Fundamental analysis of IKIO Lighting – In this blogpost, we will analyze small cap ODM lighting company IKIO Lighting, its overview, strengths, expansion plans and house view on the stock. [Fundamental Analysis of IKIO Lighting]
Table of Contents
Fundamental Analysis of IKIO Lighting
Company overview of IKIO Lighting
One of India’s leading ODM (Original Design Manufacturer) that designs, develops, manufactures and supplies products (mainly LED Lightings) that are sold under customer brand. Strong in-house R&D department that enables further integration through Process and Product Development.
Company’s products include High-End Home Decorative LED Lights, Indoor and Outdoor Lights, LED Lights for RVs, Interior LED Lights for product display including Commercial Refrigeration (CR), Solar Panels, ABS Pipes for RVs etc.,
Strengths of IKIO Lighting
Company management has over 25 years of revelant experience.
Company has a strong & diversified product offering of over 1,000 SKUs.
Company’s infrastructure includes 4 well-integrated facilities spread over ~3 Lac Sq. Ft and an In-house R&D and Product Design team of 31 employees.
IKIO operates at the Top End of the LED Lighting Offerings and is largely in the Niche, High-Value and Innovative Product Range.
Company is fully backward Integrated with a presence across the Value Chain. It covers all aspects of the value chain that includes Design & Development, Tools & Mould Design, Fabrication, Supply, Assembly and testing & validation.
Industry Analysis [Fundamental Analysis of IKIO Lighting]
The Indian EMS market is estimated to growth at 32% CAGR. The following factors are also expected to provide boost to this sector and have the potential to positively impact Indian companies operating in this sector like IKIO Lighting.
- China +1 Strategy
- Development of electronics ecosystem by global and domestic players
- Government incentives and schemes
- Import substitution
- Supply chain realignment
- Component manufacturing / lead time
- Local value addition
IKIO Lighting – Financials
Revenue and Net profit
The company reported a revenue of Rs. 44.67 crore in FY23 as compared to Rs. 33.18 crore in FY22, indicating an increase of 34.62%. The Compound Annual Growth Rate (CAGR) of Sales over the period from March 2020 to March 2023 is ~ 27.44%, and the CAGR of Net Profit during the same period is ~ 33.75%.
Profit Ratios
Company is operating at a very healthy return ratios with ROE at 23% and ROCE at 28%. ROCE greater than ROE is indicating that the company is efficiently using both debt and equity to generate profits and is not overly reliant on equity alone for generating returns.
Debt Analysis
In FY20, the company’s debt-to-equity ratio was 1.31. Ever since then, company has been steadily reducing debt and is the same is currently standing at 0.09. Company has already utilized part of IPO proceeds to pay off the debt and therefore, is almost debt free now. Further, company has a cash balance of 250 Cr by the end of H1FY24.
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Future Plans of IKIO Lighting [Fundamental Analysis of IKIO Lighting]
Company’s new manufacturing facility at Noida, consisting of Three Blocks totaling ~5 Lac Sq. Ft. (Block I of ~2 Lac Sq. Ft., Block II of ~2 Lac Sq. Ft. and Block III of ~1 Lac Sq. Ft.) to be constructed over the next 24 to 30 months.
Civil construction work in Block I of ~2 Lac Sq. Ft. is nearing completion and is expected to be operationalized by end of Q4FY24.
This project is being set up for manufacturing of LED Home Lighting, Solar Panel & Systems and ABS
Pipes, and other New Product Lines.
NSEOptions.in’s View on IKIO Lighting
IKIO Lighting is a fundamentally sound stock with very good Operating Profit Margin, Return ratios and has experienced management. Company is operating in a high growth industry and is implementing expansion which is expected to deliver results by Q1FY25. The company is well-placed to capture wallet share by expanding Product Offerings.
Disclaimer:
Intent of this post is only to provide Fundamental Analysis of IKIO Lighting and is not to be treated as a recommendation to invest and/or trade or to initiate any kind of position in the stock. All efforts have been made to correctly represent facts and figures in the post. The website or its management is not responsible for any kind of losses arising out of Investing in equities. Investors must therefore exercise due caution while investing or trading in stocks. NSE Options.in or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
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