Why is Lumax Auto Technologies Ltd falling/rising?

Strong Price Performance Outpacing Benchmarks

Lumax Auto Technologies has demonstrated exceptional stock performance over multiple time horizons, significantly outpacing the broader market indices. Over the past week, the stock surged by 6.04%, compared to a modest 0.23% gain in the Sensex. This momentum has accelerated over the last month, with the stock appreciating 26.28%, while the Sensex rose only 0.77%. Year-to-date, Lumax Auto Technologies has gained 11.47%, contrasting with a 2.82% decline in the Sensex. The company’s one-year return is particularly striking at 209.60%, dwarfing the Sensex’s 9.35% increase. Even over three and five years, the stock has delivered extraordinary returns of 602.84% and 1107.94%, respectively, far exceeding the benchmark’s 36.45% and 62.73% gains.

Robust Intraday and Moving Average Indicators

On 20-Feb, the stock reached an intraday high of ₹1,734.15, marking a 4.27% increase, and consistently traded above its key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This technical strength signals sustained buying interest and positive investor sentiment. Despite a decline in delivery volume by 46.22% against the five-day average on 19 Feb, liquidity remains sufficient to support sizeable trades, with a typical trade size capacity of ₹1.49 crore based on recent average traded value.

Fundamental Strength Driving Investor Confidence

The company’s financial fundamentals underpin its rising stock price. Lumax Auto Technologies boasts a high Return on Capital Employed (ROCE) of 21.05%, reflecting efficient management and effective utilisation of capital. Its low Debt to EBITDA ratio of 0.78 times indicates a strong capacity to service debt, reducing financial risk. The firm’s net sales have grown at an impressive annual rate of 35.81%, while operating profit has surged by 64.95%, signalling healthy operational leverage and margin expansion.

Net profit growth of 39.32% in the latest quarter, coupled with six consecutive quarters of positive results, further reinforces the company’s growth narrative. The quarterly net sales reached a record ₹1,270.66 crore, with PBDIT hitting a high of ₹175.89 crore. Additionally, the debtors turnover ratio stands at a robust 5.22 times, indicating efficient receivables management and cash flow generation.

Institutional Backing and Consistent Returns

Institutional investors hold a significant 24.52% stake in Lumax Auto Technologies, reflecting confidence from sophisticated market participants. Their holdings have increased by 0.59% over the previous quarter, suggesting growing conviction in the company’s prospects. This institutional support often translates into stability and sustained demand for the stock.

Moreover, the stock has consistently outperformed the BSE500 index across the last three annual periods, delivering compounded returns that have attracted investor attention and contributed to the recent price appreciation.

Valuation Considerations and Risks

Despite the strong fundamentals and price momentum, investors should be mindful of valuation metrics. The company’s ROCE of 21.9 is accompanied by an enterprise value to capital employed ratio of 6.8, which suggests a relatively expensive valuation. However, the stock is trading at a discount compared to its peers’ historical averages, providing some valuation comfort.

Over the past year, while the stock price has surged by 209.60%, profits have increased by 61.4%, resulting in a price-to-earnings-to-growth (PEG) ratio of 0.7. This indicates that the stock’s price growth is somewhat ahead of earnings growth, which could imply elevated expectations. Investors should weigh these factors alongside the company’s strong operational performance and market positioning.

Conclusion

Lumax Auto Technologies Ltd’s recent rise in share price is primarily driven by its impressive financial results, consistent growth in sales and profits, and strong technical indicators. The company’s efficient capital management, low leverage, and increasing institutional interest have further bolstered investor confidence. While valuation metrics suggest a premium, the stock’s discount relative to peers and robust fundamentals justify the current momentum. As a result, Lumax Auto Technologies continues to outperform market benchmarks, making it an attractive proposition for investors seeking growth in the auto components sector.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →