Initiating Coverage

INDIA l Institutional Research l Consumer l 4 May 2023

Landmark Cars Ltd l BUY l TP:830

Driving India's carvolution
We initiate coverage on Landmark Cars with a TP of Rs.830, an upside of c.38%. It Target Price 830 Key Data
is a standout entity for its uniqueness – the only listed auto dealer in India and that Bloomberg Code LANDMARK:IN
too focused on luxury vehicles. Landmark offers not just a diversified revenue CMP* 601 Curr Shares O/S (mn) 39.62
stream across retailing, servicing, pre-owned vehicles and insurance but also a play Diluted Shares O/S(mn) 39.62
on India’s incipient but aggressive luxury products growth; luxury cars growth Upside 38% Mkt Cap (Rsbn/USDmn) 24/281
continues to convincingly outstrip regular cars. We deep-dive into the criticality of Price Performance (%) 52 Wk H / L (Rs) 670/433
dealers to auto OEMs, the global dealership scenario that provides a sneak peek 1M 3M 3M Average Vol. 86358
into Landmark’s future and illustrates Landmark’s potential. Landmark 10.4% -2.4%

▪ Long-standing and fruitful OEM relationships – The Company is India's leading Nifty 4% 1.3%
Source: Bloomberg, ACE Equity, MNCL Research,
premium automotive retailer with Mercedes-Benz, Honda, Jeep, Volkswagen,
and Renault dealerships. They started their operations with their first Honda
Shareholding pattern (%)
dealership in 1998. LCL’s longstanding relationships with its OEM partners offer
Mar-23 Dec-22 21-Dec-22
both sides competitive advantages, including opportunities from the OEMs
Promoter 55.18 55.23 55.23
wishing to expand their business in new geographies. Opportunities include
attracting suitable dealership acquisition targets, sharing infrastructure and DIIs 7.53 6.84 6.28

workforce across brands to improve margins, and expanding business verticals. FIIs 6.97 7.75 7.43
Others 30.32 30.18 31.06
▪ After-sales a predictable, annuity business - After-sales service and spares Source: BSE
business provides a steady, high-margin revenue stream at each of Landmark’s
dealership outlets, which helps mitigate the cyclicity that generally characterizes Why should you read this report?
the automotive sector. Manufacturers’ warranties and maintenance programs Understand how auto dealers work
that come packaged with vehicle sales by OEMs generally permit spare parts and Revenue strategy – Why the model is sustainable
service work to be performed only at authorized service centres such as Landmark is placed against global peers
Landmark’s, creating a significant barrier to entry. This segment is highly What OEMs say about India
lucrative, with a 40% gross margin and 18-20% EBITDA margin, compared to 8%
How a prominent B2B player adds immense value to its client
and 3-3.5% in new car sales, respectively. Its revenues are stable and recurring,
even during depressed cycles of OEM sales.
▪ Capturing the entire value chain, making them indispensable for OEMs -
Landmark’s business caters to the entire customer value chain, including
retailing new vehicles, servicing and repairing vehicles, selling spare parts,
lubricants, and other selling pre-owned passenger vehicles and distributing
third-party loan and insurance products. They benefit from the synergies of
these complementary businesses and increased customer retention from
servicing their varied automotive needs. Auto dealerships in India are hugely
fragmented and minnows compared with global dealerships and provide
suitable consolidation opportunities for larger players like Landmark.
▪ Valuation & Risks- We expect the Company to post revenue growth of 19% CAGR
over FY22-25E, while EBITDA will likely grow at 28% during the same period. We
expect margins to increase by 130bps over the same period to 7.2%. At the same
time, PAT is likely to grow at a CAGR of 40% over the same period. At the current
price of Rs 601, the stock is trading at 19x FY24e and 13x FY25e. We value the
Company at 18x FY25E earnings estimate of Rs.46, post which we arrive at our Rahul Dani
target price of Rs: 830, an upside of 38% from current levels. [email protected]
NISM-201500034725

Vaidik Bafna
[email protected]
NISM-202100035711

Y/E Mar (Rs mn) Revenue YoY (%) EBITDA EBITDA (%) Adj PAT YoY (%) Adj EPS RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)
FY21 19,561 -11.8% 1,098 5.6% 111 -138.5% 3.0 6.4% 9.0% NM 19.8
FY22 29,765 52.2% 1,747 5.9% 662 493.7% 16.7 30.9% 20.1% 35.9 14.9
FY23E 32,957 10.7% 2,237 6.8% 834 26.0% 21.1 24.1% 19.1% 28.5 11.2
FY24E 41,484 25.9% 2,865 6.9% 1,242 49.0% 31.4 25.3% 21.8% 19.2 8.5
FY25E 50,772 22.4% 3,658 7.2% 1,811 45.8% 45.7 29.4% 25.3% 13.1 6.3
Source: Company, MNCL Research estimates, Consolidated Financials.

MNCL Research is also available on Bloomberg. In the interest of timeliness, this document is not edited

Initiating Coverage
 Index
Investment Thesis in Charts ................................................................................................................. 3
FAQS.................................................................................................................................................... 5
Unique and leading auto dealer in India ............................................................................................ 10
Service revenue, an annuity business, offers predictability ............................................................... 17
Comprehensive business model capturing the entire value-chain ..................................................... 20
Case Study- Comparing Landmark to a leading B2B FMCG player ...................................................... 22
How Landmark Cars stack up against global peers ............................................................................. 23
Company Overview ........................................................................................................................... 24
Financial Analysis .............................................................................................................................. 27
Valuation – a sustainable business model deserves a premium ........................................................ 29
Key Risks to our thesis ....................................................................................................................... 30
Financials (Consolidated) ................................................................................................................... 31
Income Statement ............................................................................................................................. 32

Landmark Cars 2
initiating Coverage
Investment Thesis in Charts
Exhibit 1: How the company earns

Landmark cars

Commission Vehicle servicing Pre owned

New Car Sales Others
(agency Model) and spare parts business

FY22 Revenue FY22 Revenue FY22 Revenue FY22 Revenue FY22 Revenue
Rs. 23,035mn Rs.311mn Rs. 5,967mn Rs. 214mn Rs.238mn

Source: MNCL, Company

Exhibit 2: India’s leading multi-auto retailer Exhibit 3: Outlets split- By OEMs

Source: Company, MNCL Research Source: Company, MNCL Research

Exhibit 4: Landmark plays a key role for OEMs

OEM Sales (Units) FY17 FY18 FY19 FY20 FY21 FY22
Mercedes-Benz 1,421 2,159 2,264 1,780 1,133 1,984
Honda 7,596 8,042 8,691 5,801 4,500 5,282
Jeep 51 4,163 3,745 2,047 1,311 3,121
Volkswagen 3,092 2,925 2,113 1,647 1,196 2,405
Renault 999 3,410 3,594 4,458 4,261 4,750
BYD - - - - - 13
Ashok Leyland 1,172 1,079 1,190 723 881 1,709
Former OEM partner - 77 220 274 - -
Total 14,331 21,855 21,817 16,730 13,282 19,264
Source: Company, MNCL

Landmark Cars 3
Initating Coverage
Exhibit 5: How Landmark is crucial for brands

Source: MNCL Research, Company

Exhibit 6: After-sales service- annuity business

After Sales Service and Spares FY17 FY18 FY19 FY20 FY21 FY22
Number of Vehicles Serviced & Repaired 209,808 239,963 271,906 291,040 221,468 279,078
YoY 14.4% 13.3% 7.0% -23.9% 26%
Average Realization 14,270 14,830 17,070 16,610 19,620 21,380
YoY 3.9% 15.1% -2.7% 18.1% 9.0%
Source: MNCL Research

Exhibit 7: Revenue break up – predictable business model

Particulars FY20 FY21 FY22
Sales Volume (units)
Number of new vehicles sold 16,730 13,282 19,264
Number of vehicles serviced 291,040 221,468 279,078

