Lumax Auto Technologies Limited (LUMAXTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, we welcome you all to the Q1 FY '27 Earnings Conference Call of Lumax Auto Technologies Limited. This conference call may contain certain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Anmol Jain, Managing Director. Thank you, and over to you, sir.

A very good afternoon, everyone, and thank you for joining us for Lumax Auto Technologies Limited Q1 FY '27 Earnings Conference Call. It's always a pleasure to welcome you all. I'm joined by our leadership team today, including Mr. Deepak Jain, Vice Chairman; Mr. Sanjay Mehta, Director and Group CFO; Mr. Vikas Marwah, CEO of the company; Mr. Ankit Thakral, the CFO of the company; Mr. Naval Khanna, Corporate Head, Taxation; and Ms. Surabhi Chandna, Group Head of Investor Relations and Value Creation, along with our Investor Relations adviser, SGA. We have uploaded our earnings presentation on the stock exchanges and the company's website. I do hope everybody had an opportunity to go through the same. Before discussing the company's performance, let me briefly touch upon the broader macroeconomic environment. The global economy continues to navigate a challenging geopolitical landscape with the ongoing conflict in the Middle East, heightening concerns around energy security, supply chain disruptions and inflationary pressures. Encouragingly, the past few months have witnessed signs of deescalation, providing some stability to the global markets, although the situation remains fluid and warrants close monitoring. India, while not entirely insulated from these global developments, has continued to stand out as one of the world's fastest-growing major economies. A strong domestic demand, sustained public capital expenditure and a resilient manufacturing and services sector have supported economic momentum. Despite the challenging operating environment, the Indian automotive industry has delivered a strong start to FY '27 with production witnessing a healthy growth of 22% year-on-year with all major vehicle segments reporting good traction. Passenger Vehicle production increased 17% year-on-year to 14.5 lakh units. Commercial vehicle production grew by 15% to around 3 lakh units 2-Wheeler production rose 23% to 72.5 lakh units, while 3-Wheeler production recorded the strongest growth of 39% to 3.5 lakh units. The broad-based growth in production was led by lower GST rates, easier financing, new model launches, leading to resilient consumer demand. In Q1 FY '27, Passenger Vehicles, Commercial Vehicles and 3-Wheelers recorded their highest ever first quarter sales, while exports across all vehicle segments also reached record levels. Improved monsoon conditions and stable inflation further supported demand, particularly in the rural markets. As we enter the festive season, demand is expected to remain healthy with many leading OEMs reporting low inventory levels. The industry continues to closely monitor commodity prices, geopolitical developments and supply chain dynamics that could influence input costs and overall market sentiment. Speaking on the performance of the company, we have commenced FY '27 on a strong note with robust revenues and profitability. The Q1 FY '27 revenue of INR 1,364 crores grew by 33% year-on-year with EBITDA of INR 205 crores, up 51% year-on-year, with margins of 15.1%, an expansion of 190 bps. Profit After Tax for the quarter stood at INR 99 crores, registering a growth of 83% year-on-year. Coming to the order book. We are pleased to report a robust order book of INR 1,600 crores, which provides a healthy visibility for the business going forward. Of this order book, approximately 24% is expected to be executed in this financial year FY '27 itself, 56% in FY '28 and the remaining 20% in FY '29. The order book continues to reflect a healthy traction across all our product verticals with Advanced Plastics contributing the largest share, followed by Mechatronics, Alternate Fuels and Structures and Control Systems. To support our growing scale, several expansion projects are underway. To highlight a few key projects, a new plant at Chakan for the IAC division to cater to upcoming demand from Mahindra & Mahindra, while simultaneously optimizing product lines between this facility and the existing ones. The previously announced Mega Mechatronics plant in Manesar, Haryana is expected to be commissioned by Q3 of this year, where we are consolidating four entities, Lumax Yokowo, Lumax Alps Alpine, Lumax Ituran and Lumax FAE under one roof to optimize resources and fixed costs. At Greenfuel Energy, we are pleased to report that we onboarded Mahindra as a new customer and to cater to their requirements, we shall be setting up a new facility in Nashik. In closing, while we remain watchful of the macroeconomic uncertainties, commodity inflation and the energy price volatility, the overall demand environment and industry outlook continues to be favorable, giving us confidence for the near term. In the long term, our compass remains our 2020 - 2020 vision, aiming for a 20% revenue CAGR from 2025 to 2031, inching closer to 20% EBITDA margin over the next five to seven years. And by FY '31, we aspire to more than double our current revenue base to upwards of INR 10,000 crores, fueled by a blend of organic excellence and strategically inorganic opportunities. With this, I would like to now hand over the call to Mr. Ankit Thakral, the CFO of the company. Thank you very much, sir.

