The Hindu Business Line : Lumax stock surges 79% on expansion plans

High net worth clients, expansion and less competition have together helped the stock price of Lumax Industries gain significantly on the bourses. Lumax, which traded at Rs 417.85, up Rs 19.85 or 4.99 per cent on the BSE on Wednesday, has appreciated about 79 per cent month on month.

The two-week average trading volumes stand at above one lakh shares on the BSE. Total traded quantity touched 2,11,120 shares on Wednesday.

"The company (which is in the original equipment manufacturers segment) is doing well because of its large clientele. It has also begun exporting a wide range of auto-lighting products to foreign auto majors. Their biggest advantage is being in a segment that has a few competitors. Direct competitors like FIEM and India Japan Lighting Ltd have a very narrow client base when compared to Lumax," said a sector analyst. The company provides lighting solutions to auto majors such as Ford India Ltd, Maruti Udyog Ltd, Tata Motors and Mahindra & Mahindra.

Lumax Industries is working on some major capacity expansions. "We have decided to increase our production capacity by 2010. Two more manufacturing plants would be added to the existing six. We have logged 30 per cent growth year-on-year over the past three years. Lumax is eyeing for a Rs 1,000-crore turnover by 2009," said Mr Naval Khanna, Vice-President - Finance, Lumax Industries.

The company has recorded a net profit of Rs 4.40 crore (Rs 21.5 lakh) for the second quarter ended September 30. Net turnover for the period has gone up 31 per cent.

Eyes export martkets

Lumax's tie-up with Stanley Electric Company, a subsidiary of Honda Japan, will help the company to push into overseas markets. "Our age-old technical and financial collaboration with Stanley will help us penetrate foreign markets," said Mr Khanna.

Over-dependence on the auto sector, short product cycles and vulnerability to macro economic conditions make the stock a bit dicey.

"Lumax is definitely a good company to invest in but going by its previous market performances, it appears to be susceptible to market volatility. The stock is definitely a good long-term hold as the company is expected to grow at least 20 per cent year on year for the next three years. Currently, the stock is a bit expensive to enter," said an analyst tracking the company.

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Lumax stock surges 79% on expansion plans

M.R. Hingnikar is GAIL acting chief