Vehicles Sales and Other Operating Income (Rs mn)

New vehicles 16,912 14,723 23,035
Commission income - - 311
Financial products 208 139 238
Pre-owned vehicles sold 231 354 214
Total Vehicles sales and other operating income 17,352 15,216 23,799
EBITDA -96.93 368 683
EBITDA margin -0.6% 2.4% 2.9%

After Sales Service and Spare Parts Revenue (Rs mn)

Total Revenue 4,834 4,345 5,967
EBITDA 866 771 1,085
EBITDA margin 17.9% 17.7% 18.2%

Less Unallocable income 40 41 21

Total EBITDA* 729 1,098 1,747

Total EBITDA margin 3.3% 5.6% 5.9%
Source: MNCL Research *excluding other income

Landmark Cars 4
Initating Coverage
 FAQs
What role does the auto dealer play?
Dealerships form an intrinsic part of the automobile sector as an intermediary between the customers
and the manufacturers. The dealership plays an indispensable role in the overall vehicle supply chain
As of FY22, there were providing a local vehicle distribution channel based on a contract with an automaker.
around 17,000
dealerships with nearly It also plays a vital role in the aftermarket space by providing maintenance services and supplying
28,000 touchpoints spares/automotive parts and accessories. From manufacturers’ perspective, dealers play the crucial role
across India. of retail distribution at regional, city and local levels and also provide manufacturers with customer
insights that are very useful in the production planning of manufacturers. Dealers support customers
from the initial phase with vehicle selection guidance and assist in the necessary vehicle financing. They
facilitate a smooth transfer of vehicles from the manufacturer to the customer, helping in registration
and required insurance formalities.

Dealers also provide the required support for accessorising and vehicle customisation. For financial
institutions, dealerships offer a huge business opportunity through retail finance and inventory funding.
For insurance providers, dealerships are an easy avenue for new customer acquisition.

The dealership model will become increasingly important for car makers as OEMs enrich their product
portfolio and expand their sales networks. From the car manufacturer’s perspective, dealers are
meaningful in terms of (1) inventory management; (2) lower capex in network expansion; (3)
optimization of local sales/after-sales operations; (4) flexibility in retail-end pricing management.

Exhibit 8: Dealership model adopted by most traditional brands

OEM Dealerships Customers
1) Vehicle design and 1) Purchase inventory and 1) Vehicle purchase: balance
manufacture retail to customers. between pricing and waiting
2) Wholesale products to 2) Flexibility in offering list.
dealers discounts to customers. 2) Aftersales services
3) Maintain MSRP, but flexible 3) Provide aftersales services
in adjusting dealership's
subsidies
Source: Company, MNCL Research

A case study in China- According to an industry report, there are only a handful of very large dealerships in India, with more
VW, which has a than 100 outlets each and a presence in four to five states in India. Compared with global dealership
dealership model, sold giants such as Penske Automotive (approximately 320 outlets across the United States and United
approx. 3.2mn units,
Kingdom), Autonation (more than 320 outlets across the United States), Group 1Automotivee (~185
while Tesla sold 321k
units. outlets across the United States, United Kingdom and Brazil) and Zhongsheng Group Holding (~386
VW has ~2038
outlets across China), Indian dealerships are still in the development stage with significant room for
dealership network as expansion.
against 224 experience
centres for Tesla.
Tesla has been able to
expand only in top-tier
cities, while VW has
expanded across the
country.

Landmark Cars 5
Initating Coverage
 How does an auto dealer earn revenue?
▪ Sale of new vehicles: - Selling vehicles is the primary business for any dealership and naturally forms
the lion’s share of overall dealership revenue. For PVs, new vehicle sales margins hover around 3-
5%, whereas luxury PV manufacturers offer a relatively higher margin of 6-8%. However, OEMs also
offer incentives on target completion, vehicles sold by the dealer, manufacturer market share goals,
etc. For a well-established large dealer, these incentives can provide an additional margin of around
3-5% per vehicle.
▪ After-sales service: - Income from the service segment is another major source of revenue for the
Service revenue is like dealer. All vehicles require regular and ongoing service and maintenance, and service revenue can
an annuity business and be divided into two parts: spares and labour. Revenue earned by selling automotive components,
is crucial to any auto parts, lubricants, etc., used for vehicle repair or maintenance is considered spares revenue; the
dealer.
amount charged for the effort or the technical expertise required for the vehicle repair is considered
labour revenue. Parts and labour charges contribute equally to the service revenue for PV dealers.
▪ Accessories: - Accessories include parking sensors and cameras, GPS navigation systems, LED
headlamps, music systems, speakers, seat covers, floor mats, car covers, wheel covers, air
fresheners, tyre inflators, etc. According to an industry report, margins on accessories sold for mass
and premium PVs range between 15-25%, and margins on accessories sold for luxury PVs range
between 20-30%.
▪ Financing and insurance: - PV dealers facilitate easy financing for their customers through tie-ups
with various banks and NBFCs. For every financing deal from a PV dealership, the dealer receives a
percentage of the financed amount as its commission or finance payout. According to the industry
report, PV (mass and premium markets) dealers’ commission typically ranges from 1.0% to 1.5% of
the financed amount, while the luxury PV dealers’ commission are 0.8% to 1.0% of the financed
amount.
▪ Typically, more than 90% of customers avail of insurance through dealers while purchasing a new
car. Larger dealers for the mass and premium PV segment can get up to 19.5% of the premium as
commission, while dealers for the luxury PV segment can earn between 16-18% of the insurance
premium.

Exhibit 9: Revenue stream for an auto dealer

Total Revenue

New Vehicle Pre-Owned Insurance/Finance

Sales Services Accessories
Vehicle Sales Payout

Spares

Labour

Source: MNCL Research

Landmark Cars 6
Initating Coverage
 Will profitability for auto dealers always be capped?
The business caters to the entire customer value chain, including retailing new vehicles, servicing and
repairing vehicles, selling spare parts, lubricants and other products, selling pre-owned passenger
vehicles and distributing third-party financial and insurance products. The company benefits from the
synergies of these complementary businesses and increased customer retention from servicing their
customer’s automotive needs. The company’s service centres are also points of sale for spare parts,
lubricants, and other products such as accessories and value-added services such as interior cleaning,
polishing and sales of extended warranties. Selling value-added and financial services will always help
overall profitability.

Does service revenue get impacted by an increase in EV penetration?

Given the inherent advantages and as we progress to new-age vehicles, EVs will likely become more
prominent over the next few years. However, a misconception remains that EV service costs would be a
Did you know- that
India ranks as one of bare minimum. Since service remains a significant contributor to Landmark, we address the concern
the highest in fatal road below.
accidents? Close to 46
accidents occur per With the transition from internal combustion engine (ICE) vehicles towards new energy vehicle (NEV)
hour in the country, models, we expect dealerships’ after-sales business to maintain a relatively stable margin one, given
entailing higher need
that a sizable chunk of after-sales revenue for dealerships comes from repair and the remaining from
for service.
maintenance.

On maintenance
▪ The powertrain-related items account for only approx. 20-30% of total spending for internal
combustion engine vehicles (ICE).
▪ The remaining 70-80% non-powertrain related items (e.g. brake fluid, brake pads, air conditioner
filter, tire, etc.) are required for both ICE and NEV.
▪ New energy vehicles require some inspections on the power battery, and the expected cost is ~20%
of ICE’s powertrain-related service.

On repairs
▪ Due to the integrated design, NEV spending is generally higher than ICE cars on a per-service basis.
▪ The repairing: with a more integrated vehicle design and sophisticated OTA system, the traditional
mom-and-pop shop is not able to fulfil the full repair requirements, and customers need to go to
authorized dealership workshops that the insurance company also considers eligible for
reimbursement.
▪ Even with a likely 10-20% lower after-sales spending per-vehicle for NEVs, the authorized dealers
have a much higher retention rate given the limited number of authorized/qualified service centres.