Good afternoon, everyone, and thank you for joining us today. Q1 FY '26 has commenced on a solid revenue gain, reaffirming the strength of our evolving and well-balanced portfolio. This performance is a direct outcome of our disciplined execution of the strategy and sustained focus on innovation, premiumization and deeper alignment with high-growth mobility platforms. Let me now take you through the key financial and operational highlights for the quarter. Profit Before Tax before exceptional items for Q1 FY '27 stood at INR 132 crores, which is up by 78% from Q1 of last year. The effective tax rate continues to remain around 25%, which is also expected to hold at similar levels way forward. Profit After Tax and before minority interest for Q1 stood at INR 99 crores. The share of minority interest for Q1 stood at 12% after the strategic consolidation at the stand-alone level, which is expected to be in the similar range going forward considering the existing structure. With respect to division-wise breakup, beginning with the Advanced Plastics division, this segment recorded a strong year-on-year growth of 47% in Q1 FY '27 with revenue increasing from INR 525 crores to INR 769 crores, led by strong growth in IAC business, which commands approximately 60% share in this division. The order book remains strong at INR 787 crores for this division, providing solid future visibility. The Mechatronics segment sustained its upward momentum, delivering a year-on-year increase of almost 56% in Q1 FY '27 from INR 54 crores to INR 84 crores with a very healthy order book of close to INR 500 crores. Coming to the Structure and Control Systems vertical. It reported a year-on-year growth of 21% in Q1, increasing from INR 180 crores to INR 220 crores with an order book of INR 130 crores. The Aftermarket segment showed a growth of 6% year-on-year from INR 98 crores to INR 104 crores, mainly due to dip in non-lighting product category. However, we are confident to bounce back and confident to post double-digit growth for the remaining part of the year in this particular segment. Our Alternate Fuel business showed a growth of 17% year-on-year from INR 95 crores to INR 111 crores with an order book of INR 200 crores. The CapEx during the first quarter was INR 23 crores. Our guidance for the full year continues to remain around INR 300 crores, which will include the upcoming Greenfuel expansions of Mechatronics as well as new plant of IAC division. These investments are aimed at unlocking medium-term revenue growth and supporting localization efforts across key platforms. As of June 2026, we continue to maintain a strong balance sheet and a healthy liquidity position. Free cash reserves stood at INR 415 crores, providing us with the financial flexibility to support ongoing investments and navigate market cycles confidently. The long-term debt stood at INR 508 crores, resulting in a conservative debt-to-equity ratio of 0.32, which is within our internal comfort thresholds. With this, we conclude the operational and financial overview. We now open the floor for questions. Thank you.

[Operator Instructions] We take the first question from the line of Amit Hiranandani from PhillipCapital.

Sir, my first question is basically looking at the 33% top line growth in Q1 and better demand scenario for the automobile industry and superior margin performance in Q1 as well despite input cost pressures. So are we revising our guidance for this ongoing fiscal year.

So Amit, thank you. Again, we have gone off to a good start for Q1 FY '27. As of now, we continue with the similar guidance. Please be mindful that Q1 and Q2 compared to last year, we're also sitting at a very low base and hence, the growth across the industry in terms of percentage growth will be quite robust and quite handsome. However, as we get into Q3 and Q4, for overall as an industry, the growth rates will reduce significantly because last year, post the GST rationalization, H2 was really a very hyper growth already delivered. On the margins front, I think I can only say that we will be able to sustain these current margins achieved in Q1 for the remaining part of the year as well.

Right. And sir, secondly, one important piece of comment, which I was reading from your latest annual report, which I'm quoting. "So where management believes that the industry is moving from mechanical vehicles to intelligent connected vehicles and Lumax wants to capture that value migration." Just want to understand this a little better, where are we heading? And is there anything on the table for nonlinear growth prospects?

Vikas, do you want to take that, please?

Sure. So Amit, thank you for your question. See, if you see the entire DNA evolving of Lumax Auto Technologies now where the margin expansion is also happening and moving to more future critical products. We have now taken a defined path of sensing technology, which is captured through our throttle position sensors, steering angle sensors from JV, identify components like RFIDs that we are going to introduce from our telematics division, control components, which are coming from very advanced ECUs, which have been launched in the current quarter to the market, the Body Control Modules, the connectivity platform coming from our telematics control unit and from antenna systems, and the interactive HMI systems from our gear shifter division, Lumax Mannoh, which is getting into the intelligent solutions, which will be capturing software-driven inputs coming through the ADAS and the domain controller components. Now all of this is therefore making Lumax Auto Technologies move towards more connectivity senses and thinking and an interactive kind of a portfolio. And this is our future tech story, which is being supported with our SHIFT center that we had opened in Bangalore for software-driven vehicles.

