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Lumax Industries (Accumulate)
CMP: ₹1,271.35
Target: ₹1,558
For H1FY20, a range of new products were launched by Lumax Industries with Lumax lighting components-XL-6 and S-Presso for Maruti, N-Torq for TVS Motors, Hector for MG Motors, etc. Although the share of Maruti’s revenue in Lumax Industries increased to 38 per cent in H1FY20 (excluding mould sales) from 34 per cent in H1FY19, revenues from Maruti declined. With one client garnering such a large amount of revenue share, this is a sign of concern in case there is a sustained slowdown from Maruti Suzuki India. The share of passenger vehicles reduced marginally to 64 per cent in H1FY20 from 66 per cent a year ago. With two wheelers garnering the majority of industry sales, this is an area where Lumax can make further inroads especially with the range of reforms such as AHO (all-time headlight on), etc, being introduced.
The stock currently trades at 15.5x FY20e EPS of ₹84.01 and 13.3x FY21e EPS of ₹97.4. Weighing odds, we recommend ‘Accumulate’ call on the stock with revised target of ₹1,558 (previous target: ₹2,040) based on 16x FY21e earnings (forward PEG: 1) over a period of 9-12 months.
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