'Buy' This Stock For 15% Returns In 1 Year: Edelweiss Recommends

Brokerage firm Edelweiss has recommended investors to buy Lumax Inds's stocks with a potential upside of 15%, within a target period of 12 months.

Target Price

The Current Market Price (CMP) of Lumax Inds is Rs. 1,486. The brokerage firm, Edelweiss has estimated a Target Price for the stock at Rs. 1,710. Hence the stock is expected to give a 15% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1,486
Target Price	Rs. 1,710
1 year return	15.00%

Company performance

Lumax Inds reported a topline of Rs. 453 crore (which was ~7% above expectation). EBITDA stood at ~Rs. 37 crore, registering a growth of 10% YoY and ~4.8x on a QoQ basis. EBITDA margins for the quarter stood at 8.2% vis-à-vis 8.5% in Q2 FY21 and 2% in Q1 FY22. Edelweiss stated, "Although the company was able to sustain gross margin of 36% similar to the same quarter last fiscal; increase in employee cost and other expenses dragged EBITDA margins."

Comments by Edelweiss

According to Edelweiss, "As the issue of semi-conductor shortage eases from Oct-21, we expect production schedules for 2W/PV OEMs to normalize from Q4FY22. Further, we expect LED penetration for both 2Ws and 4Ws to also see an uptrend. Being the market leader in the automotive lighting space, LUMAX should be a major beneficiary of the LED transition. We maintain our 'BUY rating with a target price of Rs. 1,710/share, valuing it at 18x FY23E EPS."

About the company

Lumax accounts for over 60% market share in Indian Automobile Lighting Business. The group's products include end-to-end Lighting solutions, Gear Shifters, Shift Towers, 2-wheeler Chassis, Intake Systems, Seat structures & Mechanisms, LED Lighting, HVAC Panels, Electrical & Electronic Components, Cables & Wiring Harness, Telematics Products and Services, Oxygen Sensors, and On-board Antennas among others.

Disclaimer

The above stock was picked from the brokerage report of Edelweiss. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: HDFC Securities Recommends To 'Buy' This Cement Stock For 15% Returns In 1 Year)