Landmark Cars 7
Initating Coverage
 Exhibit 10: Repair contributes majority of after-sales service revenue-

Source: MNCL Research

Is Landmark Cars over-reliant on Mercedes Benz?

Contrary to market fears of excessive reliance of Landmark Cars on Mercdes-Benz, the table herewith
depicts the share of the former to the latter sales/volume and the risk mitigation methodology visible in
preference by other marquee OEMs for a tie-up with LMC.

Exhibit 11: OEM relations depict the diversity

OEMs (Rs mn) FY17 FY18 FY19 FY20 FY21 FY22
Revenue from new sales 16824 24974 23113 16912 14723 23035
Mercedes Benz 5835 8200 7090 5792 4753 4936
Landmark’s diversified clients % of new vehicle sale 34.70% 32.80% 30.70% 34.20% 32.30% 21.40%
reduce the risk associated with a Honda 6060 5917 5756 3687 2994 3736
particular brand; additionally,
after-sales service helps during a % of new vehicle sale 36.00% 23.70% 24.90% 21.80% 20.30% 16.20%
downturn in the economy. Jeep 134 5422 4930 2792 2045 5562
% of new vehicle sale 0.80% 21.70% 21.30% 16.50% 13.90% 24.10%
Volkswagen 2457 2155 1587 1156 934 2203
% of new vehicle sale 14.60% 8.60% 6.90% 6.80% 6.30% 9.60%
Renault 423 1298 1437 1889 1864 2424
% of new vehicle sale 2.50% 5.20% 6.20% 11.20% 12.70% 10.50%
Ashok Leyland 1915 1905 2129 1230 1866 3866
% of new vehicle sale 11.40% 7.60% 9.20% 7.30% 12.70% 16.80%
BYD 0 0 0 0 0 36
% of new vehicle sale NA NA NA NA NA 0.20%
Source: Company, MNCL Research

The Company is the No. 1 dealer in India for Mercedes in terms of retail sales for FY22, the No. 1 dealer
in India for Honda and Jeep in wholesale sales for FY22 and was the top contributor to Volkswagen retail
sales for CY21. In addition, LMC has the third largest dealership in India for Renault for wholesale sales
contribution for CY21.

From the above table, Mercedes is the company's major revenue source; however, the risk is well
Going forward, Mecerdes India
mitigated with its presence across other major OEMs. The company does well to create a monopoly in
is looking to consolidate its
dealership network and will likely certain cities; for example, for Jeep, Landmark is the sole supplier in the Mumbai region. Landmark has
do away with smaller dealers, managed to grow its revenue from Renault by 42% over FY17-FY22 despite the latter’s struggles in India,
and this is likely to provide an which demonstrates its ability.
additional fillip to the company,
given its one of the key dealers for Additionally, the company's after-sales service provides revenue comfort, given the annuity nature of
Mecerdes.
the business. While pre-owned vehicles may currently be a minor contributor, as we move towards a
developed economy, the contribution from pre-owned is likely to increase, as evident from the
experience of global auto dealers.

The luxury car segment will likely outpace the overall industry growth, and given Mercedes's plan in the
country, they are increasingly reliant on Landmark to help them reach significant volumes in India.

Landmark Cars 8
Initating Coverage
 What is the agency model Mercedes has introduced?
Understanding how a traditional dealership model works
The Company purchases new vehicle inventory directly from the OEMs and places orders periodically
based on its internal assessment of customer demand and specific orders.

The OEMs allocate new vehicles based on availability, monthly sales levels, market area demand and
order forecast.

Landmark retails new vehicles and accessories at prices decided by them, provided that the prices are
not above the maximum sale price notified by the OEM. Landmark Cars also receive monetary incentives
from the OEMs for meeting specific targets.

Mercedes-Benz agreement
The dealership agreement with Mercedes-Benz materially changed and converted to an agency model
whereby all car sales are made directly to customers by Mercedes-Benz. Under this agency model,
customers now place orders through Landmark directly with Mercedes-Benz; the Company earns a
commission on each sale of Mercedes-Benz made through them. This change to an agency model has
The dealership model reduces significantly reduce working capital requirements from October 1, 2021, since they no longer purchase
overall inventory risk for an cars from Mercedes-Benz and are no longer required to carry an inventory, except for demo vehicles.
auto dealer.
For the OEM, this helps In its statement of profit and loss, this change will have the effect of
maintain a standard price ▪ reducing expenses (namely, a reduction in purchases of cars and changes in inventories of stock-in-
across the country.
trade, and interest expenses due to decreased working capital financing requirements and other
sales-related costs),
▪ reducing the sale of cars revenue from Mercedes-Benz cars, as it no longer books the entire sales
price of vehicles sold as revenue, and
▪ adding commission income as commissions earned on each Mercedes-Benz vehicle sale.

Landmark Cars 9
Initating Coverage
 Landmark is the No. 1
Unique and leading auto dealer in India
dealer in India for
Mercedes in terms of retail Landmark a clear partner of choice
sales for FY22, the No. 1
dealer in India for Honda Landmark Cars is a leader in India's premium automotive retail business with dealerships for Mercedes
and Jeep in wholesale sales
Benz, Honda, Jeep, Volkswagen, Renault, BYD and a commercial vehicle dealership for Ashok Leyland.
for FY22 and was the top
contributor to Volkswagen The company started their operations and opened its first dealership for Honda in 1998. Since then, the
retail sales for CY21. It is company has expanded its operations network to 106 outlets in 8 states. They are the number 1 dealer
also the third largest in India for Mercedes Benz in retail sales and the number 1 dealer for Honda and Jeep in wholesale sales.
dealership in India for
Renault in terms of The company's longstanding relationships with its OEM partners and its market leadership position
wholesale sales
allow them to expand its network in different cities and newer geographies.
contribution for CY21.

Exhibit 12: Brand relations Exhibit 13: Corporate structure

Source: Company, MNCL Research Source: Company, MNCL Research

Exhibit 14: Region-wise break up Exhibit 15: Store count

1 0 1 0 113
10 10
100 98
100 91
90
80 8
8
80
0
5
0 0

0 1
0
5
0
0

0
F 15 F 1 F 1 F 18 F 19 F 0 F 1 F 9 F 3

Source: Company, MNCL Research Source: Company, MNCL Research

Landmark Cars 10
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 Exhibit 16: Pan-India presence

Source: MNCL Research, Company

Exhibit 17: Brand-wise volume break up and market share

OEM sales (units) FY17 FY18 FY19 FY20 FY21 FY22
Mercedes Benz 1,421 2,159 2,264 1,780 1,133 1,984
YoY growth 51.90% 4.90% -21.40% -36.30% 76.10%
Landmark cars share 10.70% 14.10% 15.20% 14.50% 13.00% 16.40%
Honda 7,596 8,042 8,691 5,801 4,500 5,282
Landmark continues to play a
vital role for OEMs. Landmark's YoY growth 5.90% 8.10% -33.30% -22.40% 17.40%
smart expansion strategy has Landmark cars share 4.80% 4.70% 4.70% 5.70% 5.50% 6.20%
increased its market share with
each OEM. Volkswagen 3,092 2,925 2,113 1,647 1,196 2,405
YoY growth -5.40% -27.80% -22.10% -27.40% 101.60%
Landmark cars share 6.20% 6.50% 6.10% 6.40% 5.90% 7.80%
Jeep 51 4,163 3,745 2,047 1,311 3,121
YoY growth 8062.70% -10.00% -45.30% -36.00% 138.10%
Landmark cars share 0.90% 19.60% 22.20% 23.90% 20.00% 26.10%
Renault 999 3,410 3,594 4,458 4,261 4,750
YoY growth 241.30% 5.40% 24.00% -4.40% 11.30%
Landmark cars share 0.70% 3.30% 4.50% 5.00% 4.60% 5.40%
Ashok Leyland 1,172 1,079 1,190 723 881 1,709
YoY growth -7.90% 10.30% -39.20% 21.90% 94.10%
Landmark cars share 1.00% 0.80% 0.80% 1.00% 1.90% 2.60%
BYD 13
YoY growth NA
Landmark cars share NA
Total 14,331 21,778 21,597 16,456 13,282 19,264
YoY growth 52.00% -0.80% -23.80% -19.30% 45.10%
Source: MNCL Research, Company

