Lumax Industries Limited (LUMAXIND.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '26 Earnings Conference Call of Lumax Industries Limited. 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 do not guarantee the future performance of the company. It may 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, Joint Managing Director for Lumax Industries Limited. Thank you, and over to you, sir.

Thank you very much. A very good morning, everyone. I hope everyone is doing well. Along with me on this call today, I have Mr. Raju Ketkale, CEO of the company; Mr. Sanjay Mehta, the Group CFO; Mr. Ravi Teltia, CFO of the company; Mr. Naval Khanna, the Corporate Head, Taxation; and Ms. Priyanka Sharma, Head of Corporate Communications, along with SGA, our Investor Relations Adviser. We have uploaded our earnings presentation on stock exchanges and company's website. I do hope everybody had an opportunity to go through the same. I'll begin by giving an overview of the economy, followed by an overview on the overall automotive industry before we get to the company performance. India's economic journey remains strong, making it the fastest-growing major economy in the world today. To put things in perspective, for the year '24, '25, India's real GDP growth is estimated at 6.5% and the Reserve Bank of India expects this robust pace to continue into FY '25, '26. What's particularly noteworthy is that this growth is taking place against the backdrop of global uncertainty, highlighting the resilience and consistency of India's economic momentum. Coming to the performance of the auto industry. Growth in the automobile industry has been relatively muted, which stands in contrast to the broader momentum of India's economy. This is largely due to industry-specific headwinds seen currently. There's a noticeable pause from several OEMs on aggressively pushing forward with electric vehicle launches. One of the key reasons is the limited availability of Rare Earth magnets, critical components from, for the EVs. China, which processes over 90% of the world supply, imposed export restrictions in April, creating a significant supply bottleneck. In response, many OEMs are now exploring alternative sourcing options and are likely to resume full-scale EV plans once these constraints begin to ease. Talking about the industry performance for the quarter. According to SIAM, passenger vehicle sales crossed the 1 million marks in Q1 FY '26, reaching 1.01 million units. However, this represents a slight decline of negative 1.4% compared to the same period last year. Interestingly, utility vehicles now account for a dominant 66% share of the overall passenger vehicle segment, reflecting a clear shift in consumer preference. While domestic sales have been relatively muted, exports have provided a bright spot. The industry recorded its highest ever Q1 exports of 2.04 lakh units, marking a strong growth of 13.2% over Q1 FY '25. This export momentum was supported by steady demand across global markets, especially in the Middle East and Latin America. Additionally, recovering markets like Sri Lanka and Nepal, rising demand from Japan and growing trade under FTA, such as in Australia, further boosted this segment's performance. Turning to the 2-wheeler segment. Q1 sales stood at 4.67 million units, reflecting a year-on-year decline of negative 6.2%, largely due to inventory corrections across the industry. On the export front, however, 2-wheelers showed robust recovery with 1.14 million units shipped. Exports grew by 23.2% over the same period last year, still below the '22/'23 peak, but a strong sign of resurgence driven by recovering neighborhood market and sustained demand from key global regions. As for commercial vehicles, the segment reported a marginal decline of 0.6% with Q1 sales totaling to 2.23 lakh units. Within this, passenger carriers saw growth, indicating continued investment in public transportation. However, the goods carrier segment recorded a slight contraction. Looking ahead to Q2, the industry maintains a cautiously optimistic outlook, while some of the headwinds from Q1 may persist in the near term, a combination of positive macroeconomic indicators and seasonal tailwinds gradually getting into the festive season is expected to support a gradual recovery. On the company front, Lumax Industries has sustained its strong momentum this quarter, delivering industry-beating growth of 20.5% over the same period last year. This impressive performance has been driven by the success of key vehicle models in which the company has a strong presence, coupled with a well-optimized product mix. Notably, the increasing share of LED lighting in the portfolio has further supported overall revenue growth. The company stands as a leading force in the automotive lighting industry, renowned for its extensive expertise and enduring partnerships. With a strong Tier 1 relationship with all major OEMs in India, the company has firmly established itself as a trusted partner in the automotive lighting space. A few updates for the quarter. The company has started SOP for Maruti's first-ever EV model, the eVitara at its Sanand facility. Chakan Phase 2 will commence operations from H2 of the current fiscal year, which will primarily cater to Skoda and Volkswagen models. During the quarter, the company has successfully launched lighting products for the Tata Altroz and the Maruti Grand Vitara model in the passenger vehicle segment and for the Suzuki e-Access, Hero Vida VX2 and the Mahindra YSD models in the 2-wheeler space. Lumax Industries continues to demonstrate resilience, agility and leadership in a rapidly evolving automotive landscape, backed by strong industry partnerships, robust innovation capabilities and a clear growth road map, the company remains well positioned to capitalize on emerging opportunities. With a healthy order book of almost INR 2,000 crores as on date and focus on enhancing operational efficiencies, we are confidently moving forward on the path of a sustainable long-term value creation for all stakeholders. I would like to now hand over to our CFO, Mr. Ravi Kelia, for giving the financial update.

