Buy Lumax Auto Technologies; target of Rs 130: Dolat Capital
Dolat Capital’s research report on Lumax Auto Technologies
Despite the challenging environment LATL reported 3% YoY growth in revenue to ` 2.87bn supported by strong growth in sheet metal (led by decent volume of Bajaj Auto in 1Q) and aftermarket division. EBIDTA margin remain flat QoQ to 8.7% (in line estimates) while APAT de-grew by 19% YoY to `113mn led by higher depreciation and interest cost. During the quarter, the company has won new business for supplying Gear shifter for Scorpio (M&M) and exhaust system for Hector (MG Motors). The company has guided for single digit growth in revenue for FY20 (excluding SMT) and margin to be in the range of 8.5-9%. Given its diversified product portfolio, debt-free balance sheet, a consistent dividend pay-out record (+20%), and efficient working capital cycle (20 days), we maintain our positive view on the stock.
We cut our EPS by 14/12% for FY20/21E EPS factoring in current slowdown in 2W space. At CMP stock is trading at 12/10x for FY20/21E which looks compelling, we maintain Buy, with a lower target price of ` 130(based on 15xFY21E EPS).
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