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Initating Coverage
Exhibit 18: The company’s longstanding relationships with its OEM partners and market leadership position offer them several
competitive advantages

OEM Expansion Others

Cost Saving

•Landmarks pan India •Attracting suitable

•sharing infra and
presence enables OEM inorganic dealership
manpower across
to expand in new cities. acquisition target
brands.
•Oppurtunites to
•execute large scale
expand across business
marketing programs
verticals

Source: MNCL Research, Company

Exhibit 19: Miles ahead of other key dealers

Deutsche Navnit
Oem wise dealer presence Landmark Advaith AMPL Jubilant Kataria KUN Auto KUN Motor
Motoren Motors
Maruti ✓ ✓ ✓
Hyundai ✓ ✓
Mahindra ✓
Honda ✓
Renault ✓
VW ✓
Jeep ✓
MG ✓
JLR ✓
Passenger Vehicles
Mercedes ✓ ✓

BMW ✓ ✓ ✓
Audi ✓
Ferrari ✓
Mini ✓ ✓ ✓
Porsche ✓ ✓
Rolls Royce ✓
BYD ✓
Tata (CV)
Commercial Vehicles Bharat Benz ✓
Ashok Leyland ✓ ✓
No of Brands 7 2 3 2 2 3 1 3 6
Source: Company, MNCL Research

Landmark’s customer-centric business implementation, consistently high operational efficiency during

uncertain times, and on-track network expansion position the company well compared to other auto
dealers and make it the preferred partner for auto OEMs.

Additionally, Landmark has established robust business processes which assist them in reducing costs and
increasing efficiency and ensuring faster operationalization of new facilities. These processes allow the
company to replicate their successes as they expand organically and in the new businesses they acquire.

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 Exhibit 20: New car sales going ahead (proforma) Exhibit 21: New car sales (agency model)
60,000 45,000
49,340 38,477
40,000
50,000
39,613 35,000 30,939
40,000 30,000
Rs. 30,894 Rs. 23,346 24,210
mn 30,000 mn 25,000
23,035
20,000 16,912
16,912 14,723
20,000 14,723 15,000
10,000 10,000
5,000
-
-
FY20 FY21 FY22 FY23E FY24E FY25E
FY20 FY21 FY22 FY23E FY24E FY25E
Source: Company, MNCL Research Source: Company, MNCL Research

Focus on the fast-growing luxury segment in India

The company is focused on the Landmark focuses on the fast-growing premium and luxury segments of the Indian passenger vehicle
premium and luxury automotive market. Their dealerships offer a wide range of new passenger vehicles, from economy to luxury and
segments, which is likely to grow
commercial vehicles.
at 10-12% CAGR over22-27e,
while the luxury segment is
expected to grow at 16% over
According to an industry report, in FY17, mass-market vehicles dominated the Indian PV industry with a
the same period. 57% market share. In the last five years, the premium vehicles segment has grown at a healthy 8.1%
CAGR, expanding its contribution from 42% in FY17 to 62% in FY22. On the other hand, mass-market
vehicle sales contracted at a CAGR of 9%, with its market share declining from 57% in FY17 to 37% in
FY22.

Exhibit 22: India’s PV market Exhibit 23: Growth in premium vehicle segment
4.5 4.0 100%
4.0 3.7 3.8
3.5
3.3 80%
3.5 3.0 3.1 3.1 42%
2.9 2.9
3.0 62%
Rs. 60%
2.5
%

mn
2.0 40%
1.5 57%
20% 37%
1.0
0.5 0%
0.0 FY17 FY22
CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 Mass market Premium Luxury

Source: Company, MNCL Research Source: Company, MNCL Research

The luxury vehicles segment typically comprises ~1% of the overall PV industry in India, according to the
industry report. Sales volume of the luxury segment increased significantly at a CAGR of 16% in FY17-19,
driven by favourable economic growth, increased disposable incomes and more model launches by the
luxury OEMs/brands.

The luxury vehicles segment in India is expected to grow at a CAGR of more than 25% from 23,700 units in
FY22 to ~49,000 units by FY25e.

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 Exhibit 24: Luxury segment – retail volumes (thousand units) Exhibit 25: Growth in luxury segment (thousand units)
40
60.0
34.2 34.2
35 31.4 49.0
50.0
30
25.6
23.7 40.0
25 32.0
20 16.3 30.0 23.7
15 20.0
10
10.0
5
0.0
0
FY17 FY18 FY19 FY20 FY21 FY22 FY22 FY23E FY25E

Source: MNCL Research, Company Source: MNCL Research, Company

Exhibit 26: Luxury car market share OEM wise

120

100 5 5 6
7 7 7
5 9 8
10 12 10
Mercedes new launch program is 80
27 26
likely to help maintain leadership 28 36
position in the luxury segment. 32 36
% 60
19 19
16 3 5
40 13

20 44 42 44 46
38 36

0
FY17 FY18 FY19 FY20 FY21 FY22

Mercedes Benz Audi BMW JLR Volvo

Source: Company, MNCL Research

Exhibit 27: What’s fueling the growth?

Rising preference for

Revival in the Economy
•Younger customers, salaried •Steep rise in disposable Top-end Variants
professionals incomes across urban and
•increasingly opting for •Healthy economic revival, semi-urban areas •Rapidly rising preference for
luxury cars overs mass strong corporate earnings •a higher propensity to spend the top-end variants in the
market cars, with an •Increase in infrastructure is driving discretionary luxury car market
inclination for top variants spending spending on cars •Increase in penetration of
•Availablity of Finance electric cars
Changing
Increasing disposable
demographics of Car
income
Buyers

Source: MNCL Research

Landmark Cars 14
Initating Coverage
 Sun shining on India- what OEMs have to say about India’s prospects
Exhibit 28: Mercedes India’s plans Exhibit 29: India’s growth story in PVs

Source: Economic Times Source: Times of India

Exhibit 30: Mercedes Chairman on outlook on India

Source: Economic Times

Exhibit 31: Auto OEM Plans for India

Source: Economic Times, Business Standard, Autocar India,

Landmark Cars 15
Initating Coverage
 Exhibit 32: Auto OEM Plans

Source: Economic Times, Business Standard, Autocar India,

India is gaining prominence as Mercedes-Benz sets about recalibrating its plans to go fully electric by
2030. The Company targets 25% of its sales to comprise electric vehicles over the next four years. The
Company aims to maintain the double-digit growth chart intact on the back of the ten news launches
in 2023.

BYD has many aspirational and aggressive plans for new launches and dealer networks in India. The
company launched its third passenger vehicle in India in Q4FY23 and plans to almost double its dealer
network in 2023.
Sanjay Gopalkrishna, Senior VP of B D India’s Electric Passenger Vehicle Business, said B D seeks to
capture 0% of India’s EV market by 030. Gopalkrishna also stated that “Being a global manufacturer,
we have to keep up aggressive goals”.
The company has a manufacturing capacity of upto 15,000 units annually, and have already doubled
their shifts at the plant. The company will analyse the demand beyond this volume.
The Indian auto market became the
3rd largest market in the world (in
mn pieces) for CY 2022 growing by Renault and Nissan announced a fresh investment of Rs 53bn in the Indian market to launch six new
22% over last year. locally produced models between the two brands. The six models would comprise three new vehicles,
each with a sister product in the other partner brand.
Volkswagen India will assemble its maiden electric car for India, the ID.4, at its Aurangabad plant for a
potential 2024 launch. The company is banking on significant industry-beating growth as it foresees
“normal" production output in 0 3, with volumes buoyed by its new sedan Virtus.
Honda Cars India to launch a new car every year till 2028 in India. The next big launch for the brand will
be a mid-sized SUV. It is expected to compete with Hyundai Creta and Kia Seltos and will arrive in the
first half of the next fiscal year. Honda also plans to launch an electric car in the Indian market. Honda is
expecting a growth of 8% in the current fiscal, with around 92,000 units.

