Auto sales give positive visibility to auto lighting manufacturers

Amid the economic revival and demand visibility, the shares of automotive lighting & signalling companies have gained pace on the street. Stocks from this industry have clocked returns as high as 140 per cent since the initial reopening of the economy after the lockdown.

Auto sales numbers have improved ever since Unlock 1 started in June. In the recently concluded month of August, the auto sales for two-wheeler and tractor stood with positive YoY growth. This has given a strong boost to the auto part manufacturers. Varroc Engineering, a manufacturer of automotive lighting solutions, has surged 140 per cent within these three months. The company gets nearly 63 per cent revenue from the 4W segment and 35 per cent from two-wheelers and three-wheelers. Fiem Industries, which is also engaged in automotive lighting components have surged as much as 106.28 per cent between June and August.

Another lighting equipment company, Lumax Industries has added 77 per cent to its market value since June 2020 till August end. Lumax had the further advantage of its diverse spread across vehicle categories such as two-wheelers (25 per cent of the total revenues), passenger cars (67 per cent), and commercial vehicles (6 per cent).

Few other companies with significant market shares such as Endurance Technologies, Subros, Minda Corporation surged more than 30 per cent during this period. These companies can be kept in the watchlist by the investor as the scope of growth can be found, going ahead.

The investors though will need to take an exposure with caution. The market prices of a few select companies may have also gone past the actual momentum in original equipment manufacturers (OEMs). Historically, auto ancillary companies have been amongst the most volatile stocks. Any negative future prospect, owing to another wave of virus or lockdown, etc. would result in a sharp fall in the prices.