's EV model. Maintenance CapEx will be around INR80 crores to INR100 crores.
Q: What is the utilization rate for the new Chakan plant, and what are the revenue expectations?
A: (Anmol Jain, Joint Managing Director) The current utilization is around 60%, expected to reach 80% to 85% by Q4. Revenue from the new Chakan plant was INR85 crores this quarter.
Q: What is the import content as a percentage of total raw materials, and is there scope for indigenization?
A: (Anmol Jain, Joint Managing Director) About 25% of the total value is imported, primarily electronic components. We are working on localizing these components, but benefits will likely accrue in FY26.
Q: What is the revenue outlook for the next three years given the current CapEx plans?
A: (Anmol Jain, Joint Managing Director) We expect a 15% CAGR over the next three years, targeting revenues around INR5,000 crores by FY28. EBITDA margins are expected to be in the range of 11% to 13%.
Q: What are the plans for margin expansion, and when can we expect to see improvements?
A: (Anmol Jain, Joint Managing Director) Margin expansion will come from optimizing fixed costs and increasing revenue from the new Chakan facility. We expect to see improvements in H2, with a target of double-digit EBITDA margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