Landmark Cars 16
Initating Coverage
 Service revenue, an annuity business, offers
predictability
The company’s after-sales service and spare parts offerings at each dealership comprise regular repair
and collision repair services, including warranty, insurance claim, and customer-paid services. LMC
operates as an authorized service centre for Mercedes-Benz, Honda, Volkswagen, Jeep, Renault, and
Ashok Leyland and provides after-sales service and repairs through 53 after-sales service and spare
outlets.

Why is after-sales service so important for Landmark?

Exhibit 33: After-Sales- predictable business

Annuity Income Optimum utilization First Mover Leveraging Technology

Advantages

•Provides a stable •Emphasis on •Acquiring exclusive •Leveraging

revenue stream and customer service brand and technology to
contributes to leads to increased distribution rights improve efficiency
higher-margin customer retention for India with and customer
•helps mitigate the and higher revenue Permagard convenience,
cyclical nature of per vehicle serviced. Automotive (USA) webiste/app allows
new vehicle sales •continued focus to (paint coating) & the customer to
optimize cost and MotorOne Car Care book service,
utilize resources (Australia) (car care) appoitments
efficiently through
sharing of premises

Source: MNCL Research, Company

As vehicles require regular and ongoing service and maintenance, service income is sustainable for
Steady revenue and high margins- dealers. Services revenue can be subdivided into two major parts: spares and labour. Revenue earned
after sales plays an extremely
important role for any auto dealer. by selling automotive components, parts, lubricants, etc., used for vehicle repair or maintenance is
considered spares revenue; the amount charged for the effort or the technical expertise required for
the vehicle repair is considered labour revenue. Parts and labour costs contribute equally to the service
revenue for PV dealers.

Exhibit 34: Number of cars serviced Exhibit 35: Average Realisation

350,000 25,000
300,000
20,000
250,000
200,000 15,000
293,569
291,040

units
21,380

Rs
271,906

19,620
239,963

150,000
17,070
221,468

16,610

10,000
209,808

14,830
14,270

100,000
5,000
50,000
- -
FY17 FY18 FY19 FY20 FY21 FY22 FY17 FY18 FY19 FY20 FY21 FY22

Source: Company, MNCL Research Source: Company, MNCL Research

The after-sales service and repair business segment contribute ~20% to total revenue from operations.
Landmark has consistently expanded its after-sales business leading to predictable growth in revenue
and superior margins. Revenues from this segment have grown at a CAGR of ~19% from FY14-FY22.

Landmark Cars 17
Initating Coverage
 Exhibit 36: After-sales revenue
7,000
5,962
6,000 5,500
LMC’s OEMs offer manufacturers’
4,834
warranties and maintenance 5,000 4,642
Rs 4,345
programmes packaged with vehicle
sales and, generally, only permit mn
4,000 3,559
warranty work to be performed at their
2,994
authorised service centres, such as 3,000 2,514
LMCs. This creates a significant barrier
2,000
to entry for new competitors.
2,000 1,469

1,000

-
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 9MFY23

Source: Company, MNCL Research

LCL’s strategy is to expand its after-sales service offerings to cater to additional customers and further
enhance its higher-margin service and repair revenues. In that regard, the company will continue to
explore with its OEM dealership partners the possibility of adding service workshops and additional
authorized service centres in the markets in which it operates.

Exhibit 37: Profitability Across Segments

Source: Company

Landmark Cars 18
Initating Coverage
 The service segment is a high-margin segment for a dealership and contributes a sizeable amount to the
overall dealer profitability. For a PV (mass and premium market) dealer, margins on the service segment
range between 45-55% (with margins on spare parts ranging from 20-30% and margins on labour ranging
from 60-80%). For a luxury PV dealer, margins on the service segment range from 50-60% (with margins
on spare parts ranging from 30-35% and margins on labour ranging from 70-80%).

Exhibit 38: Margins difference between new car sales and after-sales for Landmark
3.50% 18.30%
LMC’s after-sales service 3.00% 18.20%
provides revenue and margin
comfort during an economic 2.50% 18.10%
downturn. 2.00% 18.00%
1.50% 17.90%
%
1.00% 17.80%
0.50% 17.70%
0.00% 17.60%
FY20 FY21 FY22
-0.50% 17.50%
-1.00% 17.40%

New car sales After sales margins

Source: MNCL Research

LCL will continue to invest in sophisticated equipment and specially trained technicians to service
increasingly complex vehicles. Further, LCL has entered into a spare parts dealership agreement with
Mercedes-Benz, and it will be engaged in selling genuine parts in the aftermarket in India. LCL intends
to cater to retailers, independent workshops, authorized service centres and vehicle dealers.

Exhibit 39: After-sales revenue

12,000
10,428
10,000 9,029

8,000 7,464

Rs.mn 5,967
6,000
4,834
4,345
4,000

2,000

-
FY20 FY21 FY22 FY23E FY24E FY25E

Source: MCNL Research Estimates

Landmark Cars 19
Initating Coverage
 Comprehensive business model capturing the entire
value-chain
The Company's business caters to the entire customer value chain, including retailing new vehicles,
servicing and repairing vehicles, selling spare parts, lubricants and other products, selling pre-owned PVs
and distributing 3rd party financial and insurance products. They benefit from the synergies of these
complementary businesses as well as increased customer retention from servicing their customers’
multiple automotive needs.

Since Landmark Cars is the top dealer for Mercedes Benz in terms of retail sales for FY22 and the number
1 dealer for Jeep and Honda in terms of wholesale sales for FY22, there is ample opportunity for new
business in other segments by utilizing their synergies in complementary industries.

Exhibit 40: Across the value chain

It benefits from the synergies of these

complementary businesses and increased
customer retention from servicing
customers’ various automotive needs. For
example, each sale of a new or pre-owned
passenger vehicle allows LMC to sell the
customer an extended service contract or
a financial product such as vehicle
financing & insurance.

Source: Company, MNCL Research

Customers who purchase vehicles from Landmark trust them for providing after-sales services at their
authorized service centres through products such as extended warranties, interior cleaning of cars,
change of tyres, servicing of brake plate and gearbox, changing of lights, seat covers and various other
services.

LCL incurs very minimal costs for

selling insurance and servicing
Revenue from cross-selling financial products bottomline accretive
vehicle finance. Therefore a As a value-add to its passenger vehicle sales, LMC facilitates the sale of third-party financial products,
significant portion of the revenue
from the financial product vertical
such as insurance policies and vehicle finance, through its dealerships. Each of its dealerships offers
adds directly to the bottom line. finance and insurance from its recommended financial service providers, banks and insurance
companies with which it has commission arrangements. The company typically receives a portion of the
cost of the financing paid or the sum assured by the customer for each transaction as a fee from the
finance or insurance provider.

Around 75% of the customers opt for financing while buying cars, out of which 50% are financed via LCL,
where LCL gets 0.75-1.5% commission. LCL has tie-ups with all leading banks.
Around 90% of the customers take motor insurance through LCL, where LCL gets a 17.5% commission.
LCL has tie-ups with all leading motor insurance companies.