Just a follow-up, sir, on this. Basically, are we looking for any kind of nonlinear growth prospects here anything on the table?

We are currently completely banking on the product requirements that we have received from the OEMs. There are five new products completely new to Lumax Auto Technologies, all in the intelligent and connected and software-driven space, which are being launched in 18 to 24 months. The first such launch has already happened, Body Control Module. We are cognizant of the market demand scenario also, and we would not like to overreach or overstep in terms of installing any capacities that the market is not yet ready for. So we are going in a very planned growth manner.

We take the next question from the line of Mihir Vora from Equirus Securities Private Limited.

My question basically was around the margins. Now given the commodity inflation, which we have seen this quarter where plastics were up around 30%, 40% levels and other commodities also moving up. But the margins are holding at a very decent 13.9% kind of levels. So, sir, can you just throw some light here whether how the negotiations happen here? What kind of pass-ons happened here in terms of OEM cost pass on? Was it like that OEMs were very prudent in terms of monthly pass-ons because normally, we see a quarterly or a six-monthly cycle here. So just some color on that, whether how we manage our margins.

Mihir, thank you. First and foremost, I think on the margins front, even if I were to roll back to FY '26, for the H2 portion of FY '26, the company was almost at a similar margin of about 14.9%. Currently, 15.1% for quarter 1 is again something which we further expanded from there. Largely, when it comes to the inflationary costs of raw materials, in fact, you're absolutely right, the Plastics did go up, but Plastics as a commodity, usually, we have a back-to-back arrangement with most of our OEMs, and we do realize that within the same quarter as well. Only for a few OEMs, maybe the spillover happens to the next quarter, but I would say to a great extent of 80% to 90%, we get the realization within the same quarter. If you look at our division-wise portfolio, close to more than half of our revenue comes from the Advanced Plastics division. Hence, we were able to take that benefit of the inflationary costs come back to our P&L. The other commodity, which has usually risen in the recent past is the electronics, which it has gone up by even beyond 30%, 40%, 50% in some cases or in certain particular electronic components. Fortunately, the company's portfolio on electronics still remains low. I think the Mechatronics as a division is still only about 6% to 7% of the total pie. And that's the reason we did not see a significant electronics, which usually takes a longer time to realize unlike Plastic raw materials. But because of the low footprint as on today, we were able to maintain our margins. And again, as I said, the guidance for the remaining part of the year remains to be intact as well.

And my second question, sir, basically on the Greenfuel. We also announced in the opening remarks that we are getting Mahindra as a customer in Greenfuel now. So one clarification thing there, whether it is for LCVs or PV in the future plan of Mahindra. And important point is, this quarter also Greenfuel, the growth was very strong, but even the margins were stronger. So here, if we see the margins around 23-odd percent is something which we are seeing in the presentation. So just wanted to know whether how much of this would be some higher other income element? Or would it be operational margins have seen a very strong improvement driven by some product which we would have added in the quarter?

So on the first part of your question, our penetration into Mahindra is for their Passenger Vehicle segment. Mahindra has also publicly announced that they wish to enter the CNG space for some of their models. And the first model, we are happy to inform that we have the business of the CNG delivery system for that model. So it is for the passenger Vehicle space on the LCV. In terms of the margins, maybe Ankit can throw some light whether there were certain onetime exceptional gains for the Q1 on Greenfuel, but I would definitely say that given the long-term perspective, we should look at more of 19% to 20% margin should be sustainable. 23% seems slightly more than what we usually anticipate. But Ankit, if you can throw some light there.

So yes, correct, sir. So Mihir ji there was an amount of around INR 3-odd crores specifically for this particular Greenfuel division impacting around 3% on the EBITDA margins, which was one-off as a result of certain tooling revenue, which happened to the existing customer. So if we remove that amount, the normalized product if operational EBITDA margins will be at the level of 20-odd percent, which is expected to continue for the remaining part of the year as well.

Okay. All right, sir. And sir, lastly, just one question, if I can squeeze in. So sir, basically, if we see your customer mix and customer growth this quarter, Bajaj Auto comes out as a surprise wherein volume growth, yes, was around, say, 15%, 16% kind of a volume growth, but the revenue growth has been growing at around 64% level year-on-year for us in terms of Bajaj. So sir, basically, just some color on it, whether what is driving here? Are we getting into some new products with Bajaj or our polymer products slightly the content increase? Or what is driving the strong growth for Bajaj Auto?