Thank you, sir. Good morning, everyone. Let me take you through the key highlights of our operational and financial performance for the quarter. Starting with the financials. As our CMD mentioned, we delivered strong top line growth this quarter. Our consolidated revenue stood at INR 923 crores, making a healthy 20.5% year-on-year increase. EBITDA for the quarter came in at INR 85 crores, up from INR 70 crores in Q1 FY '25, reflecting a growth of 20.7%. EBITDA margin improved to 9.2%, up 10 basis points year-on-year. This improvement is a result of continued focus on cost discipline, operational efficiencies and a growing contribution from our premium product portfolio. Moving to the bottom line. Our consolidated profit after tax, including share of associates for quarter 1 FY '26 stood at INR 36 crores compared to INR 34 crores in the same quarter last year, registering a growth of 6%. PAT margin stood at 3.9%. The effective tax rate for the quarter stood at 25.109%. Now turning to the operations side. We are seeing strong traction in the LED lighting segment, which continues to be a key growth driver. In quarter 1 FY '26, LED lighting accounted for 61% of our total revenue, up from 45% in the same quarter last year. This reinforced our strategic focus on LED solutions. Importantly, 84% of our current order book is now LED based, which gives us strong visibility and confidence in further expanding this segment and increasing our market share in the quarters ahead. Looking at our segment mix for the quarter, revenue contribution stood at 65% from passenger vehicles, 29% from 2-wheelers and 6% from commercial vehicles. This well-diversified mix underscores our solid positioning across multiple segments of the automotive market. From a product standpoint, front lighting contributed 68% of total revenue, followed by rear lighting at 23% with other products making up the remaining 9%. With that, we now open the floor for questions.

[Operator Instructions] Thank you. The first question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

I have 2 questions. First, you have mentioned before customer price correction impacting quarter 1 margins. So, could you clarify the expected quantum of this correction in quarter 2 and whether they will be more on this? [Technical Difficulty]

I'm sorry, you're not audible. Can you -- there is a lot of echo at your end. Could you please repeat the question?

You mentioned deferred customer price correction impacting quarter could you clarify the expected quantum of this correction in quarter 2 and will be more on this... [Technical Difficulty]

So we've already got price corrections to the tune of almost INR 1,313 crores in quarter 1, which was pending from quarter 4. And again, this is a recurring phenomenon in the subsequent quarters also, we continue to perhaps expect certain realizations.

Okay. And sir, next question is Green Fuel contributed INR 50 crores revenue in quarter 1. So, what's the growth trajectory in the alternate fuel segment...

Sorry I'm unable to hear you. Maybe you're using speaker phone.

Yes. Okay. Sir, my second question is on the green fuel segment 95 crore revenue in quarter 1. So, what the growth trajectory you foresee in the fuel over the next 2, 3 years? And how is hydrogenated R&D...

Sir, this is for Lumax Industries Limited. I would restrict the conversation to Lumax Industries Limited. Green Fuel is a part of Lumax Auto Technologies Limited, which is another company.

The next question is from the line of Viraj from SIMPL.

Just a couple of questions. First is, if you see the competitive landscape in 4-wheeler lighting, one of the major players also entered into a JV with Tata AutoComp. So, Value lighting system, both Ichikoh and TACO, Tata AutoComp has kind of entered into a JV. So just trying to get a sense how do you see the competitive landscape shaping up? And a related question is you also see a lot of other players targeting the ambient lighting and the interior lighting space. So, any color you can give how you see competitive landscape within various subsegments in 4-wheeler lighting? And are you seeing any pressure in terms of realization?

