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

Ladies and gentlemen, good day, and welcome to Lumax Industries Limited Q2 and H1 FY '26 Earnings Conference Call. 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 does not guarantee the future performance of the company, and 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. Deepak Jain, Chairman and Managing Director of Lumax Industries Limited. Thank you, and over to you, sir.

A very good morning, everyone. I hope everyone is doing well. Along with me on this call today, I have Mr. Anmol Jain, the Joint Managing Director; Mr. Raju Ketkale, the CEO of the company; Mr. Sanjay Mehta, Lumax Group CFO; along with Mr. Ravi Teltia, the company's CFO; Mr. Naval Khanna, the Corporate Head of Taxation; and Ms. Priyanka Sharma, Head Corporate Communication, along with our Investor Relations adviser, SGA. We have uploaded our earnings presentation on the stock exchange and company's website. I hope everybody had an opportunity to go through the same. We thank all the stakeholders who have been with us throughout our eight decade long journey. We would also continue to advance in the future of mobility with a foundation rooted in innovation and enduring commitment. Let me now give you a brief on the economy, followed by the automotive industry performance and company updates. India's economic journey continues to demonstrate resilience and strength, supported by a robust demand environment, rising private sector capital expenditure and progressive policy measures. The automotive industry performance in the quarter gone by reflected a mixed performance across automotive segments. Passenger vehicles witnessed a relatively muted trend, while the 2-wheeler, 3-wheeler and commercial vehicle segments delivered a strong performance. However, with the onset of Navratri and the GST rate cuts announced towards the end of September, demand, especially for the passenger vehicles saw a sharp rebound. Notably, despite the revised GST rates coming into effect during the last nine days of the month, all industry segments recorded their highest ever sales for September. Talking about now the segment-wise performance, according to the data published by SIAM, the passenger vehicle sales stood at 1.04 million units, reflecting a marginal decline of 1.5% due to subdued demand in July and August. However, the segment witnessed a clear recovery momentum towards the end of the quarter with September 2025 sales rising by 4.4%, supported by the festive season and also the GST rate rationalization. On the export front, PVs continue to perform well with the highest ever exports in Q2, growing by 23% on the back of steady demand from markets such as Middle East, Latin America and also other emerging regions. The growing global acceptance of Make in India vehicles is driven by India's strong cost competitiveness, high-quality manufacturing standards, favorable trade agreements and also improving supply chain efficiencies. On the 2-wheeler front, the segment posted sales of 5.56 million units in Q2, registering a growth of 7.4% on a year-on-year basis. Growth is led by the scooter segment, which grew by 12.4% in the quarter over the same period last year as compared to growth in motorcycles, which grew by 5%. This segment too witnessed its highest ever exports during the quarter, 1.3 million unit, registering a growth of 25%. Similarly, the 3-wheeler segment continued its strong growth trajectory, registering a robust 9.8% increase during the quarter, driven primarily by the rising economic activity. Lastly, on the commercial vehicle front, the segment witnessed a growth of 8% on the back of increase in freight carrier activities, reflecting heightened movements of good across key sectors such as steel, cement, mining and construction. Looking ahead, the overall outlook of the industry remains very encouraging. OEMs continue to plan multiple product launches in the second half of the year and the underlying consumer sentiment remains positive. Now coming to Lumax Industries. Today, we work closely with OEMs right from the conceptualization stage, co-developing lighting design, technology specifications and performance requirements. Our engineering expertise, domestic manufacturing capability and deep understanding of industry trends has positioned us as a key innovation partner rather than just a supplier, enabled us to steadily increase in our content per vehicle. As OEMs move towards more premium and advanced lighting systems, we have expanded our presence across new models, supplying higher value, feature-rich lighting solutions and also deepening our penetrations across customer platforms. We continue to outperform the industry growth. During the quarter, we saw a strong growth of 24% in our revenues, led by the increasing share of LED lighting to 61%, which has led to higher content per vehicle and better performance of the models we are present in. Also, the Board has approved the setting up of a new manufacturing facility in Bengaluru, Karnataka with a capital investment of approximately INR 140 crores. The plant will cater to newly secured orders from Maruti Suzuki and from Toyota. Once fully ramped up, the plant is expected to achieve a peak annualized turnover of around INR 450 crores. The facility is targeted to be commissioned by the Q4 of FY '26, '27. The Chakan Phase 2 is on track and to commence operations from H2 of FY '26, which will primarily cater to Skoda and Volkswagen. Coming to order wins, we have secured multiple order wins across both 4-wheeler and 2-wheeler segments during the first half of FY '26. Our order book remains healthy at over INR 1,800 crore, providing strong revenue visibility for the coming quarters and reinforcing a confident outlook. I'm happy to share that about 85% of our current order book is LED-based, indicating strong alignment with future market demand. Lumax Industries continues to eliminate the road ahead with technology-driven innovation, operational excellence and an unwavering commitment to our industry leadership. We remain optimistic about the remainder of the FY '25, '26 with a healthy OEM launch pipeline and also favorable policy measures. I now hand over to our CFO, Mr. Ravi Teltia, for the financial updates.

