IKIO Lighting: Execution ramp up in the offing

20 Mar 2024 , 11:50 AM

• IKIO is the leading ODM player in the LED lighting segment in India and has also established presence in the non-lighting segment off late. It has four manufacturing facilities and boasts of robust backward integration – share of in-house manufacturing in BoM at >50%.
• IKIO serves a wider market with its extensive product line (1,000+ SKUs) in LED lighting, commercial refrigeration lights, and RV offerings. Prioritizing the introduction of new products and maintaining relationships with existing customers has allowed IKIO to increase its market share while also increasing its overall gross margin by about 300bps between FY20 and FY23.
• IKIO’s export revenue witnessed significant growth in past 3-4 years to reach ~15% of the mix in FY23 (vs ~10% in FY22). It aims to further increase its presence in the international markets across verticals especially GCC, US, Europe and SEA, and is building on relationships with established MNCs like Phillips, Honeywell to achieve the same.
• Steadfast to remain in the B2B ODM business, IKIO plans on entering new product lines in the Electronics category where it can add value and earn high margins (OPMs of ~22%) and is focussed on enhancing capabilities by further investing in capex (~Rs2.2bn) and expects fixed asset turns of 5- 6x over the next 3-4 years.
• Exposure to a single segment, high customer concentration risk (Phillips makes up ~45-50% of overall revenue) and growth challenges in the lighting segment remain key risks, ramp up in the non-lighting electronics segment remains to be seen. The stock currently trades at 34x TTM EPS.