Buy Lumax Auto Technologies, target price Rs 312: HDFC Securities

HDFC Securities has buy call on Lumax Auto Technologies with a target price of Rs 312. The current market price of Lumax Auto Technologies is Rs 264.7. Time period given by analyst is 2-3 quarters when Lumax Auto Technologies Ltd. price can reach defined target.

Lumax Auto Technologies, incorporated in the year 1981, is a Small Cap company (having a market cap of Rs 1806.86 Crore) operating in Auto Ancillaries sector.

Financials
For the quarter ended 30-09-2022, the company has reported a Consolidated Total Income of Rs 494.70 Crore, up 16.15 % from last quarter Total Income of Rs 425.93 Crore and up 21.79 % from last year same quarter Total Income of Rs 406.19 Crore. Company has reported net profit after tax of Rs 33.81 Crore in latest quarter.

The company’s top management includes Mr.Milap Jain, Mr.Anmol Jain, Mr.D K Jain, Mr.Avinash Parkash Gandhi, Mr.Kanchan Kumar Gandhi, Mr.Arun Kumar Malhotra, Mr.Sanjay Mehta, Mrs.Diviya Chanana, Mr.Roop Salotra, Mr.Deepak Jain. Company has S R Batliboi & Co. LLP as its auditors. As on 30-09-2022, the company has a total of 7 Crore shares outstanding.

Investment Rationale
EBITDA margin of the company is expected to remain firm, led by operating leverage and cost-control measures. Lumax Auto expects its EBITDA margin profile to improve gradually to 12-13% over the next 3-5 years. The brokerage maintains that modest expansion needs and negligible debt levels provide comfort on the net profitability front for the company.

The brokerage expects Lumax Auto's Revenue/EBITDA/PAT to grow at 20/25/32% CAGR over FY22-FY24E, led by increased demand from end user industries. HDFC Securities suggests investors can buy the stock in Rs 262-267 band and add on dips in Rs 230-235 band (13x FY24E EPS) for base case fair value of Rs 290 (16.25x FY24E EPS) and bull case fair value of Rs 312 (17.5x FY24E EPS) over the next 2-3 quarters.

Promoter/FII Holdings
Promoters held 55.98 per cent stake in the company as of 30-Sep-2022, while FIIs owned 19.53 per cent, DIIs 5.59 per cent.