Buy Lumax Industries; target of Rs 2503: Chola Securities

Chola Securities's research report on Lumax Industries

In 1QFY19, Lumax Industries clocked robust revenue growth of 46% YoY to INR 4,962mn, led by increase in volumes and value addition from new technology lighting components. EBITDA came in at INR 407.6mn (+65.2% YoY) with EBITDA margin at 8.2% (+100 bps YoY). The expansion in margins is on account of optimization of fixed overheads due to increased sales.  Adjusted PAT increased by 32.2% YoY to INR 200.4mn. Adjusted PAT margin decreased by 41bps YoY to 4.0%, impacted by lower profit from SL Lumax and lower other income.

Outlook

At CMP, the stock is trading at P/E of 21.1X/14.6x on FY19E/FY20E EPS, respectively. We arrive at a price target of INR 2,503 based on P/E of 18x FY20EPS and maintain a BUY rating on the stock.