Fiem Industries Ltd

IIFL Investment Ideas CMP: Rs 1,010; 1 year Target: Rs 1,298

Sector: Auto Ancillary Proxy play on 2W growth story, Demonetization in the rear view mirror
Fiem Industries Ltd has a core automotive operation (lighting, signaling,
mirrors, etc) with focus on 2-wheelers (2W). Its key clients - Honda
BUY Motorcycle and Scooter India (HMSI) and TVS Motors - account for a giant
Upside: 28.5% share of the revenue. With the impact of demonetization out of the way, we
expect the two clients to resume their growth momentum. Its products,
Stock Data especially for HMSI, are inclined towards the scooter segment, which has
Sensex: 29,337 driven Fiems revenue so far and are expected to drive growth going forward.
52 Week h/l (Rs): 1,510/ 736 The outlook for the overall 2W industry and the scooter segment remains
Market cap (Rs Cr) : 1,330 positive with key clients expected to outpace industry growth rate.
532768
BSE code: LED business reset
NSE code: FIEMIND Fiem was one of the earlier entrants in the Indian LED lighting industry and
FV (Rs): 10 was purely catering to the B2B segment by supplying LED lights to EESL. It has
Div yield (%): 0.79 entered into a Joint Venture (JV) with Su-Kam Power Systems to leverage on
the latters distribution network, providing access to the B2C segment. With
price of LED in EESL tenders showing an uptick, we expect Fiem to increase its
Shareholding Pattern
Sep-16 Dec-16 Mar-17
EESL participation and thereby utilize its recently added capacity.
Promoters 63.6 63.6 63.6 New businesses, JV in the pipeline provide comfort
DII+FII 28.3 28.1 26.8 Fiem has multiple JVs in the pipeline that will provide support to its core
Individuals 8.1 8.3 9.6 automotive business. It has developed canisters with technical assistance
Source: www.bseindia.com from Aisan (Japan) and has secured orders for the same. Additionally, other
Share Price Trend agreements for JVs, which are yet to materialize, are seeing positive traction
that will enable Fiem to foray into key locks, mirrors, outside handles, and
automotive switches. Its ability to build strong relationships with its clients
should enable it to successfully scale these businesses.
Outlook & Valuation
We believe that Fiem is poised to benefit from the recovery in production
volumes of its key clients. Its renewed approach to scale up its LED business
along with fructifying of new businesses will aid revenue growth. Moreover,
Prices as on 19/04/2017
Fiem has a strong balance sheet and with lower capex going forward, we
expect the Free Cash Flow to improve. At CMP, the stock trades at 15.6x its
FY19E earnings. We have a BUY recommendation for the stock with a target
price of Rs 1,298 based on exit multiple of 20.0x.
Financial Summary
Consolidated Rs Cr. FY15 FY16 FY17E FY18E FY19E
Revenue 825 988 1,052 1,273 1,514
EBITDA 103 127 129 158 192
EBITDA% 12.4 12.9 12.2 12.4 12.7
PAT 42 57 49 66 85
EPS Rs 32.3 43.6 37.3 50.1 64.9
Analyst- Milan Desai P/E 31.3 23.2 27.1 20.2 15.6
research@iifl.com
ROE % 19.9 22.1 11.9 14.2 16.2
April 20, 2017 ROCE % 23.1 26.1 17.7 18.1 20.4
Source: Company, IIFL Research
 Fiem Industries Ltd
IIFL Investment Ideas

Company Background
Fiem Industries Ltd is one of the largest manufacturers of automotive lighting and signaling equipment &
rearview mirrors in India. The Automotive segment accounts for 88.5% of its revenue with product offering
that include head & tail lamps, signaling lamps, roof lamps, rearview mirrors, wheel covers, rear fender &
frame assembly, mudguards and various sheet metal and plastic parts. 2W account for 95% of automotive
revenue and key clients HMSI and TVS Motors account for 44.5% and 25.3% of automotive revenue,
respectively. LED business, which includes Integrated Passenger Information System (IPIS), accounts for
11.5% of total revenues.

Revenue Break-up (FY16)

Automotive
Lights, signaling
equipment and
11.5% parts
Rear View
Mirror and
6.4% Parts

Plastic
12.6% Moulded Parts

57.1%
Others

12.4%

LED

FIEM is a 2W focused company with HMSI and TVS Motor accounting for majority of the revenues (FY16)

3.6%
5%
9.8%

16.9% 44.5%

95% 25.3%

HMSI TVS Motor Other OEMs Aftermarket Exports

2W 4W
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Buy Absolute return of over +10%

Accumulate Absolute return between 0% to +10%
Reduce Absolute return between 0% to -10%
Sell Absolute return below -10%

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