Landmark Cars Limited (LANDMARK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Landmark Cars Limited Q1 FY '26 Earnings Call hosted by B&K Securities. Before we begin, a big disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] With this, I now hand the conference over to Mr. Akhil Parekh from B&K Securities. Thank you, and over to you, sir.

Thanks, Soumya. Good morning, everyone. On behalf of B&K Securities, I welcome you all to Landmark Cars 1Q FY '26 conference call. From the management side, we have with us Mr. Sanjay Thakker, promotor, Chairman and Executive Director; Mr. Aryaman Thakker, Executive Director; Mr. Surendra Agarwal, Chief Financial Officer. Without taking much time, I will have the call to Mr. Sanjay sir for his opening remarks. Post which we will open the floor for Q&A. Over to you, sir.

Thank you, Akhil. Much appreciated. On behalf of the company, I extend the sincere welcome to everyone, who has joined the call today. As explained by Akhil, we have Aryaman and Surendra, who are along with me for this call. The results and the presentations are uploaded on the stock exchanges and the company website. I hope everyone has had a chance to have a look at it. While the Indian passenger vehicle market grew only by 2.59% year-on-year in the first quarter on a volume basis, Landmark Cars achieved nearly 22% growth in revenue, which was driven by strong deliveries in new car sales segment. This performance was backed by recent brand additions over the past couple of years, which have significantly outperformed the industry. Our profit before tax and profit after tax have more than doubled over the same period last year. And if we consider the pre-IndAS numbers, the underlying growth was even strong. The auto industry globally is currently waiting for clarity on tariff bilateral trade. India has one of the highest tariffs in the world, likely that these tariffs will come down sooner or later. Landmark has several global brands within its portfolio and will stand to benefit when this were to happen. India has taken a central stage in many global OEs future plans. Many have announced aggressive India plans in the past few months. Many more global OEs will announce them soon. In the last year, Landmark has transformed itself completely as far as the portfolio mix is concerned. We now represent fast-growing brands in a meaningful way. BYD and MG together are nearly 20% of the company's business now. With the possible improvement of relationship between India and China, this could grow rapidly in the times to come. Landmark has seen seamless execution of projects last year and near perfect operationalization of newly opened outlets thereafter. We are focused on reducing costs continuously and the results are evident. In an environment, which is challenging, Landmark aims to significantly grow and show better results in the coming quarters and outperformed the industry by a distance. I hand over to Aryaman for more granular detail. Aryaman?

Thank you. Let me first start with an update for network expansion. During July, which is in quarter 2, we operationalized the Mercedes-Benz showroom in Patna as well as the workshop. It is the first luxury brand outlet in Bihar. We, at Landmark Cars, have again reiterated our status as a partner of choice for our OEMs. We expect that this new outlet will further increase our market share from the bank. In July, we operationalized the showroom and service center for MG Select in Ahmedabad as well with deliveries and operations beginning in August. One, a further outlet of MG Select in Kolkata and workshop for Kia in Hyderabad are set to commence operations in the later part of Q2 FY '26. In quarter 1, FY '26 saw healthy performance from most of our OEM partners. Mercedes-Benz India achieved its best-ever quarterly sales in April to June of 2025, retailing 4,238 vehicles, which was a 10% year-on-year growth. This performance was driven by strong demand for both high-end luxury models as well as the balance model lineup. Sales of top-end models like the S-Class, the Maybach as well as the AMG portfolio rose approximately 20% in this time frame. Mercedes continues to be the leader for the leading luxury OEM in India and Landmark continues to be partners. Mahindra industry growth. It recorded over a 22% year-on-year growth in Q1 FY '26. Its models continue to enjoy a high demand with long waiting periods. Our outlets in both Hyderabad and Kolkata are stabilizing as expected. At an OEM level, BYD enjoyed strong demand across its model range. With its consistent healthy demand, BYD has become a meaningful contributor to our brand portfolio, and we remain bullish on the future of the brand in India. We recently started our outlet for MG Select in Ahmedabad. MG Select is a new age luxury brand and has launched with 2 models in India currently. The Cyberster, which is priced at approximately INR 75 lakhs and the MG M9 MPV positioned at INR 69.9 lakhs. Both of these models have received a positive response with reasonably long waiting periods already. With deliveries expected to begin from August, MG Select will contribute positively to Landmark's top line and profitability starting from quarter 2. Also, the premium positioning of these models will help uplift our average selling price, and we expect MG Select to be a good long-term story, which will help expand the premium luxury market in India. Renault has recently announced its plans to launch 5 new products in India over the next 2 years. This includes models like the new Duster as well as revamping the balance model lineup as well. This will turn around Renault's performance in India. Let me share that Landmark remains the only partner for Renault Mumbai region. As mentioned previously, our focus on renegotiating contracts for consumables as well as focus on finance and insurance with better terms with banks have been executed. The benefits of these agreements will start reflecting in the coming few quarters. Now I hand it over to our CFO, Surendra Agarwal, to take us through financial highlights. Thank you.

