Domestic brokerage firm, Axis Securities, has recently initiated coverage on Landmark Cars, which made its market debut in December. Despite its relatively short time in the market, the stock has already witnessed a stellar gain of 44.87% since its listing.
During Thursday's trade the stock jumped nearly 2% to record a new life-time high of ₹743.85 apiece.
The company is a leading premium automotive retail business in India, with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen, and Renault. It also has a commercial vehicle dealership with Ashok Leyland in India.
The company's business model captures the entire customer value chain, including retailing new vehicles, servicing and repairing vehicles, (including sales of spare parts, lubricants, and accessories), selling spare parts, lubricants, and other products, selling pre-owned passenger vehicles, and distribution of third-party finance and insurance products.
The company's shares made a weak debut on the exchanges on December 23, 2022. The scrip was listed at 10% discount, around ₹458 per share, on the NSE, as against the issue price of ₹506 apiece. A month after it debuted, the stock bounced back strongly with a 41% gain, reaching 647 levels, and since then it has kept its bull momentum intact.
With a positive outlook on the company's potential, Axis Securities has given the stock a 'buy' rating, and a target price of ₹810 apiece, which implies an upside potential of 11% from the stock's previous closing price.
The brokerage has cited multiple growth factors for its bullish outlook. These factors include the company's strong execution capability, a prominent market position in the luxury segment, a close correlation with the premiumization trend, diversified revenue streams that can withstand fluctuations in new-vehicle sales, and a robust financial position characterized by a healthy balance sheet and positive cash flows.
These factors collectively position Landmark as an attractive proxy play for passenger vehicles (PVs) in the Indian market, said the brokerage firm.
The company has a solid track record of growth and profitability, delivering a 16% revenue CAGR over FY14–22. Each of the company’s businesses/brands is managed professionally, with a strong focus on customer service and return generation, it noted.
Owing to its offerings of a wide range of vehicles to choose from (particularly in luxury), Landmark Cars is well-positioned to deliver in the future as well, the brokerage highlighted.
Overall, Axis Securities expects the company to deliver a 14/29% revenue/PAT CAGR over FY23–26. PV industry growth of 7% (higher for luxury OEMs) over the period, supplemented by a shift towards premium/luxury cars should drive growth for the company.
Greater salience with OEMs (premium and luxury, in particular) puts the company in a driving position to not just be a cog in the wheel, but also be a partner to the OEMs in their growth. EBITDA margin and return ratio (post-tax RoCE) will likely improve to 7.9/19.7% by FY26, driven by the rising share of luxury/premium and the ROTF (Retail of The Future) model for Mercedes Benz, said Axis Securities.
During Q4FY23, the company reported a consolidated net profit of ₹24 crore, an increase of 26.3% from ₹19 crore in Q4FY22. Its revenue from operations grew by 17.46% YoY to ₹854 crore.
Looking at the overall fiscal year 2022–23, the company achieved a net profit of ₹85 crore, marking a notable improvement from the net profit of ₹66 crore in the previous fiscal year. The total revenue for FY23 stood at ₹3,382 crore, an increase from ₹2,977 crore in FY22.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.