Landmark Cars Vs Popular Vehicles: Which Auto Retailer Should You Bet On?
NDTV Profit Research analyses their business, sales mix and financials.
Popular Vehicles and Services Ltd. became India's second automobile retailer after Landmark Cars Ltd. to get listed on the bourses.
Landmark Cars listed in December 2022 and is up 55% since then, while Popular Vehicles started trading on the bourses recently at a 6% discount to its issue price of Rs 295 apiece.
Of the two, which stock should be kept in the portfolio? NDTV Profit Research takes a look at both the companies, the automakers they work with, their sales mix across categories, dealerships and their financials.
Automotive Retailers — What They Do
Landmark Cars largely operates in the premium-to-luxury segment and is India’s first listed multi-brand, multi-location auto retailer. It is the number one partner of Mercedes in India, and sells 16 out of every 100 Mercedes cars sold in India. The company also has dealerships for automobile brands like Honda Motors, Jeep, Volkswagen, etc.
On the other hand, Popular Vehicles operates in the mass-to-premium category, and mainly works with brands such as Maruti Suzuki India Ltd. and Honda Motors. They also work with Jaguar Land Rover, but the share of the same is low due to its operations in the luxury segment. Sales from Maruti Suzuki dominate the total vehicles sold by the company, with the share being at 64% of all cars sold by them.
Revenue And Sales Mix
Most auto retailers in India have multiple sources of revenue, with sales of new cars being the primary contributor. The other sources mainly include after-sales services and pre-owned vehicles.
The pre-owned vehicles segment offers an interesting comparison between Landmark and Popular, with Popular gaining roughly 7% of total revenue from this segment versus a measly 2% for Landmark for the first six months of FY24.
Ebitda margin across segments has been similar for both players.
Dealerships And Presence
Landmark Cars has presence across nine states and is working on adding Telangana as the newest addition to its existing presence. They currently operate 117 outlets across 27 cities. More than 100 of these outlets are spread across their four main brands, namely Mercedes, Honda, Jeep and Volkswagen.
Popular Vehicles is more South India-centric and has presence across three states and operates 130 outlets across 43 cities. The lion's share of sales are for Maruti Suzuki, followed by Honda Motors.
Financials
While Popular Vehicles has higher revenue, vehicle sales and showrooms as compared with Landmark Cars, it lags on a profitability basis.
In terms of gross profit, which removes variable costs from total revenue, Landmark Cars is at 20% while Popular Vehicles is at 15%. Generally, the industry reports lower gross margin as compared with industries like FMCG.
This also leads to higher Ebitda margin for Landmark Cars versus Popular Vehicles. This is key as Ebitda margin tells us about the operating profitability of the company. With the luxury car market set to grow only upwards, despite low penetration in India, this augurs well for Landmark Cars.
While Popular Vehicles also has showrooms of Jaguar Land Rover, the scale is yet to materialise with only two showrooms as of September 2023.
Valuations Profile
On comparing both the companies on a price-to-earnings basis, it suggests premium valuations for Landmark Cars as compared with Popular Vehicles.
The premium valuation for Landmark Cars is on its higher exposure to the premium-to-luxury segment. ICICI Securities is positive on Landmark Cars, with its long standing marquee OEM relationships, diversification efforts including pre-owned car business and healthy financial profile.
Landmark Cars has also commenced operations with MG Motors India Pvt., BYD and has recently signed an agreement with Mahindra & Mahindra Ltd. as well.
For Popular Vehicles, it will be key to see their expansion in the three-wheeler and two-wheeler space, with partnerships with Piaggio and Ather for selling their respective vehicles.
The Verdict
The passenger vehicle market sold upwards of 40 lakh vehicles in calendar year 2023. When we compare the luxury car market with the overall passenger vehicle market, it constitutes less than 2% of sales. This indicates the large addressable market and premiumisation trend to play out over the years to come.
With only a few listed automobile manufacturers of scale like Maruti Suzuki India, Tata Motors Ltd. and Mahindra & Mahindra, the opportunity to play the theme via automobile retailers presents an alternate investing proposition.