Thank you, Aryaman. Good morning, everyone. I would now like to present the financial highlights for the quarter of FY '26. The total pro forma revenue for the quarter stood at INR 1,415 crores compared to INR 1,164 crores in the same period last year, reflecting a year-on-year growth of 21.6%. Of this, the new car pro forma sales contribute approximate INR 1,181 crores across all OEM partners, while aftersale revenue was INR 235 crores. Gross profit for the quarter was INR 184 crores versus INR 161 crores in Q1 FY '25, reflecting a growth of 14.8%. The GP margin in Q1 FY '26 stood at 17.4%. The rate of growth in new car sales has been much faster than the growth in aftersales segment, thus impacting the GP margin on year-on-year basis. Once the new workshop reached full operational capacity and start generating more aftersale revenue is likely to improve the GP margin. The EBITDA for Q1 FY '26 was recorded at INR 66 crores with the EBITDA margin of 6.2% on a reported revenue basis. At Landmark, we have believed that both sales and aftersales need to contribute to the company, and that is happening. We expect the aftersales business growth pick up from H2 onwards when the newer workshop is start contributing more. In aftersales surveys, the total number of services stood at 94,000 in Q1, '26 with a growth of 10.5% on a year-on-year basis. For Q1 FY '26, the average revenue per vehicle service was INR 25,000, even through, even though the ASP of after sales have gone down marginally which is due to product mix increasing of newer brand. The gross profit and EBITDA margin remained constant for aftersales business. We will see the impact of reduced borrowing costs due to the reduction in repo rates from this quarter onwards. Profit after tax stood at INR 7 crores versus INR 3 crores in the same quarter last year, representing 114% year-on-year growth. Cash PAT for the quarter stand at INR 22 crores. With that, I open the floor for Q&A.

[Operator Instructions] The first question comes from the line of Pritesh from Lucky Investments.

My question is, first, with respect to the service revenues. So what we see is now that the new car sales growth rate is fairly strong for us. What is the lag between this and the service revenue growth rate to pick up because the service revenue is still 8% growth? So that's question one. Second question, if I look at your revenue growth this quarter and try to look at new brands led growth and the legacy brand-led growth. The split of this even. Is it fair to assume that this new car, new brand-led growth, which is like some 10% to 12% easily contributing to the overall growth number since the brands are setting, we can assume a further acceleration in this growth with the launches within MG and other brands because MG seems to have not done well between last year and this year. So the third question is basically some comment on MG. These are my 3 questions.

