Landmark Cars - Listed premium Car dealership in India

[Yougal_deep_dhiman]

Leading and only listed car & CV seller in India - deals in luxury car segment (Merc, Jeep, VW, Honda, BYD & Ashok Leyland(CV)) - Company exiting Renault cars as renault has future plans to launch cars in affordable low price segment. Landmark want to focus on premium & Luxury segment.

Overall market- India has become 3rd largest car market in the world and growing at good CAGR owing to increasing purchasing capacity. Shift towards high end cars is clearly visible as sales of SUV segment is growing rapidly. People are looking beyond Maruti Suzuki & Tata cars.

Share of BYD is abnormal as it is new entrant in Inida (Landmark owns showrooms in Delhi & Mumbai areas for BYD).

Business Sub-segments:

1. New Car Sales: Low margin / medium-high growth business

2. Service : Growing at 20% + CAGR, Kind of annuity business as premium vehicles mostly gets serviced at authorized centers only (as per concall 50% + footfall even after 5 years of selling), ALso holds exclusive license for few premium accessories like permaguard & motorone car care brands

3. Allied business - Insurance & financial products, Second hand car sales - Low margin & low revenue business

Thesis:

1. Entire bet is on growing band & disposable income of Indian higher middle & higher class.
2. Shift of people from economic to premium/luxury cars
3. Higher use of electronics in cars will make sure, cars are serviced/repaired at authorized centers only
4. High sales numbers will widen the annuity service segment revenue for next few years (at least 5)

Anti-Thesis:

1. Discretionary spending product - recession/low growth will hit hard on business
2. Attached Brands don’t perform as good as rival brands (Hyundai is gaining market share but Honda is losing share.
3. High working Capital requirement as they buy from company & then sell to customers except Merc (model changed in 2022- now company directly bill in name of customer & dealer gets his share of commission, helpful in improving WC of dealer)

Disc: tracking position

[dd1474]

Please change the name. This is not the first auto dealership listed company in India. There are many like Spectra Industries which are listed on stock exchanges.

[Piyush_Vats]

Actually it is. Spectra is an illiquid stock with market cap of 3 cr.

[ranvir]

Landmark cars Q1 concall highlights -

Sales- 694 vs 800 cr
EBITDA- 44 vs 51 cr ( margins constant @ 6.4 pc )
PAT- 7.3 vs 18 cr

Indian auto Industry grew by 10 pc YoY despite a high base

The company’s OEMs - VW, Honda, Mercedes, Renault, MG did not participate in Q1’s growth

Second Qtr onwards, sales may be pickup due -

1.Launch of Mercedes GLC which has received bookings (>1500 cars) amounting to aprox 1200 cr

2.Launch of Honda Elevate which is seeing very good customer response. Honda sales de-grew 37 pc in Q1 due discontinuation of Jazz, WRV

3. Start of MG Motors operations in Q2 at Bhopal and Indore

4. Have started receiving BYD cars which were stuck up for over 2 months

5. Launch of Jeep’s new 4x2 Diesel version

After sales business continues to be strong

Have started a new business of selling pre owned cars

Avg selling price of new cars at 19.5 vs 15.6 LY

Avg cost of servicing/car is also up 9 pc vs LY

Gross margins @ 15 pc (sales + service + sale of pre owned cars)

Aim to hit 100 cr sales from the sale of pre owned cars this yr

Management believes, they can make money here from sale of 1st car onwards as no new infra / manpower is being employed here

In active conversation with MG Motors for allotment of new locations. Awaiting clarity on selection of their Indian partner before going ahead

Jeep India’s management has changed and they have a renewed focus on India. Jeep’s numbers likely to recover to 800-900 units/month and with Jeep’s avg selling price, that’s a good business

Renault going to launch new models in about 16-18 months

Renault providing financial support to Landmark in the interim

VW opening low cost/small outlets in Gujarat through Landmark to drive incremental sales

Once the company is able to crack the pre-owned car sales business in a profitable way, they can easily & quickly scale up

Currently, BYD is allowed to import only 2500 cars / year in CKD format. Even this is a profitable business as the Margins here are high. Company may go ahead with an Indian partner to expand its manufacturing footprint in India

Company is expecting to get advance bookings for 700-800 Elevate car units. That should amount to Aprox 100 cr sales (rough calculation)