So, thank you. And number one, on the competition landscape, we do not foresee any major change based on the recent announcements of Ichikoh and TACO. Again, Valeo was always here, and they are just acquiring the company value. Lighting, as I've always maintained, is already having a hypercompetitive scenario in India. Despite that, your company continues to have the majority market share along with its associate company, SL Lumax for India. So, coming to the competitive landscape, I think we are pretty well positioned to competitively continue to maintain our market share and continue to grow our wallet share across OEMs with respect to the future order book. So again, I don't see that as a threat. Also given the fact that it is perhaps a TACO JV, it would automatically get restricted to entering into multiple OEMs being a TACO company. So that's my comment on the specific joint venture. The second question you had on the ambient lighting. I'm happy to share that the ambient lighting business of one of Honda's forthcoming models has already been awarded to Lumax Industries Limited. and it is currently under development. And going forward, we are trying to rationalize the optimum synergies at a group level because usually ambient lighting also becomes an integral part of the interior systems. So how do we try and synergize our strengths, both on ambient lighting as well as interior solutions as a group to at least offer a lucrative solution to our OEMs. So, we are very much working on ambient lighting as a product at a group level.

Got it. Second, one more question I had was on the order book. So, if you look at the current revenue mix, you still have fair representation from 2-wheelers as a category. But if I look at the order book incrementally it's more skewed towards 4-wheelers. So, is it more to do with the focus for us relatively being more on 4-wheeler as a space, maybe because the TAM is higher and the play is more higher? Or any perspective you can give how are we going about this?

So first, you have to understand that currently, the company sits with a 61% revenue mix from passenger vehicle segment. Actually, it's 65% from passenger vehicle and it's about 29% from 2-wheeler. The value, the content per vehicle on a passenger vehicle for lighting is almost close to 7x that of a 2-wheeler. And that's the reason when you look at the value-wise distribution, the passenger vehicle will always outperform the 2-wheeler. So again, 80% of our order book comes from the passenger vehicle segment. And again, keeping that in mind, we do not expect any significant change to our overall segmental pie.

Understood. Last query, if I may. You've seen a very good success with scaling up the HMSI, right? So, can you give some more perspective what model wins we have won, commercialized and whom we are taking share? Any color you can give more on this?

You're talking about HMSI side?

Yes.

So HMSI, we continue to maintain a very strong wallet share of almost more than 50%. Specifically on the front lighting, I do believe our share is anywhere between 60% to 70% and the order book also continues to maintain that wallet share. So, we are across models of HMSI for, across their facilities, both in North as well as in Gujarat and in Bangalore.

Got it. So, the customer, they have a very strong pipeline, both in EV and ICE. So, in terms of incremental pipeline also, any color you can give? Are we there on, are we able to maintain a similar share...

Yes, absolutely. We have an order book of HMSI as well. Almost I would think close to about INR 50 crores to INR 70 crores out of this total order book would be of new models of HMSI.

The next question is from the line of Mihir Vora from Equirus.

So sir, firstly, the clarification on this ambient lighting front. So, when we say as a group, we'll be providing the solutions to the OEM. So is it that ambient Lighting production can also go to the Lumax Auto or it will be in Lumax Industries?

So, it really depends on the customer ask. And again, ambient lighting, there could be a mix that there could be certain customers who could be catered to from Lumax Industries. There could be certain customers who could be catered from Lumax Auto Technologies, subsidiary, IAC India. Again, maybe the engineering would rest in Lumax Industries, but in terms of production and integration with the interior modules could happen at Lumax Auto Technologies. So that's something which again would be more driven from the customers, let's say, ask rather than more of an internal strategy. But I do believe that ambient lighting as a first step, we have started already at Lumax Industries Limited.

Right. And sir, in terms of production, how would this ambient lighting production be different than our lighting...

Well, the science behind it is similar. But again, the ambient lighting could be very, very different, again, based on the kind of features and the kind of mood lighting, which is there from the customer. From a product standpoint, it's fairly simple. But again, the idea is how much of an integration with the software we can do. And that's, again, what the bigger challenge would be. But it is a much simpler product compared to, let's say, the front lighting or the rare lighting in terms of the product specifications.