Yes. Thanks, Pritesh, for your questions. Let me first answer the aftersales question. And this is an important question. So I'll take a little time. So many of the questions of the next participants may also be answered simultaneously. Aftersales also like sales is a seasonal business. Now why is it a little seasonal because the cars which are sold, they come for a service that the interval of, say, 12 months. The quarter that has gone by April, May, June quarter is the softest quarter in our trade. It contributes around 21% of the overall year, which is what we have seen historically. And the pace of service also is more or less in that zone. Also, as you will see, the contribution of the new cars to the overall turnover is nearly 20%, while the service is only 10%. The reasons are small, small, but several. Our Kia workshops, for example, we did not have a Kia workshop in Hyderabad until July of this year, and it has started now. So last quarter, had our Kia operations without a workshop in Hyderabad. Our Mahindra workshop actually was awarded and this is, again, a very satisfactory situation for us. It was awarded as the fastest breakeven by Mahindra and Mahindra in Hyderabad. We achieved the fastest breakeven for any workshop and they awarded special award to us. So your question was that when will the growth come back? Now our expectation is that we will reach the double-digit growth in the next half of the year and try going towards the 13%, 14% growth that we have seen for the last 10 years, which is the 10-year CAGR by end of the year. So we will get back to that pace. I don't think we see that much of a challenge. It is going more or less as planned. It's a mathematical business, and it will get there. The other thing was about the growth in sales. Now -- and as I think Surendra mentioned in his speech, we have been firm believers that sales and aftersales both need to contribute towards the profitability of the company. It is not only aftersales. Aftersales is clearly, I think everybody has understood that this is an annuity type of a business. It keeps on growing every year. But we believe that sales also because it has insurance, finance, accessories, a lot of other peripheral income streams that also needs to contribute. You will see that in this quarter, around 1/3 of our EBITDA has come from sales. It is improving. And we believe that this will improve further in the times to come. The growth in Aryaman has listed down a few brands. The good part about having kind of a portfolio approach is that at any given time, some brands will do well, new launches will help. So we will see the growth momentum continue in the coming quarters. Our expectation is that the growth momentum will continue. We believe that the MG has done well. In absolute numbers, they are one of the fastest-growing brands that we have seen. And they have grown at around 26% in the first quarter year-on-year, which is amongst the fastest growing. My figures are showing me that they have grown at 26%, which is possibly among the fastest in the industry this year, and we have kind of grown simultaneously. If you were to only look at our market share from an OE perspective, it may not be such a good number to see on a quarter-on-quarter basis because we have reduced -- this is based on wholesale. What has happened is that we have reduced in many of the OEs, the stock that we had on 1st April and what we have on 30th June, there has been a reduction in stock, which is good for our balance sheet. So that's way -- that's the answer I have to say. Pritesh, anything else?

So just a clarification. So in the new brand, when you do the calculation, when you say that the new brand contribution to sales has moved from 13% in FY '25 to 19%. It means that the new brands are growing at a 50% run rate and it's just a start. Is it fair to extrapolate this incrementally also an acceleration further in terms of growth rate?

Yes. So the growth rate, as I see slightly difficult to kind of put a hard-coded number on it. The growth, what we have seen, we are hoping to continue for the balance part of the year.

The next question comes from the line of Arnav Sakhuja from AMBIT.

So I just wanted to know how has been the response for Tesla in India since they recently launched the Model Y? And do we expect that it will provide any threat to our current product portfolio, especially the EV portfolio that we have?

Yes, this is Aryaman here. I'll just quickly answer that. Of course, there was a good amount of media hype and buzz surrounding the launch. I think on ground level because the first showroom has opened in Mumbai, and we do have some of our EV brands like BYD also operating in the region. So far, we have not had any sort of impact on our sales. And this is at least what our data says that it has been low single-digit customers that we have at least experienced who have switched over to the brand in the time since they have launched. So so far, we have not seen any sort of meaningful impact on our EV portfolio of brands.

One of the journalists actually set up important -- very interesting thing. He said that the -- as it stands now, India seems to be more interested in Tesla than Tesla in India.

Okay. So my next question is with regards to Mercedes. So basically, as you were mentioning in your opening comments, Mercedes had a very strong quarter on a year-on-year basis this Q1 FY '26. But does it indicate a wider growth in the luxury and ultra luxury car segment this quarter, like, for example, did Mercedes as competitors like BMW and Audi, did they also show such strong growth levels? Or was it restricted to Mercedes?

So my -- I'll check the numbers, which are -- so I think JLR as well as BMW both have grown. And -- but the growth in luxury cars, we expect that it is generally around 3x right now. That is the way we are looking at it or the normal passenger cars. That is how we believe it will happen. So first quarter is a short period. We still have a whole year to go. So let's hope that it kind of continues. But BMW and JLR both have grown. I think Audi may have degrowth.

Okay. But would they have grown at somewhat similar levels as Mercedes or lower level?