Landmark Cars 20
Initating Coverage
 Exhibit 41: Commission on financial products Exhibit 42: Revenue from commission

600 543
1.40%

1.20% 1.23% 1.10% 1.10% 500 436

1.13%
1.00% 1.10% 400 340
0.93% 1.03%
0.80% 0.95%
300 262
% 0.73% 233 238
Rs mn 208
0.60%
200 139
122
0.40%
100
0.20%
0
0.00%
FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Source: Company , MNCL Research Estimates Source: Company, MNCL Research Estimates

Pre-owned passenger vehicle sales – less profitable but growing

LCL uses a digital SaaS platform
for pre-owned vehicles – LMC buys and sells pre-owned passenger vehicles at each of its dealerships. The company operates on
Sheerdrive (an auto technology two business models: (1) it facilitates the sale of used vehicles through an appointed panel of agents on
start-up focused on used car a commission basis, and (2) it also takes the vehicles on its books for sale after any needed
transactions). Sheerdrive enables refurbishment. LMC also receives an incentive from OEMs for used vehicles traded in for new vehicles.
digital evaluation and real-time
used car prices. This incentive or over-allowance is available to a new car dealer and helps it close these transactions.

The use of technology in pre-owned vehicle acquisition and sales processes has improved business
efficiency. This enables the company to buy vehicles in its books and sell them through its own sales
outlets without incurring additional infrastructure and workforce costs.

Exhibit 43: Pre-owned revenue

1400
1261
1200
1029
1000 898

800
Rs mn
600

354
400
231 214
200

0
FY20 FY21 FY22 FY23E FY24E FY25E

Source: Company, MNCL Research Estimates

Landmark Cars 21
Initating Coverage
 Case study- comparing Landmark to a leading B2B
FMCG player
In order to understand how the B2B model works, we would like to use Varun Beverages and Pepsi as
an example. While not an apple-to-apple comparison, we would like to highlight the importance of a
What people consider “just a credible business partner when brands want to expand in the country.
bottler” contributes close to 85%
of Pepsi’s sales in India. PepsiCo doesn't run its own show in India. It has a loyal partner of nearly 30 years in the country, Varun
Beverages Ltd (VBL), that does all the leg work.

PepsiCo only lends its brand name, sells the concentrate that makes the beverages to VBL and spends
on brand awareness. It prefers being asset-light and doesn't want to set up manufacturing facilities in
every nook and corner of India.

It relies on its trusted ally Varun Beverages, to do all the last-mile connectivity. VBL wasn't always at the
top in PepsiCo's India business. In 2011, it contributed just 26% of PepsiCo's beverage sales in India. But
by 2021, things look significantly different. It contributed a staggering 85% of PepsiCo India's beverage
sales.

Exhibit 44: Presence Exhibit 45: Contribution o to Pepsi

40 90 85 85
80
80
30 7 70
60 51
20 45 45
2 50
27
10 40
17
1 30
1
2 5
0 20
1995 2005 2016 2021 10
States Union territories 0
CY16 CY17 CY18 CY19 CY20 CY21
Source: MNCL Research Source: MNCL Research

Like Varun Beverages, Landmark And it got here simply by virtue of convincing PepsiCo that there existed no better partner for the
doesn’t own the brand but plays a beverage giant in India. That means PepsiCo needs Varun Beverages as much as Varun Beverages needs
crucial role in last-mile connectivity PepsiCo.
for OEMS. Additionally, after-sales
service makes it indispensable for And slowly but steadily, it has gained the right to bottle and distribute almost every PepsiCo beverage,
the end customer. Given brands
looking to consolidate their
including Tropicana Slice, Gatorade, and Aquafina.
dealerships, we could see
something similar play out for There may be some scepticism about auto dealers’ importance to the OEM. But without Landmark Cars
Landmark, given its leadership or other auto dealers, the OEM could not have expanded its reach in the country. Landmark Cars offers
position, as we saw in the case of one point of contact for any consumer, from new car sales to service to pre-owned, and is the preferred
VBL when Pepsi decided to point of contact. Additionally, with OEMs wanting to reduce the number of dealers across the country,
consolidate its bottlers.
Landmark's pan-India presence and proven pedigree make it an ideal partner for any new regions or a
new OEM looking to expand its presence.

Exhibit 46: Landmarks market share with Jeep Exhibit 47: Landmarks market share with Mercedes
30.0% 26.1% 20.0% 16.4%
25.0% 15.0%
10.7%
20.0%
10.0%
% 15.0% %
10.0% 5.0%
5.0% 0.9% 0.0%
0.0% FY17 FY22
FY17 FY22

Source: MNCL Research Source: MNCL Research

Landmark Cars 22
Initating Coverage
 How Landmark Cars stack up against global peers
Exhibit 48: Peer Comparision

Source: Bloomberg, MNCL Research Estimates

While compared to global peers, landmark Cars is still very small, with just over 50 showrooms and ~50
service stations compared to global peers with more than 200 showrooms.

In developed countries, volume growth is in low single digits, while revenue contribution is more
diversified than Landmark. However, the overall profitability is noticeably lower than Landmark Cars.

Exhibit 49: Revenue breakup across years for global peers

Revenue CY12 CY13 CY14 CY 15 CY16 CY 17 CY 18 CY 19 CY 20 CY 21 CY 22
New Vehicle Sales 57% 57% 57% 58% 57% 57% 55% 52% 51% 47% 44%
Pre-owned Vehicle Sales 24% 24% 23% 23% 23% 23% 24% 26% 27% 33% 36%
Spare parts & service 15% 15% 15% 15% 15% 16% 16% 17% 16% 14% 15%
Finance & insurance sales 4% 4% 4% 4% 4% 4% 5% 5% 5% 5% 5%
Source: MNCL Research

New sales generated 43.5% of revenues, used vehicle sales 35.8%, parts and services added 15.2%,
finance & insurance 5.3%, and other revenues accounted for 0.1%. On gross profit, the most significant
contributor was parts and services with 36%, followed by finance and insurance at 27.3%, new vehicles
at 26%, and used-vehicle at 10.5%.

In terms of valuation, global companies have been serious wealth creators. Automation in America, for
instance, is the best known that listed in 1990 at a $110mn market cap, went on to an almost $13 bn
market cap. Many global auto-dealer companies have played an integral part in developing the market
for OEMs. Since for the global auto retail companies the volume growth is in low single digits, the market
is substantially matured, and hence the valuation hovers around single digits.

Importance of auto dealers

▪ Inventory management: Because of dealerships, car manufacturers can generally wholesale their
produced volume towards dealers, significantly mitigating OE ’s inventory turnover risks
regardless of the end-market demand. Over the past 12 months, when the semiconductor shortage
/ Covid control measures resulted in production uncertainties, dealers mitigated the retail delivery
volume by actively destocking and restocking inventories, and consequently, fluctuations in retail
volume were less than production/wholesale.
▪ Network capex: China has 600+ cities, and to fulfil all the demand, carmakers must extend the sales
network nationwide. For example, Mercedes has one localized production base for passenger
vehicles in Beijing but has 700+ dealerships across mainland China. By comparing the OE ’s capacity
expansion capex versus the dealership’s network expansion capex, we conclude that the capex
required for production and retail is around the same level. Therefore, if the OEM wants to adopt
the direct selling model, it would require doubling capex to include the self-owned and dealer
channels.

Landmark Cars 23
Initating Coverage
 Company Overview
Incorporated in 1998, LCL is India's leading premium car retailer, with more than 50 showrooms. It
primarily caters to Mercedes-Benz, Honda, Jeep, Volkswagen, Renault and BYD in the PV segment and
the CV retail business of Ashok Leyland. The company has a presence across the automotive retail value
chain, including sales of new vehicles, after-sales service and repairs (including spare parts, lubricants
and accessories), sales of pre-owned passenger vehicles and facilitation of the sales of third-party
finance and insurance products.

The company's vehicle dealership network is spread across 32 cities in eight states and union territories,
including Maharashtra, Uttar Pradesh, Gujarat, Haryana, Madhya Pradesh, Punjab, West Bengal and the
National Capital Territory of Delhi. These states and union territories constituted approximately 51% of
Indian vehicle demand in FY22.