Okay. And sir, any broader range of only if we consider ambient lighting, what would be the content in a broader range like there would be, depending on the coverage, you may have aboard ambient lighting or a full car ambient lighting. But any broader range in terms of content value?

It really depends again on the customer ask and the model. In our initial estimates, we've seen the range go from anywhere between INR 1,000, INR 1,200 per vehicle all the way up to INR 10,000 per vehicle. So again, it would hugely differ based on what the customer wants as an experience inside the cabin.

All right. Okay. And my second question, sir, was on basically going to the SL Lumax number for FY '25. The margins there have been quite good, and the profitability has been good, which is reflecting in our share of associate numbers also. But going ahead, do we expect this kind of performance from SL Lumax to continue because around 60% of your PAT is derived from this share of associates. So that is the reason I'm asking...

So again, Lumax SL Lumax continues to be a very symbiotic partner for Hyundai India. I don't see any reason why the performance would drift from where we are currently and historically. My only comment there is that rather than looking at SL Lumax's performance on a quarter-to-quarter basis because there are a lot of price corrections, adjustments which happen with Hyundai, it is better to look at it from an annual perspective and then compare it to a year-on-year growth. But I don't see any reason why the performance would going forward change.

[Operator Instructions] The next question is from the line of Hrishit Jhaveri from Pi Square.

My first question would be towards our localization efforts. So, sir, if we see the cost of raw materials is shooting up. I think this is due to the high value imports. So, what are, what is the status on our localization efforts?

So, number one, I think if you look at our raw material consumption for the manufacturing part, we've actually improved that on a year-on-year basis from 65.1% to 64.3, and also on a consecutive quarter-on-quarter from Q4 to Q1, it's gone down from 66.5% to 64.3%. There are multiple reasons for it, one of them being the product mix. But more than that, the localization efforts, which were kickstarted last year, they have now started to come in from Q1 onwards. And that's why we do expect that going forward, we should be able to maintain our raw material consumption between 64% to 65.5% or so. But the localization efforts are starting to be seen from Q1 onwards, and we continue to drive further localization efforts throughout the year.

Okay. And sir, with the higher concentration in the passenger vehicle with high reliance on Hyundai and Maruti, and you said in the industry outlook that passenger vehicle is still facing some inventory challenges. So how do we plan to mitigate this? And how do we plan to have that double-digit growth trajectory going ahead?

I think despite the muted quarter, you can see that the company has reported a 20% growth. And again, while the overall industry volumes seem to be under pressure, there are also certain outliers like, for example, Mahindra & Mahindra, which have actually shown a very robust performance for their quarter 1, and they continue to be very, very buoyant and optimistic for the remaining part of the year. Again, the company is privileged to have such a diverse customer base. Again, I do believe that our growth is coming mainly on account of higher wallet share and the deeper penetration of LED, which actually goes to a higher content value per vehicle. And hence, our growth will always be outperforming the industry growth, whether it's passenger vehicle or even the 2-wheeler segment. But again, we remain cautiously optimistic about the current financial year going ahead.

Okay. Sir, last question on the margin front. We saw a dip of around 60 basis points on the PAT margins. Any specific reason first, due to SL L? Secondly, how do we see the recovery in the PAT margins in the coming quarters?

Hi Ravi this side. Especially on SL Lumax in the quarter 1, there are certain in the margin and that is because some of the profit generating models of SL were not picking up. So that's why on the SL impact is there. But if you see our PBT level, which is there, there we are showing the growth better than the profit growth, our sales growth is 20.5% and our PBT growth is 6.6%. And in terms of the next, the coming quarter, we are maintaining the margin on the upward side only in the range of, say, 9.5% to 9.8%, that's what we are focusing on.

[Operator Instructions] The next question is from the line of Apurva Mehta from AM Investments.

Congratulations on decent numbers. Sir, the employee cost from Q-on-Q has gone up substantially. Is it anything one-off in that... [Technical Difficulty]

Sir, your voice is not clear.

Congratulations on decent numbers on the top line front. I just wanted to ask that the employee cost Q-on-Q has gone up substantially. Is there any one-off? Or is it that Q4 is always where we take adjustments and that's why that was lower and Q1 is where the price are there, that's why?