It could be at similar levels. I don't have the numbers that they don't publish these numbers very -- on a monthly basis, as you know. They -- so I don't have the data unfortunately with me today.

And just 1 last question. So with regards to the new MG Select segment that we entered into MG M9 and MG Cyberster. How is the market reaction for these 2 models?

Yes, Aryaman will take it.

I think the market reaction as well as the customer as well as the media reaction has been reasonably positive. I think they -- it's a new age segment, and they are trying to tap into a slightly what they call as the value or the accessible luxury price point. So I think the price point to what they offer has been well accepted by the market. It's still early days of these products has just started this week, but we do expect the response so far and the waiting periods that we are showing so far are quite positive. And we think that this will be a good long-term bet in the Indian luxury space.

The next question comes from the line of Lokesh Manik from Vallum Capital.

Sir, just a couple of questions. One is on preowned vehicles. If you can share some developments on that side with some numbers for this quarter. And the second one is on financing and insurance numbers on that front as well for this quarter. It was not mentioned in the presentation. So has it inched up from 1% or 1%?

Yes. Lokesh, the first question about finance and insurance. No, it has not moved from 1%. It is in and around that. The sale has moved up. It will not -- it will gradually move up as Aryaman said, with better penetration, better margins and all that. This quarter has not been anything which is significantly different than some of the other quarters, but it is improving. On the POC front, we -- this is something we need to kind of crack but in a better way, our focus in the last maybe 9 to 12 months had been to operationalize and stabilize the 2 outlets that we had done, we left everything else for the future and basically focused on getting that done and which is where we have reached. I think we are happy with the situation that we find ourselves in. And the preowned car business will again get on to the center stage of happening. We would also, I think, from after 2 quarters, stopped reporting the new and old kind of a thing because I don't think it will be required after that December maybe after that, we won't have this done. And the focus will turn to the things that need to be done like the preowned cars.

Right, sir. Sir, just for clarification. Financial income would have grown in line with the new car sales growth. Would that be a fair assessment?

That is right. That is right.

The next question comes from the line of Nishant Shah from Jacobs Capital.

Congratulations on the result. Just a very basic question. I wanted to understand what really is the moat for our aftersales service. Or if you could kind of like try and quantify what percentage of the cars that we sell end up having aftersales only with us? Like as far as I understand, like whenever we buy a car, you end up somehow the other receiving calls from a lot of other workshops for annual maintenance or like any kind of like service requests. So how do you ensure like a higher wallet share in aftersales from the cars that we sell?

Yes, Nishant, this is a good fundamental question that you are asking. So unlike the global environment, India doesn't have any local garages, which are a meaningful play as far as the aftersales business is concerned. Neither are there any insurance-backed garages where the car gets repaired. So the aftersales revenue is basically broken up into periodic and general maintenance and accident repair. The accident repair gave around 45% of our aftersales revenue comes from accident repair. Now that also should be kind of understood. Now the moat is what you are saying, the cars come with a warranty of 3 to 4 years, depending on what car you are talking about. And during that time, a customer is expected to service these vehicles only at the authorized dealerships. After that, people like us sell extended warranty. Some of them like us have a white-labeled extended warranty product. So this is also something which happens. So during a period of the extended warranty, which may extend up to 7 years from the time the car was bought, the car comes to our workshop for service. Your question was also that you received many times the calls from different workshops. Now as far as Landmark is concerned, in many of the brands that we represent in most of the geographies that we operate, we are, as of now, they're only partners. So there is a natural inflow that happens because we would be the only authorized workshop in that region. Now the other answer is that because we provide superior services, most of our workshops are rated nearly 5 star as far as the customer satisfaction is concerned, I believe that the customers migrate in from other workshops wherever they are competing workshops rather than moving out. So it is a very unique proposition that India has to offer as far as the after sales business is concerned, currently, and it is like an annuity business that you need to kind of look at.

Understood. So what would be the -- like the attachment rate for extended warranties beyond the first 3 years or 4 years of free warranty?

I would think around 40%, 35% to 40% is what we -- and many of the brands that we focus on. But the -- what we believe is that the cars come to our workshop. Every year, some amount of cars do drop in first 3, 4 years is upwards of, say, 93%, 95%. And after that, it keeps on gradually going down up to around 7 years, 8 years is what we kind of look at the cars coming in.

