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Landmark Cars Ltd

| Q2 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤12th Nov 25

Summary : Landmark Cars navigated Q2 FY26 with strong revenue growth despite GST transition impacts on margins, expressing optimism for sustained profitable growth driven by robust demand and strategic OEM partnerships.

Management Perspective positive : Management expressed optimism about sustained profitable growth for several years, citing robust demand, new model launches, and the positive impact of GST reforms. They are confident in improving gross margins.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 proforma revenue grew 31% year-on-year to INR 1,657 crores.
  2. New car sales contributed INR 1,403 crores, up 35% year-on-year.
  3. Aftersales revenue increased 11.2% year-on-year to INR 254 crores.
  4. Gross profit for the quarter was INR 196 crores, with a 16.2% margin on reported revenue.
  5. EBITDA for the quarter stood at INR 59 crores, with a 4.9% margin.

Future Growth Prospects

  1. Anticipate sustained demand momentum from new model lineups and OEM promotions.
  2. Honda plans 10 new models by 2030, aiming for a fivefold volume increase.
  3. Mercedes-Benz expects a massive product offensive globally from 2026.
  4. BYD demand is robust, with new stock arriving in January '26 for pre-orders.
  5. Renault will launch the all-new Duster in January, first of several new models.

Management Insights

  1. GST rate revision on August 15th caused buyers to defer purchases until September 22nd.
  2. Proactively liquidated inventory with cess credit to mitigate potential losses, impacting Q2 margins.
  3. October saw double-digit passenger car industry growth, reaching 5.5 lakh cars.
  4. Guiding for gross profit percentages to increase by over 100 basis points in the second half.
  5. Optimistic about continued growth, especially in premium and luxury segments post-GST.

Risk Factors

  1. GST transition caused short-term uncertainty and temporary pressure on gross margins.
  2. Abolition of compensation cess led to challenges in utilizing accumulated cess credits.
  3. Liquidation of inventory with cess credit impacted gross profit margins.
  4. Higher sales growth versus after-sales subdued overall gross profit margin percentage.
  5. Erratic monsoon pushed aftersales revenue to Q3 instead of Q2.

Good To Know

  1. GST on spare parts reduced to 18% from 28%, making genuine parts more affordable.
  2. Average selling price (ASP) of new cars in Q2 FY26 was INR 23.16 lakhs, highest ever.
  3. Landmark is the largest partner for BYD, contributing over 20% to their volumes.
  4. One in six Mercedes sold in India is by Landmark; one in five BYD sold in India is by Landmark.
  5. Pre-IndAS operating cash flow for H1 FY26 was INR 128 crores.

Key Drivers

  1. GST reduction boosts premium car demand.
  2. New model launches from key OEMs.
  3. RBI interest rate cuts stimulate buying.
  4. Consolidation opportunities for market share.

Key Analyst Discussions

Competitive Environment

  1. BYD is considering local assembly with a JV partner, which could reduce prices.
  2. Landmark aims to acquire strategic assets to consolidate its market position.
  3. The Indian automotive retail market is fragmented, offering consolidation opportunities.
  4. New outlets like Kia Hyderabad and Patna Mercedes-Benz workshops are ramping up.
  5. No major new outlet openings are organically planned for H2, focus on existing.

Market Trends & Consumer Behavior

  1. GST rate reduction is attracting a larger base of buyers to premium and luxury segments.
  2. Inquiries for all brands increased by 20% in early November compared to last year.
  3. Past GST reductions led to significant demand growth in subsequent years.
  4. Interest rate cuts by RBI in December are expected to further boost demand.
  5. Customers are upgrading to higher trims and variants post-GST reduction.

Financial Highlights

  1. Gross margin dip in Q2 was mainly due to liquidation of Mercedes demo car stock.
  2. Employee expenses rose due to new store openings and company-wide salary increments.
  3. Interest expense increased slightly due to higher sales, but lower inventory will benefit coming quarters.
  4. Gross margins are expected to normalize to Q1 levels or beyond in the second half.
  5. After-sales service margins are expected to improve with workshop ramp-ups.

Product Composition

  1. ASP increase was primarily driven by strong sales of higher-end cars like Mercedes-Benz.
  2. Running out of stock for high-demand BYD models like Sealion impacted ASP.
  3. Product mix changes slowly across quarters, so ASP is an output of sales mix.
  4. Mercedes-Benz gross margins were impacted more than subsidiaries due to demo car sales.
  5. Subsidiaries are performing to expectation, contributing to a diversified brand bouquet.

Strategic Considerations

  1. Landmark aims to become significantly bigger through strategic acquisitions over 3-5 years.
  2. The company believes there is adequate capacity in the market for acquisitions.
  3. Management is in talks with BYD regarding future expansion and partnerships.
  4. New outlets are expected to become breakeven by the end of next quarter.
  5. The definition of existing outlets has changed, with new ones moving to this category after a year.
Landmark Cars Ltd (LANDMARK) Concall Report Analysis & Insights | Dhanarthi