Buy Lumax; target of Rs 884: CD Equisearch

Lumax registered a modest growth of 4.1% in Q4FY16 y-o-y in its revenue at Rs 323.22 crores ($47.8 m) compared to Rs 310.40 crores ($45.9 m) in Q4FY15. Largely due to weak dispatches of India’s two & three wheeler vehicles, it reported sub 10% growth in revenues to Rs 1255.18 crores ($185.8m) last fiscal compared to Rs 1142.56 crores ($169.1 m) in the same period a year before. Yet early signs of cyclical turnaround in passenger and commercial vehicle sales bode well for the company.

 

The stock currently trades at 11.2x FY17e EPS of Rs 62.84 and 9.6x FY18e EPS of Rs 73.63. Galvanized by stable margins and technology upgradation initiatives, earnings would advance by 15% on average over the next two years. Low volume base of the Indian automobile sector shifts odds in favour of value minded investors. Needless to mention sourcing benefits arising out of the new design centre in Taiwan. Weighing all odds, we retain our ‘buy’ rating on the stock with a revised target of Rs 884 (previous target Rs 625) based on 12x FY18 earnings.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.