Established in 1989, Fiem Industries Limited (“Fiem Industries” or the “Company”) manufacture automotive lighting & signaling equipments and rear view mirrors. As part of its diversification strategy, the Company has entered into LED luminaries for indoor and outdoor applications and integrated passenger information system for railways & buses. The Company is also among first companies in India introducing LED lights in two wheelers.
KEY FINANCIAL FIGURES (In Rs. Cr.)
|
FY2013 |
FY2014 |
FY2015 |
Total Income from Operations |
606.42 |
720.47 |
825.47 |
Expenses |
536.11 |
632.08 |
722.72 |
EBITDA |
70.32 |
88.39 |
102.74 |
Depreciation |
18.35 |
21.79 |
30.72 |
Finance Costs |
12.97 |
14.45 |
12.05 |
Other income |
0.35 |
0.67 |
0.90 |
Exceptional items |
0.00 |
0.00 |
0.00 |
PBT |
39.36 |
52.81 |
60.88 |
Tax |
11.63 |
15.54 |
18.40 |
PAT (before Minority Interest and share of Associates) |
27.72 |
37.27 |
42.47 |
Profit attributable to Minority Interest |
0.00 |
0.00 |
0.00 |
Share of profit of Associates |
0.00 |
0.00 |
0.00 |
Consolidated Profit / (Loss) |
27.72 |
37.27 |
42.47 |
KEY BALANCE SHEET FIGURES (In Rs. Cr.)
|
FY2013 |
FY2014 |
FY2015 |
Share Capital |
11.96 |
11.96 |
11.96 |
Reserves & Surplus |
156.11 |
184.89 |
215.32 |
Net worth (shareholders funds) |
168.07 |
196.85 |
227.28 |
Long Term Borrowings |
76.18 |
57.96 |
51.47 |
Current liabilities |
162.26 |
171.62 |
192.95 |
Other long term liabilities and provisions |
2.52 |
1.14 |
2.01 |
Deferred tax liabilities |
24.21 |
27.51 |
27.61 |
Total Liabilities |
433.25 |
455.08 |
501.32 |
|
FY2013 |
FY2014 |
FY2015 |
Fixed Assets |
294.14 |
313.07 |
339.09 |
Noncurrent Investments |
0.02 |
0.02 |
0.02 |
Current assets |
131.14 |
136.42 |
154.41 |
Long term advances and other noncurrent assets |
7.96 |
5.57 |
7.80 |
Total assets |
433.25 |
455.08 |
501.32 |
RATIO ANALYSIS (In %)
|
FY2013 |
FY2014 |
FY2015 |
Operating Profit Margin Ratio |
11.60 |
12.27 |
12.45 |
Net Profit Margin Ratio |
4.57 |
5.17 |
5.14 |
ROCE |
28.79 |
34.69 |
36.86 |
ROE / RONW |
16.49 |
18.93 |
18.69 |
Current Ratio |
0.81 |
0.79 |
0.80 |
Debt/Equity Ratio |
0.45 |
0.29 |
0.23 |
Interest Coverage |
5.42 |
6.12 |
8.53 |
VALUATION ANALYSIS
|
FY2013 |
FY2014 |
FY2015 |
Total Income from Operations (Rs. Cr) |
606.42 |
720.47 |
825.47 |
Growth (%) |
– |
18.81 % |
14.57 % |
PAT (Rs. Cr) |
27.72 |
37.27 |
42.47 |
Growth (%) |
– |
34.45 % |
13.95 % |
Earnings Per Share – basic |
23.17 |
31.16 |
35.51 |
Earnings Per Share – diluted |
23.17 |
31.16 |
35.51 |
Price to Earnings |
8.35 |
13.31 |
18.01 |
INVESTMENT RATIONALE
Diversified Product Portfolio
With its wide range of products, the Company is the market leader in the scooter segment with 85% market share. The Company’s major markets include UK, Italy, Germany, Indonesia, Japan and Australia.
Capex Plans
Fiem Industries has set up a new manufacturing facility in Gujarat for manufacturing of automotive lighting and plastic parts etc. The Company will supply the production to newly setup plant of Honda in Gujarat. This facility has started its commercial production from the month of January 2016.
Fiem Industries is also expanding its capacity in Tapukara plant (Rajasthan) for manufacturing of LED lighting products such as LED bulbs, LED street lights, LED tubes etc. The Company is expanding its capacity in LED segment to 2 lakhs bulbs per day from the present capacity of 60,000 bulbs per day, 500 street lights per day to 1,000 street lights per day and 1,000 down lighters per day.
Strong Client Base
Fiem Industries has a strong client base of more than 50 OEMs and has significant market share for supply of automotive lighting & signaling equipments and rear view mirrors to two-wheeler and four-wheeler OEMs. The Company exports automotive lighting to Honda Japan, Kubota Japan (Tractors & Farm equipments) besides exporting to Austria, UK, Germany, Thailand, Indonesia & Vietnam.
Top Clients
- Two Wheelers Segment (accounts for 94.40 % of revenue) – Honda, TVS, Suzuki, Yamaha, Mahindra, Harley Davidson
- Four Wheelers Segment (accounts for 5.60 % of revenue) – Tata Motors, Force Motors, Honda, GM, Hyundai, Daimler, Mahindra Reva
Entry into LED Lighting – Fastest Growing Segment
The LED market has emerged as one of the fastest growing industries in India. According to a report – India LED Lighting Market (2015 – 2021) by 6Wresearch, India LED Lighting market is projected to reach Rs. 21,600 Cr. by 2020 from Rs. 1,925 Cr. in FY 2013.
Fiem Industries has diversified into the LED lighting business and has developed more than 100 products and developing more and more LED lights to attain significant market share in the coming years.
Company’s Progress on LED Bulb Orders with Energy Efficiency Services (a Joint Venture Company of PSUs under power ministry)
Integrated Passenger Information System Segment
IPIS also provides huge opportunity in Indian Railways and State Transport Buses. IPIS is a computer based electronic system providing audio and visual information to passengers through multiple displays spanning over the entire station and coaches.
The Company has successfully installed this Passenger Information System in many DTC buses in Delhi operating at different routes and has also installed the same in many of the school buses of Delhi Public School, GD Goenka School, PP international school, Dynasty International School, Manav Rachna International School etc.
The Company has also received approval for IPIS with LED Display from Ministry of Railways – Research Design and Standard Organization. Fiem Industries is looking for big business opportunities from Railways, Central & State Government, Metro, Overseas Market etc.
INVESTMENT CONCERNS
Client Concentration Risk
A significant portion of Fiem Industries’s auto component revenue comes from two clients namely Honda and TVS Motors (45% and 26% of revenue). Any slowdown in off take from these two clients can hurt its revenue significantly.
Overdependence on 2 Wheeler OEMs
Fiem Industries gets about 94% of its revenue from 2 wheeler OEMs. Any slowdown in 2 wheeler segment could adversely impact its growth especially as its presence in 4 wheeler segment is small.
Failure to Gain Share in Led Luminaries
Though the underlying drivers for the LED segment continue to remain intact, slower off-take from Government agencies in implementation of LED lighting, competition from global competitors like China, who has become a global manufacturing hub for LED/ electrical components could cap the potential upside from this segment.