Thank you, sir. Good morning, everyone. Let me now take you to the key highlights of our financial and operational performance. On the financial front, we delivered robust performance across all key parameters. For the quarter ended 30th September 2025, total operating revenue stood at INR 1,009 crore, reflecting a 24.2% year-on-year growth. EBITDA for the quarter was INR 91 crore compared to INR 62 crore in Q2 FY '25, representing strong growth. Our EBITDA margin stood at 9%. I would like to highlight that margins during the quarter were impacted by exceptional foreign exchange fluctuations. Excluding this one-off forex impact, EBITDA margins would have been around 70 to 80 bps higher than Q1 FY '26. PAT including share of associates stood at INR 36 crores or 26% growth with PAT margin at 3.5%. Looking at the performance for H1 FY '26 operating revenue stood at INR 1,931 crore, a growth of 22.4% year-on-year. EBITDA came in at INR 175 crore, up 32.6% with margin at 9.1%, again marginally impacted by the forex movement in Q2. PAT stood at INR 72 crore, growing 15% with a margin of 3.7%. Moving to the operational performance. Looking at the segment-wise revenue mix, the passenger vehicle segment continue to dominate given the higher complexity and higher content per vehicle in PV Lighting. PV contributed 64% of our revenue, while 2-wheeler contributed 30% and the remaining 6% came from other segments. This trend is reflected similarly in the order book, where nearly 2/3 is PV Lighting with the balance largely in 2-wheeler lighting. From a product mix standpoint, front lighting, which involves higher technological complexity and safety link component contributed around 69% of our revenue. Rear Lighting, which continued to evolve with increasing emphasis on aesthetic and design differentiation accounted for 22% with the balance coming from other lighting product. Coming to our FY '26 guidance. Post GST cut, we are revising our revenue growth guidance for full year to 20% to 25% from earlier guidance of 15% to 20% Also, our CapEx guidance for full year FY '26, which was earlier INR 180 crores to INR 220 crore is now revised to INR 220 crores to INR 260 crore with new upcoming facility at Bangalore. Our debt levels remain in check with turnover to equity ratio at 0.44. Effective tax rate for Q2 FY '26 stands at 25.7%. With this, we can open the floor for questions.

[Operator Instructions] The first question is from the line of Mihir Vora from Equirus Capital Private Limited.

So my question basically revolves around the margins. Like from the last 7 quarters, the growth has been very strong at roughly more than 20%. However, the margins have not been reflecting the same. Ideally, there should have been some operating leverage benefit in our favor. And even compared to peers, our margin has been sort of lagging historically. So what are the steps that we are looking at improving the margins? And like what would be our target in the near term to reach a specific margin level or margins will continue to remain in this range only. So your views on this.

So basically, if we see our margin for this quarter, as I mentioned, should have been on the range of 9.7%, 9.8%. And this is the one-off scenario which has impacted the margins for this quarter, which we explained the FX date. Over the years, if we see like last full year, we closed the margins at 8.5% and this year our guidance is already close to double-digit margin. So we are maintaining that in coming quarters and for the full year.

Let me come in here. This is Anmol Jain. I think compared to last year, we definitely feel that just at H1 level, there has been an increase of about 70 or 80 bps despite the foreign exchange hit, the increase in margins would have been higher had it not been foreign exchange. But again, as Ravi mentioned, I think for the full year, we continue to hold a strong outlook on delivering a double-digit EBITDA margin for the entire fiscal year. Going forward, I think as I've always maintained over the next two to three years, we should be inching closer to more maybe a 12% to 13% EBITDA margin.