So let me first give you a broader perspective. I think, as I have mentioned in the past, the key growth drivers for Lumax Auto Technologies over the next few years are primarily four. Number one is the wallet share expansion with respect to our current products, which we have across OEMs. Number two is the value content going up on account of premiumization. Number three is localization that a lot of our products, which currently the OEMs are importing, we will be able to localize them. And hence, for us, that's a significant growth starting from ground zero. Number four, a new technology play where specifically, as Vikas had mentioned earlier, the Mechatronics division has a lot of products on account of being connected and sensors. So these four are largely our growth drivers in the OEM space. Of course, we have Aftermarket as a separate growth driver. Now answering to your specific question on Bajaj, it is largely a wallet share expansion and getting into certain newer models where we were not present in the past. Both, if you see the Metallics division, I think Metallics division has also shown close to 37% to 40% growth in quarter 1, largely because of getting into new frames for other models. I think this growth will continue to drive. We are very strong on a platform like Chetak, both for the lighting as well as the frame business. And as we all know that Chetak as a platform is going to significantly, they already have ramped up, and I think they will significantly ramp up going forward as well. So it's purely a wallet share expansion.

We take the next question from the line of Apurva Mehta from AM Investments.

Congratulations to the team, great set of numbers during this challenging time. My question was regarding the Mechatronics division. In next two, three years, what will be the wallet share of our Mechatronics because that's one of the things that electronics, we are looking at a big growth driver for all companies. So where do we stand on that?

Sure. So maybe I will have Vikas answer that, but I think Mechatronics overall was one of the key growth drivers for quarter 1. I think the whole division grew by almost more than 55%, 56% on a quarter-on-quarter basis. I think the order book looks quite healthy with respect to Mechatronics. So I will let Vikas throw some light on the future growth prospects of Mechatronics over, let's say, 3 to 5 years.

So thank you, Apurva Ji. Currently, the flagship products that we have talked about to the markets and to investor community currently is that we are present in the Mechatronics segment in switches, sensors, antennas, telematics. And for the first time, we are announcing the entry into the advanced ECUs, which is the body control module. Now trust me, these are only five broad headings where you see us talking about these right now. There are at least 22 new subproduct categories which are currently on our radar. We continue to be in a state of either POCs with the customers or receiving RFQs or continuing to work on them in our R&D centers and along with our JV partners. I think giving a number to the Mechatronics market share position would not be the right way to look at it. It would need to look product-wise. We can tell you our ambitions very clearly. Let's take a connectivity flagship product like Vehicle Communication Antenna Systems. in common parlance, let's say, call the shark fin antennas. Our stated position would be like for any other flagship product coming from Lumax, be it the lighting or the gear shifters, we would like to be in the top two players in the next three to five years in this segment, which is fast emerging. Again, on the switches and the sensor side, we should be able to consolidate our position in the top two players in the country over the next three years, but then there are different subheadings to it. So Mechatronics definitely is poised for a very aggressive play. We are currently on a INR 400 crores to INR 500 crores order book, and this could continue to be the growth driver for Lumax Auto Technologies going ahead.

Just to supplement and throw some color there. I think if you look at Mechatronics, I think for the full year, we should be clocking anywhere around INR 400 crores of revenue in this fiscal year as a division. I think to me, by FY '30, '31, we should definitely be looking at close to INR 1,000 crores top line from Mechatronics division. So that's the kind of growth potential which we are anticipating under Mechatronics.

Great to hear, sir. Sir, and on the ADAS front, where do we stand because we have started the Bangalore facility for research and doing on. Are we looking for partners from different like China or Taiwan or Japan or somewhere where we can enhance that pie of that component?

So a lot of work has already started on a lot of technologies with respect to ADAS. Most of these are driven by our SHIFT teams in Bangalore. There are a lot of POCs from multiple OEMs, which we are currently working upon. Again, as of now, we do not have any such requirement of partnering with companies outside of India. But if that need arises, we will be happy to utilize our China group resource center and see if we need to partner with a specific specialized partner for any specific technology needs. But there is a lot of work happening on ADAS internally as well.