Exhibit 50: Long-Standing OEM Relations

Vehicles sold in Fiscal year first dealership Landmark market
OEM Geographic Network Market Position in India
FY22. established share

Gujarat, Madhya Pradesh,

Mercedes Benz 1984 2008 Number 1 (for fiscal 2022) 16.50%
Maharashtra, West Bengal

Honda 5282 Gujarat, Madhya Pradesh 1998 Number 1 (for fiscal 2022) 6.20%

Punjab, Delhi, Maharashtra,

Jeep 3121 2017 Number 1 (for fiscal 2022) 26.10%
Haryana, UP

Volkswagen 2405 Haryana, Delhi, Gujarat 2009 Number 1 (for CY 2021) 7.80%

Renault 4750 Punjab, Haryana, Maharashtra 2016 Number 3 (for CY 2021) 5.40%

BYD 13 Delhi, Mumbai 2022 NA NA

Ashok Leyland 1709 Gujarat 2012 NA NA

Source- MNCL Research, Company

Landmark Cars 24
Initating Coverage
Exhibit 51: Structure

Source: Company, MNCL Research

Exhibit 52: Revenue streams

Landmark cars

Commission Vehicle servicing Pre owned

New car Sales Others
(Agency Model) and spare parts business

FY22 Revenue FY22 Revenue FY22 Revenue FY22 Revenue FY22 Revenue
Rs. 23,035mn Rs.311mn Rs. 5,967mn Rs. 214mn Rs.238mn

Source: Company, MNCL Research

Landmark Cars 25
Initating Coverage
Exhibit 53: Board of Directors

Source: Company, MNCL Research

Exhibit 54: SWOT Analysis -

Strength Weakness
•Brand relations •Dependence on key states of Maharashtra and Gujarat
•Strong Entry barriers •Lack of Bargaining power with brands
•Annutiy business
•robust revenue drivers
•Diversified OEM clients
•Promoter pedigree
SWOT Analysis

Opportunity Threat
•Growing Demand for Luxury Cars in India •OEMS doing away from dealership model
•Changing consumption pattern in India •negative brand perception of key brand
•Economic downturns

Source; Company, MNCL Research

Landmark Cars 26
Initating Coverage
 Financial Analysis
Exhibit 55: Revenue growth (Rs mn)
60,000
50,772
50,000
41,484
40,000
32,957
29,765
30,000
22,186
19,561
20,000

10,000

-
FY20 FY21 FY22 FY23E FY24E FY25E
Source: MNCL Research Estimates

We expect the company to post revenue growth of 19% CAGR over FY22-25E. We expect the growth to
be driven by growth across all verticals. New car sale is expected to post a growth of 18% over the same
period (commission model), while service is expected to post a growth of 20% over the same period.
While finance income and pre-owned vehicles are expected to grow at 32% and 80%, respectively, over
the same period.

Exhibit 56: EBITDA (Rs mn) and OPM growth

4,000 3,658 8.0%

3,500 7.0%

3,000 2,865 6.0%

2,500 2,237 5.0%

2,000 1,747 4.0%

1,500 3.0%
1,098
1,000 729 2.0%

500 1.0%

- 0.0%
FY20 FY21 FY22 FY23E FY24E FY25E

Source: MNCL Research Estimates

We expect the company to post an EBITDA growth of 28% over FY22-25E, while margins will likely to
sustain at close to improve by 130bps to 7.2%. Margins to improve on the back of better operational
efficiency an and increase in after-sales revenue.

Landmark Cars 27
Initating Coverage
 Exhibit 57: PAT growth (Rs mn)
2000 1811

1500
1242

1000 834
662

500
111
0
FY20 FY21 FY22 FY23E FY24E FY25E

-500 -289

Source: MNCL Research Estimates

We expect the company to post a PAT growth of 40% over the same period.

Exhibit 58: Return ratios

35.0%
30.9% 29.4%
30.0% 25.3%
24.1%
25.0% 25.3%

20.0%
21.8%
20.1% 19.1%
15.0%
9.0%
10.0%

5.0% 6.4%
1.2%
0.0% 0.0%
FY20 FY21 FY22 FY23E FY24E FY25E

ROE ROCE

Source; MNCL Research Estimates

Exhibit 59: DuPont Analysis

DuPont Analysis FY20 FY21 FY22 FY23E FY24E FY25E
Profit to sales -1.30% 0.57% 2.22% 2.53% 2.99% 3.57%
Sales to assets 2.67 2.27 3.02 2.95 3.54 4.05
Asset to Equity 4.92 4.90 4.60 3.23 2.38 2.04
ROE NA 6.4% 30.9% 24.1% 25.3% 29.4%
Source: MNCL Research Estimates

Landmark Cars 28
Initating Coverage
 Valuation – a sustainable business model deserves a
premium
The Company is one of the country's only few pan-India auto dealers, spreading its wings meticulously.
The Company's business caters to the entire customer value chain, including retailing new vehicles,
servicing and repairing cars, selling spare parts, lubricants, and other products, selling used passenger
vehicles, and distributing third-party financial and insurance products.

The dealership model will become increasingly important for car makers as OEMs enrich their product
portfolio and expand the selling network. From the car manufacturer’s perspective, dealers are
meaningful in terms of

1. inventory management,
2. lower capex in network expansion,
3. optimization of the local sales / aftersales operations,
4. flexibility in retail-end pricing management.

Given the robust growth plans laid out by a few landmark key brands, the Company remains a strong
proxy for growth in the luxury market.
Additionally, Landmark has established robust business processes which assist them in reducing costs
and increasing efficiency and ensuring faster operationalization of new facilities. These processes allow
the company to replicate their successes as they expand organically and in the new businesses it
acquired.

Exhibit 60: Revenue and margin break up

Particulars FY20 FY21 FY22
Sales Volume (units)
Number of new vehicles sold 16,456 13,282 19,264
Number of vehicles serviced 291,040 221,468 279,078

Vehicles Sales and Other Operating Income (Rs mn)

New vehicles 16,912 14,723 23,035
Commission income - - 311
Financial products 208 139 238
Pre-owned vehicles sold 231 354 214
Total Vehicles sales and other operating income 17,352 15,216 23,799
EBITDA -96.93 368 683
EBITDA margin -0.6% 2.4% 2.9%

After Sales Service and Spare Parts Revenue (Rs mn)

Total Revenue 4,834 4,345 5,967
EBITDA 866 771 1,085
EBITDA margin 17.9% 17.7% 18.2%

Less Unallocable income 40 41 21

Total EBITDA 729 1,098 1,747

Total EBITDA margin 3.3% 5.6% 5.9%

Source: MNCL Research

Landmark Cars 29
Initating Coverage
 We expect the Company to post revenue growth of 19% CAGR over FY22-25E, while EBITDA will likely grow
at 28% during the same period. We expect margins to increase by 130bps over the same period to 7.2%.
At the same time, PAT is likely to grow at a CAGR of 40% over the same period. At a current price of Rs
601, the stock is trading at 19x FY24E and 13x FY25E, our earnings estimate. we value the Company at
18x FY25E earnings estimate of Rs 46. post, which we arrive at our target price of Rs.830, an upside of
c.38% from current levels.

We value the company higher than its global peers; given higher volume growth, the luxury segment
being still nascent, and a few select dealerships in India offer end-to-end services. Landmark Car’s
success is predicated on its customer-centric business implementation, consistently high operational
efficiency, and on-track network expansion, which positions the company favourably to achieve topline
growth and profit expansion.

Key risks to our thesis

Economic Slowdown
An economic slowdown could hamper the demand for the company’s products, which are
discretionary in nature.