All right. Okay. Okay. So yes, that's on the margin front. While on the growth also, you are revising your number to 20% to 25%. So would this be limited to FY '26 or we further see FY '27 and '28 also to be good -- like '27 to be a good year driven by the GST cuts, which has happened? Like how are we seeing the traction currently in terms of our OEM inquiries as such?

So the OEM volumes are robust. But given the order book and almost close to 1/3 of the order book will get into SOP in FY '27. For FY '27, we do expect a similar growth as FY '26. But given a 3 to 5 years horizon, I think we continue to maintain that we will probably grow much, much ahead of the industry, maybe close to a 15% to 20% CAGR over the next few years. But for next year, I think the guidance would be similar to FY '26, which is about 20% to 25%.

Right. Sir, just one follow-up on this. Like now because of the GST rate cut, we are also seeing the small car segment coming back. So are we seeing some kind of traction right now that the mix of small car is increasing? And will that lead to the product mix deterioration for us if that happens and the growth may be revenue growth may not be a 20%, 25%, but say, a 15% to 20% if the small car segment comes back in a stronger way.

So the small car is definitely seeing some signs of revival. However, it's too premature to say whether this is sustainable. Also, even if the production gets increased, how much of the product mix will really change is something which we'll have to wait and watch. But as of now, we are seeing a good traction on small cars, yes.

[Operator Instructions] The next question is from the line of Karan from Guardian Capital Partners.

Congratulations on the number. I had one question, which is regarding the CapEx. So we've increased our CapEx guidance. So just wanted to understand that specifically the new plant that you are putting in, is it a part of the order book that we already have? And secondly, how do we see the debt moving from here with the higher CapEx guidance?

Yes. So you rightly mentioned the new plant since it's already the order [indiscernible], so it is part of the current order book and the CapEx guidance which we've increased you rightly mentioned that because of the requirements for the new CapEx, which will come in this current financial year. As far as the debt is stand so as we want to maintain the -- our scenario wherein that -- there will be no new long-term debt would be taken. So gradually the debt --long term debt will keep reducing and with the schedule of the payment.

The next question is from the line of from Ranodeep from MAS Capital.

So 2025 has been a very interesting year and pardon my enthusiasm, but Tesla has entered India. VinFast has not only opened their shop, but they're also talking about setting up the ecosystem to help their manufacturing. Any color or any thoughts you'd like to share, especially how these global giants are coming in, especially in the EV front with 85% of our order book at EV. So any thoughts or any early wins, any indications?

So just a clarification. 85% of our order book is towards LED, not EV. EV constitutes only about 9% of our entire order book, which includes passenger vehicles as well as 2-wheeler models. So just to clarify that. My sense is very simple. Yes, there are big names coming in. And I think the EV industry in passenger car, there are a lot of forthcoming models. There are a lot of plans. However, given the current state also, it's the mere single-digit penetration on EV close to about 4% to 5%. Even going forward, I personally expect this to perhaps get saturated or plateaued up at maybe about 8% to 10% given the next two to three years. So yes, there is a lot of noise. There is a lot of enthusiasm and the company continues to engage with various OEMs who have not just assembly plans, but deeper localization plans to try and garner a wallet share for the lighting business.

I appreciate that. My next question, thanks for sharing the road map till 2032. And globally, lighting is moving beyond just safety to aesthetics and becoming more of a design and branding element, especially the DRL segment and logo projection lighting. So how is Lumax working with OEMs to increase the content per vehicle? And if you can kind of give some projection in terms of how is the ARPU kind of slated to improve over the next 5 to 7 years?

So the content per vehicle is rapidly increasing more in passenger vehicles and again, we saw one major shift when the LED transition happened. However, to me, that is pretty much hygiene now because almost, as I mentioned earlier, 85% of the order book is all LED. I think going forward, there is a lot of animation. There is also a lot of customization, which we foresee happening. A lot of new technologies like the ADD, which was recently introduced on one of the models will become a lot more deeper penetration across different models. With that, I do feel that the content per vehicle will also increase. And again, there are some models out there where we already see almost twice the value of content per vehicle compared to any other premium models from certain other OEMs. Just because the styling and the animation and the integration, even tomorrow, there will be maybe like an LCM or LDM, which gets embedded for the lighting. So again, lighting being a key four corners of the vehicle, the functionality will not just be aesthetic, but perhaps also go into the safety terrain to maybe have certain embedded camera systems in the future to give real-time information for the driver. So there are a lot of technologies which are happening. And hence, I see that the content per vehicle, given the future direction will continue to increase, but we will see at least a 5-year window before which these technologies come into the production.