I would like to just add to what Anmol Ji is saying, Apurva Mehta. So there are two ways of looking at ADAS. One, of course, is a vehicle compliance-driven ADAS system that you hear about. And then there is an ADAS connectivity to the existing components that we are bringing. I will give you an example of RFIDs and TCUs from our telematics division. Now they are also V2X enabler and the TCU becomes the connectivity and the data backbone around ADAS there. So the ADAS player at the DNA level is very much already there. And from future perspective, of course, we are looking at the compliance-led ADAS introduction. And as Anmol Ji mentioned, we are in advanced stages of POC now on Advanced Rider Assist System for our major OEMs and probably another two quarters, we should be able to share the results with you and how it becomes the business case.

We take the next question from the line of Shashank Kanodia from ICICI Securities.

Sir, first question is regarding the minority interest. So this quarter, you reported 12% as the minority interest on the CAD that you reported. So any guidance going forward should be we should be assuming the models.

So yes, you said it correctly. So for the quarter 1, the minority interest is 12%. And after the consolidation of, or the merger of IAC and later on Lumax FAE becoming the 100% subsidiary as well. And going forward, this minority interest will remain in the similar range between 11% to 13-odd percent considering the existing structure, which is at the present moment.

Understood. Second, sir, when you mentioned your order book and you display the application for three years. So this is the annualized revenue we should be realizing over and above our base business, right?

Yes, that's correct.

This is annual revenue, right?

Yes, yes, correct. This is annualized revenue.

So sir, given the fact that the industry is guiding for roughly 10% to 12% kind of volume growth and there are some price hikes as well, and you mentioned INR 300 crores of additional revenue this year. So we should be closer to INR 6,000 crores of revenue this year and in excess of INR 7,000 crores next year?

I think the other way to look at it is that we should be in line with our 20% CAGR. Last year, we grew by almost 34%, which was an exceptional year for us. This year, as I mentioned earlier, when you look at Q1, you're looking at a significant growth at an industry level. Almost all the segments have reported, as I mentioned, Passenger Cars at 17%, 2-Wheelers at 23%, Commercial Vehicles at 16%. But these growth rates will start to slow down as we enter Q3 and Q4, not because the demand will slow down, but purely because of the base becoming significantly higher in FY '26 post the GST rationalization. So for the current year, I think we may not be looking, I mean, it would be unfair to say that we should be looking at a INR 6,000 crore mark because, again, from an INR 4,870, I would say, given a two-year horizon, FY '27 and FY '28, it's very safe to presume that we should be able to deliver a 20% CAGR.

So because of the positive surprise being that initially, we had guided for 15% organic growth, including inorganic, we are supposed to do 20%. But right now, given our wallet share increase and our customer wins, we are growing 20% organically. So is the understanding correct to that extent?

Well, 20% CAGR over the long run is still what we maintain. Yes, we had given a 15% organic CAGR and approximately another few hundred crores of inorganic. As of now, we continue to maintain that. I think while the company does not have any immediate plans of an inorganic growth in the current year, but we continue to look at strategic fits for the next few years. But I would still say that let's maintain the 20% CAGR growth for the overall company as a whole.

Understood. Lastly, sir, do we have any role to play in the vehicle-to-vehicle communication. I think there have been increasing talks about government doing some regulatory push on that front, if you can highlight?

Yes, absolutely. Maybe Vikas can throw some more light on that.

Sure. So I already mentioned it earlier, but let me talk a little bit more in detail to clarify. Now RFID systems that we are going to be introducing as a compliance-driven thing from the government side from our Telematics division, is very much one of those systems where the vehicle data is being captured on the cloud and in terms of the digital identification. So RFID provides an identity service to the device. In terms of V2X, we call it as external intelligence, and that is coming through our Telematics control units. Happy to share with you that we are now in the process of filling the order book with all the top four OEMs in the country in the commercial vehicle space for these solutions, and you will see them coming to the market by the end of Q3. Due to the NDA reasons, we cannot talk more about it right now that exists with the customers.

Sorry to interrupt, Mr. Shashank. I would request you to join back the queue as there are several participants waiting for their turn. Thank you. Before we proceed, a reminder to the participants. Please limit your questions to two per participant. We take the next question from the line of Radha from Motilal Oswal. Please proceed.

My first question is, what are the key advantages that help Greenfuel win more business as compared to competitors, who I believe are also pretty formidable in this auto component industry?

Well, I think Greenfuel, there are a couple of unique advantages. Number one, this space does not have many competitors. There are only two or three big players in the space where Greenfuel operates, number one. Number two, I think our technical capability, which we have, along with our technical partnerships with some of the global world leaders with respect to the products that we offer is something which we definitely score way ahead of competition. That is the reason why we are able to give localized solutions to certain products, which historically has been a full import product for vast OEMs in India. So I would say that it is largely the technical expertise, the partnership relationships, which give us an edge over the competition.