Landmark Cars Rated New 'Buy' At B&K Securities; 60% Upside Seen

B&K Securities has initiated coverage on Landmark Cars with a 'Buy' rating, setting a target price of Rs 820, based on a potential upside of 61.4%. The brokerage's optimistic outlook comes from view that Landmark Cars is bottoming out of its profit cycle and is now poised for a strong revival.

The brokerage firm highlights the company's established multi-brand and location auto dealer operations, its high-entry barrier business, and its experienced management as key positives that are driving the initiation.

Landmark Cars' proforma sales growth has been muted, with an 11% Compound Annual Growth Rate (CAGR) from Financial Year 2023 to Financial Year 2025. This underperformance is primarily attributed to a 2% decline in the Indian passenger vehicle sales CAGR over the same period. In Financial Year 2025, the older outlets and workshops contributed negatively, incurring profit before tax (PBT) losses of INR 700 million and INR 400 million respectively. However, B&K expects these facilities to ramp up, starting to break even in the first quarter of Financial Year 2026, and to turn profitable by the end of Financial Year 2026. The company's strategic tie-ups with three new brands – Mahindra & Mahindra, Kia, and MG Motors – over the last two years are also expected to contribute significantly. Furthermore, the after-sales mix for older brands is 17%, while for the new brands, it is 9%. B&K anticipates the after-sales mix to improve from the new brands and new outlets, expecting a margin increase from 5.5% to 7.5% over Financial Year 2025-27.

During financial year 2025, Landmark Cars initiated cost rationalization activities, which have now been completed. Employee costs and other expenses as a percentage of proforma revenues have seen a reduction to 4.7% and 4.5% respectively in Financial Year 2024. The company achieved its cost rationalization target with employee cost at -4% and other expenses below 4% in the second half of Financial Year 2025. This was despite a footprint expansion of 23 outlets in Financial Year 2025 and the upfronting of various costs. B&K notes that management remains confident in bringing further down the employee and other expenses to -3.6% of proforma sales in Financial Year 2026, which will provide an added lever for operating margin improvement.

Landmark Cars operates as the first multi-brand, multi-location auto dealer in the premium and luxury car segment in India, boasting 70 showrooms and 61 workshops. B&K emphasizes that this segment has high entry barriers, making it difficult for new players to establish themselves. Landmark Cars maintains strong relationships with leading OEMs, including Mercedes-Benz, BYD, Jeep, Volkswagen, Honda, and MG Motors. The requirement for higher capital deters smaller players, further solidifying Landmark Cars' position. B&K concludes that Landmark Cars remains one of the few auto dealerships in India that is professionally managed, a key factor in its continued success.