Sure, sure. If I can just squeeze in one last question. Your top 5 customers contribute to almost 79% of your revenue. How do you see this changing? Is there a client concentration risk or you want to keep it this way? What are your thoughts on this?

I think, number one, we are very proud that we cater to pretty much every major OEM across different segments. You're absolutely right. I think if I look at our top 5 customers today, we have pretty much the key brands like Maruti, Mahindra and Tata Motors from the passenger car side, and we also have Honda Motorcycle and Hero Motor Corp from the 2-wheeler side. And I think if you look at the industry landscape, Mahindra, Tata and Maruti Suzuki would automatically contribute close to about a 70% share of the passenger vehicle market. And Honda and Hero together also contribute close to 60% to 65% market share. So again, these are our top 5 customers. But having said that, we actively are engaged with other OEMs as well. And there is a very clear plan how do we expand our wallet share over the next few years.

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

Congratulations on a good set of numbers. Just wanted to ask about the competitive intensity when you go for bidding. And what is our -- in this competitive intensity? Just your thoughts about that.

Thank you very much. I think there are a couple of pointers I want to highlight. I think the competitive intensity is, of course, very high. I always say for a market of India, the number of lighting players that exist across different segments is extremely high, more than any other ASEAN market at least. So there is a very high degree of competitive intensity. And I think in the future, it will not be the differentiator in terms of production facilities or the price competitiveness, but I think it will be largely on technology. What is the technology availability in terms of engineering, in terms of localized technology solutions, and that to me will be the biggest competitive advantage going forward. And there, I would say that Lumax enjoys one of the -- it's one of the front runners in terms of our engineering resources in India, given the capability to design, develop and get into mass production with limited support from, let's say, overseas engineering talent. So that, to me, would be the biggest competitive advantage and the company continues to invest and build the engineering competence going forward as well.

Great. Great, sir. And on the localization front on the LED side, where do we stand now? And what is our road map for localization?

So I think as of now, the LEDs are still imported. The LED as in the LED module, which is a source of light. We have been able to localize some of the PCB assemblies, PCB boards and certain other electronic components as well. I think going forward, the current localization is about 25% to 30%. And going forward, it will probably get enhanced to maybe 50% to 60%. But right now, we are just probably starting discussions if there is any merit in localizing the entire LED modules as well. But right now, it's still under discussions. But for other parts, there is a concrete plan on localizing the electronic parts.

And as you mentioned your journey towards 12%, 13% kind of margin, what are the levers for that? Just can you -- and when can we achieve its next 2 years' time, 3 years' time? And what are the levers? And what are the risks also involved in that?

I think some of the key levers will be the operating leverage. I think as I mentioned, the company this year as well as next year continues to hold a guidance of a 20% to 25% top line growth. With that, there will be certain operating leverage, which will kick in. Also, a lot of these order books are with certain technologies, which will further give us a better margin. Again, it is a mixed bag. But I would say largely, it will be the introduction of new technologies as well as the operating leverage, which will expand the margins. From a guidance perspective, as I mentioned, we do expect to attain these kind of margins over the next 2 to 3 years.

And on SL Lumax, last two quarters were very subdued. Can you throw some light where this -- our JV is heading towards? And what kind of in next two quarters, can we see some recovery on the contribution to our profitability?

So as I've always mentioned that SL Lumax, it's important to look at it on an annualized basis. I think looking at it on a quarter-to-quarter basis may have certain challenges. That's just the way this ecosystem works. I think because it is completely dedicated to Hyundai Motor, I believe Hyundai Motor has also not performed extremely well in their total numbers for the quarter. But I'll let Ravi maybe throw some light there as well.

Yes. So basically, you rightly mentioned for the last two quarters, we see that there is a comparatively lower bottom line. And it is because their top line is also not picking up since they are primarily supplying to Hyundai and Hyundai was relatively lower in terms of the market growth there. So forth coming next H2 also, it all depends how the Hyundai will pick up in the market. So in case they will pick up good, then the SL will also start looking at better growth and profit. Apurva, SL is also putting a new plant, so the overhead is also slightly in that way still the sales will pick up. So that is one of the reasons of the down in the bottom line also.

