Landmark Cars - Beneficiary Of Domestic Car Premiumisation: ICICI Securities Initiates Coverage

ICICI Securities Report

We initiate coverage on Landmark Cars Ltd. with an 'Add rating and 'discounted cash flow-based target price of Rs 766, implying multiple of 18 times FY25E earnings.

We believe, Landmark Cars is a direct beneficiary of the ongoing car premiumisation in India, which has resulted in a rising proportion of utility vehicles and 10% plus compound annual growth rate in car average sellince price during FY21-FY23. Nevertheless, mean ASP in the India passenger vehicle industry is only ~$13,000 versus ~$35,000 plus in the developed markets and ~$20,000 plus in the developing markets. Thus, we believe, premiumisation of PVs in India has a long way to go and Landmark Cars is ready to benefit by adding new original equipment manufacturers to its client-list in addition to the ones with whom it is already doing business (e.g. Mercedes Benz, Jeep, VolksWagen, etc).

Landmark Cars is focused on maximising higher-margin service/spares revenue from its target catchment areas and existing stores for car sales instead of adding new sales outlets in new areas.

By principle, it would avoid being a third or fourth player entering a market and having a lower share in it. Thus, in FY19-FY24E, without changing the net number of outlets, Landmark Cars is set to more than double its revenue.

With stable profitability and asset-light business model, we expect the company to deliver ~20% return on equity in FY24EFY25E.

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