Company’s share in various OEM’s India sales -

Mercedes- 16 pc
Honda- 6 pc
Jeep- 26 pc
VW- 10 pc
Renault- 5 pc

New partnerships - BYD, MG, Ashok Leyland

Disc: hold a tracking position

[Dhruv2]

Landmark cars

Prominent dealer of Mercedes Benz
Luxury car market proxy play and also much more than that
Many more oems apart from Mercedes
9 OEM
Car dealer has 4k+ employees
Luxury car - From 4 million cars in India we sell 40k luxury cars (in most countries it’s 10% and in India it’s 1%)
Wealth effect is strong in India so luxury car market will grow exponentially
Within luxury cars Mercedes doing very well and 15% of Mercedes is sold by landmark
Mercedes has reduced dealer’s working capital cycle
Strong growth with a player landmark is comfortable with which is Mercedes
After sales business is non cyclical the car sold come for repairs and maintenance. Landmark serviced 3lakh cars last year. Largely linear growth here.
OEM sales can be cyclical but after sale is stable
It also has share of accidental damage
After sale service ebitda margin 18% and Roce is 25% (60% of ebitda)
Asset light model.
Landmark has tie ups with 9 oems
Non mercedes volumes are also growing at 6-7%
Premiumization in cars is increasing
Optionality - 100cr pre owned car biz which is refurbishment of old car. This is 1.5x of PV market (23b dollar market) so very miniscule
Capital allocation is disciplined
Highly roce focus
High skin in the game
Seperate ceos for each OEM and for Mercedes seperate ceos in seperate geography
EBITDA CAGR 19% (FY26E) - Driven by volumes and realisation
Within PV you have a diversified opportunity
Apart from Tesla all need dealers and service centres

[divygupta]

Few questions:

1. Business standard article mentioned that almost 20% of Mercedes sales are happening online, and what I also understand that the money in fresh sales is driven through the insurance commission. So with increasing direct OEM sales, who earns this insurance commission? or are the dealerships adequately compensated for the loss of commission (as well as trail?)

2. With EVs increasing (understand premium end has seen more penetration of EVs), wont the after sales requirements actually reduce, as updates can be pushed OTA and anyways there are far more lower moving parts which actually need servicing/maintainence

[aadhar.aggarwal]

I can take the second question. I have been driving an EV for more than 18 months now. I need to get the car serviced every 8000 kms. The cost of each service is definitely lower as compared to an ICE vehicle. But the frequency of getting the car serviced is pretty much the same.

So updates OTA aane ki wajah se car ki servicing requirement khatam nahi hoti.

[divygupta]

if you can explain, what is the servicing for? ie. is it consumables refill/replacement or oils or something else, trying to get a sense on what is the work being done and therefore the margins that the service guys can make

[aadhar.aggarwal]

I have attached my invoice from one of the service sessions. I am not good with cars. Please read it and share what is your inference with all us. Thank you.

[divygupta]

Seems oil work and filter changes, similar to an ICE; guessing engine oil kind of stuff is getting eliminated. Even I dont understand these things in detail, so just making an intelligent guess

[rankamoksh]

Heavy selling my promoter group and employees in this stock for the past 1 year.

[aadhar.aggarwal]

Hi. How is this heavy promoter selling?

Can you share in percentage terms how many shares have been sold by the employees and promoters? In absolute terms the amount seems small.

And also all of the selling in the screenshot has been done by employees and not promoters. Your thoughts?

[rankamoksh]

Promoter has sold around 2.3% and many employees/directors have sold shares, the company had given ESOPs of around 200,000 shares recently but selling is more than that, looks like insiders do not want to stay invested.

[Piyush_Vats]

MG Motors enters Mumbai in partnership with Landmark Cars.

Press Release: https://www.bseindia.com/stockinfo/AnnPdfOpen.aspx?Pname=c1f8d769-1ff5-4a8a-a776-1bd4534b3365.pdf

It will be interesting to see how much business MG is willing to give Landmark and how much to other dealers. If everything goes well, they could become biggest dealer of MG just like Mercedes Benz.

Disc. - Not invested, tracking.

[nav_1996]

Has anyone analyzed how Popular Vehicles and Services compare to Landmark. It appears that Prashant Jain bought into Popular Vehicles and Services after investing in Landmark cars last year.

His views on valuations is highly respected and I am curious that how much value he saw in Popular Vehicles and Services. Valuations with current metrics are not mouthwatering but cheaper than Landmark. Probably he is looking at growth runway.

Auto sector catches Prashant Jain's fancy: Landmark Cars 2nd purchase in a month

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