The next question is from the line of Faraj from Simple Technologies Private Limited.

Just a couple of questions. First is, if you see outside of the 4-wheeler, I think in 4-wheeler, we have done a very remarkable job in terms of scaling up and gaining more share. But if I just purely have to look at the 2-wheeler segment in terms of our play, what will be our share with regards to, say, HSMI or Hero now? Because in one, there was a existing vendor who was undergoing some financial issues and in terms of play in terms of us to gain share in Hero. And similarly in HSMI, we have been seeing a good scale up for us playing out. So what is the kind of share we'll able to gain in these 2 customers both in terms of existing and the pipeline which we have built? And then the second question is beyond these two, you also talked about in the earlier part of the call that we are also building a good amount of pipeline and have a good amount of presence in other customers also in 2-wheelers and 4-wheelers. So specifically in 2-wheelers, do you see any further white spaces or any avenues to further gain share?

Thank you. Absolutely. Just to answer your question, currently, at a Honda Motorcycle, the company enjoys more than 50% to 55% wallet share. With the order book, we do expect this wallet share to further increase to perhaps close to 60%. On Hero MotoCorp, the company enjoys almost a 35% wallet share, and we expect this to be maintained going forward as well. The other 2-wheeler OEMs where the company has actively engaged in the recent future has been TVS, Suzuki Motorcycle as well as Yamaha Motors. And I'm glad to share that TVS with the current order book, we will expect to get to close to a 15% to 18% wallet share going forward given the fact that this relationship is only about a couple of years old. And in Suzuki 2-wheelers, we will be getting to close to a 35% wallet share and Yamaha, again, close to a 15% to 20% wallet share in the near future given the order book in hand. So there is an active engagement on expanding the 2-wheeler portfolio, both at the major OEMs as well as these white spaces, which exist today.

And just a follow-up on this, who would we be gaining share from? Just to get a perspective.

So I don't think I can give you a particular name. There are other 2-wheeler lighting companies, which do service across these OEMs, which I mentioned. So in some cases, it could be competitor A. In some cases, it would be competitor B. But largely, there are 3 or 4 lighting players who cater into the 2-wheeler segment.

And is the share gain for us more in applications, say, like headlamps because that's typically the most complex and also the most high-value items. So is the share gain accruing to us more in headlamp as a space, front lighting as a space? Or is it more across the category in terms of application?

So it's a mixed bag. In certain OEMs, we are a lot heavier on headlamps. In certain white spaces, we have a much deeper tail lamp wallet share. And again, the other part is the blinkers, which also constitute a significant portion of the vehicle. So again, it's a mixed bag across different OEMs.

Just one last question, if I may. See, typically, what you see in LED, maybe in the consumer space is there's a good amount of price moderation already happened. Now when you say your aspiration is to go from 9%, 9.5% to 13%, 14% operating margin, is it purely operating leverage or you expect some bit of gain also to frow from the gross margin? And with gross margin, what basically also wanted to get your perspective is you're seeing more and more technologies also coming, you talk about ADB and other various laser tech and all. So does that give you an opportunity to further improve your gross margin with this new technology offerings or that becomes a constant when it comes to dealing with negotiation with OEMs?

So I believe the major share will come under the gross margin at the operating leverage. However, given the current state, there will always be certain technologies, which will come at a higher material consumption and hence, the gross margin would actually probably might get reduced. But again, certain things like a deeper localization, which I mentioned earlier, would be able to offset that. So given a three year horizon, I do not expect a significant reduction in the gross -- I mean, increase in the gross margin, significant reduction in the raw material consumption, but I do expect a significant operating leverage to kick in. And that's how we are expecting to grow from a double-digit EBITDA margin for FY '26 to more like 12% to 13% over the next couple of years.

The next question is from the line of Preet from InCred AMC.

Sir, I would like to ask on the same question, margin expansion like we have around gross raw material cost of 57% and 8%, 9% EBITDA margins as of now. So if you could just give the breakup of what would be the fixed cost and what would be the variable cost as a percentage of sales so that we can have an idea on how this -- better idea on this EBITDA margin expansion?