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CD Equisearch
Lumax Industries (Accumulate)
CMP: ₹1,665
Target: ₹2,040
The stock currently trades at 20.4x FY19e EPS of ₹84.18 and 16.8x FY20e EPS of ₹102.47. The Indian automotive industry is on the verge of a major shift towards adoption of energy efficient and technologically superior automotive components galvanised by regulatory norms such as the new National Auto Policy, Bharat Stage, AHO (automatic headlight on) and electric vehicles. These norms will doubtlessly propel rapid conversion from conventional lamps to LED lighting solutions.
The company is well placed to cater to the LED lighting demand as well as keep pace with the everchanging automotive lighting technology, thanks to its financial and technical collaboration with one of the global auto lighting manufacturers, Stanley Electric Company, Japan. However, high import content in LED lighting, availability of low-cost alternatives from China and cyclicality of automobile sector remains a concern.
Given the recent slowdown of the automobile industry affecting the sales and profitability of the company over the short term, we assign ‘accumulate’ rating on the stock with a revised target of ₹2,040 (previous target: ₹2382) based on 20x FY20e earnings over a period of 9-12 months.
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