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    Lux Industries

    LUXINDGood
    Textiles·4 Feb 2022
    Management Summary

    Lux Industries reported strong Q3 and 9M FY2022 results, driven by robust demand across product categories and an increased share of value-added products. The company achieved significant growth in revenue, EBITDA, and PAT, with healthy margin expansion. Strategic focus on premium segments, brand building, and e-commerce expansion contributed to this performance, despite some working capital challenges and a notable corporate governance concern regarding a SEBI interim order.

    Highlights

    8

    • Q3 FY22 Revenue: ₹668 Crores, up 24% YoY.

    • Q3 FY22 EBITDA: ₹145 Crores, up 33% YoY, with a margin of 21.74% (up 154 bps).

    • Q3 FY22 PAT: ₹101.2 Crores, up 35% YoY, with a margin of 15% (up 122 bps).

    • 9M FY22 Revenue: ₹1720 Crores, up 26% YoY.

    • 9M FY22 PAT: ₹265 Crores, up 48% YoY, with a margin of 15.5% (up 230 bps).

    • Premium category sales grew 16% in Q3 FY22, contributing 13% to overall sales.

    • Lyra (women's wear) accounted for roughly ₹220 Crores (13%) of 9M FY22 net sales.

    • Working capital cycle increased to 168 days, with inventory days at 119 days due to raw material build-up and delayed winter.

    Concerns

    1

    • SEBI interim order against Mr. Udit Todi (Executive Director) and his wife for alleged insider trading.

    What Changed1

    vs Q4 FY22

    Guidance items7 → 6 (-1)
    Key financials

    Metrics

    13

    Periods

    3

    Headline

    3
    • Working Capital Cycle
      168 days
    • Debtor Days
      97 days
    • Inventory Days
      119 days

    Q3 FY22

    5
    • Revenue
      ₹668 Cr
      YoY+24%
    • EBITDA
      ₹145 Cr
      YoY+33%
    • EBITDA Margin
      21.7%
    • PAT
      ₹101.2 Cr
      YoY+35%
    • PAT Margin
      15%

    9M FY22

    5
    • Revenue
      ₹1,720 Cr
      YoY+26%
    • EBITDA
      ₹377 Cr
      YoY+43%
    • EBITDA Margin
      22%
    • PAT
      ₹265 Cr
      YoY+48%
    • PAT Margin
      15.5%

    Segment breakdown

    Mid-premium Segment (9M FY22)
    55% Revenue Contribution
    Economic Segment (9M FY22)
    32% Revenue Contribution
    Premium Segment (9M FY22)
    13% Revenue Contribution
    Premium Category (Q3 FY22)
    16% Sales Growth
    Economy Category (Q3 FY22)
    64% Sales Growth
    Mid-Premium Segments (Q3 FY22)
    9% Sales Growth
    Lyra (9M FY22)
    ₹220 Cr Net Sales13% Contribution to Net Sales
    List

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    EBITDA Margin
    20% plus
    		High
    Marketing
    Ad Spend as % of Sales
    7.5 to 8%
    		Medium
    Revenue
    Lyra Brand Revenue
    500 Crores
    		High
    Revenue
    Online Sales Revenue
    100 Crores
    		High
    Revenue
    Annual Revenue Growth Rate
    above 20%
    		High
    Market Share
    Growth vs Industry
    200 to 300 basis points
    		High

    Risks & concerns

    5
    RiskSeverity

    Inventory buildup of finished goods due to delayed winter.

    Working capital cycle increased to 168 days, with inventory days rising to 119 days, partly due to delayed winter and a conscious call to build raw material inventory. — Management acknowledged

    medium

    Raw material price inflation.

    Management made a conscious call to build raw material inventory expecting price increases, and stated they pass on price increases to consumers in the long term. — Management acknowledged

    medium

    Impact of COVID-19 on distribution network expansion, particularly in South India.

    COVID-19 restricted distribution expansion efforts, but management expects to become more aggressive once the situation normalizes, given the milder Omicron strain. — Management acknowledged

    low

    SEBI interim order against Mr. Udit Todi (Executive Director) and his wife for alleged insider trading.

    SEBI passed an interim order against Mr. Udit Todi and his wife; management clarified no direction against the company, Mr. Todi has complied with directions, and the matter is under investigation. — Analyst acknowledged

    high

    Areas of Evasion(1)

    • exact number of dealers and distributors in the South India market

    Q&A highlights

    3

    “See partly the gross margin which you have seen expanding over the last couple of years has also been in account of change of product mix so the premium portfolio of the company is also gaining pace compared to the semi premium and mass category. See we also have to keep that in mind that the product mix has also been changing favorably for the company and yes you are also right to a certain extent we have gained from the old raw materials in an inflationary scenario so those gains are also there...”

    Clarifies the drivers of margin expansion, attributing it to both favorable product mix and temporary inventory gains, which is crucial for assessing margin quality.

    asked by Ishrat Khatri

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q3 & 9M FY22 Financial Performance

    Lux Industries delivered robust financial results for Q3 and 9M FY2022. Q3 revenue grew 24% year-on-year to ₹668 Crores, with EBITDA increasing 33% to ₹145 Crores, and PAT rising 35% to ₹101.2 Crores. EBITDA margin expanded by 154 basis points to 21.74%, and PAT margin improved by 122 basis points to 15%. For the nine-month period, revenue stood at ₹1720 Crores (up 26% YoY), EBITDA at ₹377 Crores (up 43% YoY), and PAT at ₹265 Crores (up 48% YoY), demonstrating strong operational leverage and a commitment to maintaining 20%+ EBITDA margins in coming quarters.

    02

    Segmental Growth and Product Mix Shift

    The company witnessed strong demand across all product categories, with overall volume growth of 6% and ASP growth of 16% in Q3 FY22. The premium category, including brands like ONN and Lux Premium, registered a sales growth of 16% in Q3 FY22 and now contributes 13% to overall sales, up from 11% last year. The economy category showed exceptional growth of 64%, while mid-premium segments grew by 9%. This favorable product mix shift towards higher-value offerings is a key driver of margin expansion.

    03

    Strategic Focus on Brand Building, Distribution & E-commerce

    Lux Industries continues to invest in brand building, having spent ₹108 Crores on advertising and promotion in 9M FY22, representing 6.4% of net sales, with a plan to restore it to 7.5-8% in FY23. The women's wear brand, Lyra, contributed roughly ₹220 Crores (13%) to 9M FY22 net sales, with a long-term target to become a ₹500 Crores brand. E-commerce presence is expanding, with a target to generate ₹100 Crores in online sales revenue over the next 3 years, up from a current run rate of ₹40-45 Crores, indicating a strong push into digital channels.

    04

    Working Capital Management

    The working capital cycle increased to 168 days as of December 31, 2021, primarily due to a conscious decision to build raw material inventory in anticipation of price increases and a buildup of finished goods inventory due to delayed winter. While debtor days improved to 97 from 121 days, inventory days increased to 119 from 101 days. Management expressed confidence in reducing working capital days in the coming quarters through continuous monitoring and control.

    05

    Corporate Governance Update

    A significant concern regarding a SEBI interim order against Mr. Udit Todi, Executive Director, and his wife for alleged insider trading was addressed. Management clarified that the order has no bearing on the company, and Mr. Todi has complied with SEBI's directions, clarified his position to the board, and voluntarily recused himself from board meetings pertaining to the order. The matter is under investigation, and the company is cooperating fully to demonstrate innocence, with external advisors indicating no criminal liability at this stage.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.