The next question comes from the line of from Monarch Networth Capital Limited.

Congratulations on good set of numbers. Sir, I just have 1 doubt regarding our other income, which has come. So it has increased drastically. So what has driven this other income? And what would be a steady state of other income which we should build on for the full year?

Surendra will answer.

So Vaidik, it is not increased drastically. If you look at the total year, it come, it is in line with that. It's mainly consist of the interest income, which we put the FD against the bank guarantee we used to take. And then the miscellaneous income, which is like an old provision write-back, et cetera. So it is in the line. Some quarter, it may have slightly up, but for some quarters, it may slightly down.

Sir, for the full year, how much should we build in?

So full year, last full year, it was roughly around INR 14 crores, and we expect similar or maybe a better number than the full year.

The next question comes from the line of Bhavya from Tamohara individuals -- Tamohara Investment Managers.

I had a question on the aftersales for EVs. So I want to understand how is the average service realization for vehicles compared to IV models? And how should we think about service visit frequency for EV maybe annually? So if you can broadly explain this?

These are, Bhavya, probably early days for us to kind of stick our neck out and give a very definitive number. The experience that we have had with, say, a BYD, which is pure EV brand. In case of MG, for example, it's a mixed thing that we keep on selling. The accidents what we have seen are more now frequent in EVs is what we are seeing. As I had said that the -- around 45% of our aftersales business comes from body and paint accident repair. So this is slightly more in EVs because they run more, they accelerate more and the damage whenever it happens, has a disproportionate amount of attached to it. So that is what we are seeing. The report of Goldman, which I'm still referring to and we are trying to plot our findings along with it, which came from China 2 years back, I think, was saying that the revenue generated by EVs is approximately 86% of the regular ICE cars as far as the revenue generation is concerned in aftersales. It is still a little early to kind of call it, maybe another 6 months, and we will have a better data point to give you.

The next question comes from the line of Bhargav from AMBIT Asset Management.

Congratulations on our strong performance. Sir, my first question is that if you look at the EBITDA margins, the aftersales business on a Y-o-Y basis has been a significant improvement from 16.5% to 18.2%, given the seasonality, whereas the revenue per the vehicle in aftersales has seen a decline. So what explains this EBITDA margin improvement, sir?

So Bhargav, as far I'll answer the second part. Firstly, marginal drop in the average service cost is kind of expected because the product mix when we service non-Mercedes vehicles, it will drop. So that -- I'm really not too concerned about because the margins, whether we service this or that is more or less similar. So that is the first part. The second is that the aftersales businesses, a lot of the workshops have and started to get in a mature state or near breakeven or profitable stage. We had a lot of workshops last year, which we were paying the rent, the salaries, electricity bills, et cetera, where they were not generating any revenue or very small revenue. So to keep on kind of maturing the profitability of workshops will start showing. We believe that this has further use in the aftersales business where many of the workshops are nearing breakeven and all that, they should make significantly more money and the ROCE that they should generate should be upwards of 30%. Many of the workshops are still not there, but they are their way.

Sir, what would be the EBITDA margin for the most profitable workshop? Is it possible to highlight?

We will -- we have still not Bhargav have gone into that kind of granularity because we believe that it will finally even out. So -- but I think the long-term average has been where we are currently between 18% and 18.5%, 19%. That's the range.

Sir, if I look at your loss in the new car outlet has dropped to about INR 7 crores versus INR 12 crores in the fourth quarter. Is it fair to say that this year, as we end, we should be closer to breakeven in new car outlet?

So the new car outlet definition Bhargav is that we -- as soon as a location completes 12 months, we are moving them into what we call existing outlets. So it is not a like-to-like comparison that we are talking about. But I mean, the hope is that it will go by book and after 12 months, they at least start breaking even. You will see that even in these -- I think the EBITDA breakeven or profitability has happened in the most recent of the outlets. One of the locations, which I also pointed out was operating without even a workshop. So there is all reasons to believe that we will kind of have no loss situation in practically all the new locations. Let's keep our fingers crossed. That's what we are all working with.