Negative brand perception

Any damage to these brands or their failure to compete effectively in India could materially adversely
affect the company’s business, results of operations and financial condition

Landmark Cars 30
Initating Coverage
 Financials (Consolidated)

Quarterly Statement
Y/E March (Rs mn) 3QFY22 Q1FY23 Q2FY23 Q3FY23

Particulars
Net sales 8,371 8,003 8,521 8,761
Cost of Raw materials consumed 7,007 6,618 7,028 7,217
Staff cost 444 450 479 455
Other operational expenses 402 424 405 440
Operating Profit (Core EBITDA) 518 511 610 649
Depreciation 172 208 218 219
EBIT 346 303 391 430
Interest 88 123 148 138
Other Revenue/Income 21 16 36 84
Exceptional item - - 40 63
Profit Before Tax 280 196 240 313
Tax 88 15 71 55
Profit After Tax 191 180 169 258

Margin (%)
EBITDA 6% 6% 7% 7%
EBIT 4% 4% 5% 5%
PAT 2% 2% 2% 3%

Landmark Cars 31
Initating Coverage
 Income Statement
Y/E March (Rs mn) FY20 FY21 FY22 FY23E FY24E FY25E
Revenues 22,186 19,561 29,765 32,957 41,484 50,772
Materials cost 18,949 16,474 25,117 27,289 34,349 41,988
% of revenues 85% 84% 84% 83% 83% 83%
Employee cost 1,367 1,077 1,532 1,761 2,114 2,536
% of revenues 6% 6% 5% 5% 5% 5%
Others 1,141 912 1,369 1,671 2,157 2,589
% of revenues 5% 5% 5% 5% 5% 5%
EBITDA 728.8 1,098.2 1,746.9 2,236.7 2,864.6 3,657.9
EBITDA margin (%) 3.3% 5.6% 5.9% 6.8% 6.9% 7.2%
Depreciation & Amortisation 629.5 624.8 697.9 894.9 1050.5 1224.2
EBIT 99 473 1,049 1,342 1,814 2,434
Interest expenses 448.9 378.1 352.2 440.4 378.4 272.2
PBT from operations -350 95 697 901 1,436 2,161
Other income 103.2 102.4 125.9 210.0 220.5 253.6
Exceptional items 0 - - - - -
PBT -246 198 823 1,111 1,656 2,415
Taxes 43 86 161 278 414 604
Effective tax rate (%) -17% 44% 20% 25% 25% 25%
Reported PAT -289 111 662 834 1,242 1,811
Adjusted PAT -289 111 662 834 1,242 1,811
Source: MNCL Research Estimates

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 Balance Sheet
Y/E March (Rs mn) FY20 FY21 FY22E FY23E FY24E FY25E

SOURCES OF FUNDS

Equity Share Capital 183 183 183 198 198 198

Reserves & surplus 1,508 1,635 2,286 4,236 5,198 6,729

Shareholders' fund 1,691 1,818 2,469 4,434 5,396 6,927

Minority Interest 7.8 6.0 13.1 13.1 13.1 13.1

Lease and Liablity 1,233 1,028 1,864 1,864 1,864 1,864

Total Debt 1846 2163 2554 1854 1354 1000

Def tax liab. (net) 14 9 6 6 6 6

Total Liabilities 4,793 5,024 6,906 8,171 8,632 9,809

Gross Block 2,372 2,395 2,861 3,399 3,899 4,399

Less: Acc. Depreciation 257 494 714 1,156 1,663 2,235

Net Block 2,114 1,901 2,146 2,243 2,236 2,164

Right to use 1,311 1,096 2,089 1,636 1,092 440

Capital WIP 0 7 38 - - -

Other Intangible assets 51 41 269 269 269 269

Goodwill 232 232 478 478 478 478

Other Non-Current Assets 568 231 228 228 228 228

Investments 102 130 165 165 165 165

Net Fixed Assets 4,379 3,636 5,414 5,019 4,469 3,744

Inventories 2,258 2,888 3,299 3,973 4,546 5,564

Sundry debtors 236 558 642 722 909 1,113

Cash 333 227 300 610 954 1,714

Loans & Advances 149 563 334 334 334 334

Other assets 963 1,006 865 800 735 670

Total Current Asset 3,939 5,243 5,440 6,440 7,479 9,395

Trade payables 557 1,002 1,449 1,346 1,506 1,726

Other current Liab. 2,968 2,852 2,499 1,942 1,809 1,604

Provisions - - - - - -

Net Current Assets 414 1,388 1,492 3,152 4,164 6,065

Total Assets 4,793 5,024 6,906 8,171 8,632 9,809

Source: MNCL Research Estimates

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 Key Ratios
Y/E March FY20 FY21 FY22 FY23E FY24E FY25E

Growth Ratio (%)

Revenue -21.5% -11.8% 52.2% 10.7% 25.9% 22.4%

EBITDA -9.6% 50.7% 59.1% 28.0% 28.1% 27.7%
Adjusted PAT NA NA 493.7% 26.0% 49.0% 45.8%
Margin Ratios (%)
EBITDA 3.3% 5.6% 5.9% 6.8% 6.9% 7.2%
PBT from operations -1.1% 1.0% 2.8% 3.4% 4.0% 4.8%
Adjusted PAT -1.3% 0.6% 2.2% 2.5% 3.0% 3.6%
Return Ratios (%)
ROE NA 6.4% 30.9% 24.1% 25.3% 29.4%
ROCE 1.2% 9.0% 20.1% 19.1% 21.8% 25.3%

Turnover Ratios (days)

Gross block turnover ratio (x) 9.4 8.2 10.4 9.7 10.6 11.5
Debtors 4 10 8 8 8 8

Inventory 37 54 40 44 40 40
Creditors 11 22 21 18 16 15
Cash conversion cycle 30 42 27 34 32 33
Solvency Ratio (x)
Net debt-equity 0.9 1.1 1.0 0.3 0.1 (0.1)
Debt-equity 1.1 1.2 1.0 0.4 0.2 0.1

Interest coverage ratio 0.5 1.5 3.3 3.5 5.4 9.9

Gross debt/EBITDA 2.5 1.9 1.4 0.8 0.4 0.2
Current Ratio 0.8 1.0 0.9 1.4 1.7 2.3

Per share Ratios (Rs)

Adjusted EPS (7.9) 3.0 16.7 21.1 31.4 45.7
BVPS 46.2 49.6 62.4 112.0 136.3 175.0

CEPS 9.3 20.1 34.3 43.7 57.9 76.7

DPS - - - 5.0 6.0 6.0
Valuation (x)*

P/E (adjusted) NA NM 35.9 28.5 19.2 13.1

P/BV 11.7 10.9 8.9 5.4 4.4 3.4
EV/EBITDA 29.2 19.8 14.9 11.2 8.5 6.3

Source: MNCL Research Estimates

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 Cash Flow
Y/E March (Rs mn) FY20 FY21 FY22 FY23E FY24E FY25E
Operating profit bef working 805 1,164 1,788 2,447 3,085 3,911
capital changes
Trade and other receivables 540 (327) (88) (81) (187) (204)
Inventories 1,140 (631) (394) (674) (573) (1,018)
Trade payables (107) 479 343 (103) 160 220
Changes in working capital 2,129 430 1,002 1,097 2,416 2,770
Direct taxes (32) (3) (238) (278) (414) (604)
Cash flow from operations 2,097 428 764 819 2,002 2,167
Net Capex (224) (148) (415) (500) (500) (500)
Others (435) (72) 76 - - -
Cash flow from investments (659) (220) (339) (500) (500) (500)
FCF 1,437 207 425 319 1,502 1,667
Issue of share capital - - - 1,365 - -
Increase/(decrease) in debt (708) 291 371 (700) (500) (354)
Dividend - - (14) (234) (280) (280)
Cash flow from financing (1,483) (334) (375) (9) (1,159) (907)
Net change in cash (45) (127) 50 310 344 760

Source: MNCL Research Estimates

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