CMP 687.00 Target Price 770.00 ISIN: INE737H01014 DECEMBER 9 th . 2015 FIEM INDUSTRIES LIMITED Result Update (PARENT BASIS): Q2 FY16 BUY Index Details Stock Data Sector Auto Components BSE Code 532768 Face Value 10.00 52wk. High / Low (Rs.) 945.30/475.00 Volume (2wk. Avg. Q.) 21000 Market Cap (Rs. in mn.) 8217.89 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 8247.74 9270.46 10197.51 EBITDA 1033.35 1175.19 1307.56 Net Profit 422.64 487.36 546.10 EPS 35.33 40.74 45.65 P/E 19.44 16.86 15.05 Shareholding Pattern (%) (QUARTERLY) As on Sep-15 As on Jun-15 PROMOTER 69.96 69.96 FIIs 5.14 4.98 DIIs 1.68 3.16 OTHERS 23.22 21.90 1 Year Comparative Graph FIEM INDUSTRIES LIMITED BSE SENSEX SYNOPSIS Fiem Industries Ltd is one of the leading manufacturers of automotive lighting & signaling equipments & rear view mirrors. During the quarter, Company’s net profit stood at Rs. 125.42 million against Rs. 106.71 million in the corresponding quarter of previous year. An increase of 17.53% y-o-y. In Q2 FY16, Net sales rose by 12.18% and stood at Rs. 2361.14 million when compared to Rs. 2104.70 million in Q2 FY15. Operating profit or EBITDA is Rs. 296.71 million as against Rs. 259.02 million in the corresponding period of the previous year, registered a growth of 14.55%. Profit before tax (PBT) stood at Rs. 183.45 million, an increase of 18.71% y-o-y in Q2 FY16 compared to Rs. 154.54 million in Q2 FY15. Other income jumps to Rs 3.79 million for the 2 nd quarter ended of FY16 from Rs 0.48 million for the end 2 nd quarter ended of FY15. Company has signed a Memorandum of Understanding with Asian Industry Co., Ltd., Japan for joint work to explore and gain the business of “Canister”. Net sales for the half year ended of FY16 stood at Rs. 4395.34 million, rose by 12.88% as compared to Rs. 3893.94 million for the half year ended of FY15. In H1 FY16, the company’s net profit grew by 17.68% of Rs. 220.66 million as compared to Rs. 187.51 million in H1 FY15 Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Fiem Industries Ltd. 687.00 8217.89 35.33 19.44 3.85 70.00 Automotive Axles Ltd. 686.00 10366.80 17.34 39.56 3.43 10.00 Rane Madras Ltd. 358.00 3762.80 11.16 32.08 2.59 45.00 Amara Raja Batteries Ltd. 838.90 143294.60 26.30 31.90 4.83 361.00
SYNOPSISFiem Industries Ltd is one of the leadingmanufacturers of automotive lighting & signalingequipments & rear view mirrors.During the quarter, Company’s net profit stood at Rs.125.42 million against Rs. 106.71 million in thecorresponding quarter of previous year. An increase of17.53% y-o-y.In Q2 FY16, Net sales rose by 12.18% and stood at Rs.2361.14 million when compared to Rs. 2104.70million in Q2 FY15.Operating profit or EBITDA is Rs. 296.71 million asagainst Rs. 259.02 million in the corresponding periodof the previous year, registered a growth of 14.55%.Profit before tax (PBT) stood at Rs. 183.45 million, anincrease of 18.71% y-o-y in Q2 FY16 compared to Rs.154.54 million in Q2 FY15.Other income jumps to Rs 3.79 million for the 2ndquarter ended of FY16 from Rs 0.48 million for the end2nd quarter ended of FY15.Company has signed a Memorandum of Understandingwith Asian Industry Co., Ltd., Japan for joint work toexplore and gain the business of “Canister”.Net sales for the half year ended of FY16 stood at Rs.4395.34 million, rose by 12.88% as compared to Rs.3893.94 million for the half year ended of FY15.In H1 FY16, the company’s net profit grew by 17.68%of Rs. 220.66 million as compared to Rs. 187.51 millionin H1 FY15Net Sales and PAT of the company are expected togrow at a CAGR of 14% and 19% over 2014 to 2017Erespectively.PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Rane Madras Ltd. 358.00 3762.80 11.16 32.08 2.59 45.00
Amara Raja Batteries Ltd. 838.90 143294.60 26.30 31.90 4.83 361.00
Recommendation & Analysis - ‘BUY’For the 2nd quarter of accounting year 2015-16, Fiem Industries Ltd posted a 12.34% growth in total income(including other income) to Rs. 2364.93 million from Rs. 2105.18 million in previous year period. Net profitstood at Rs. 125.42 million against Rs. 106.71 million in the corresponding quarter ending of previous year.Operating profit is Rs. 296.71 million as against Rs. 259.02 million in the corresponding period of the previousyear, registered a growth of 14.55%. Profit before tax (PBT) stood at Rs. 183.45 million, an increase of 18.71% inQ2 FY16 compared to Rs. 154.54 million in Q2 FY15.The major breakthrough in diversification of the product line as well as enhancing the presence of the Companyin the Key Sets will be for four-wheel as well as for two-wheel vehicles segment and being a new product line forthe Company, will add new dimensions to the growth of the Company. Based on the latest industry estimates, theLED market in India is expected to reach to Rs. 104600.00 million by the year 2016. This estimate stand revisedupward vs. earlier forecast of Rs. 55000.00 million. It is believed that government intervention can drive themuch needed acceleration in the Indian LED lighting Industry. We expect that the company surplus scenario islikely to continue for the next three years. We expect the company to post a CAGR of 14% and 19% in its top-lineand bottom-line respectively. Hence, we recommend ‘BUY’ for ‘FIEM INDUSTRIES LTD’ with a target price of
Rs. 770.00 on the stock.
COMPANY PROFILE
Fiem Industries Ltd. is one of the leading manufacturers of automotive lighting & signaling equipments and rearview mirrors. The major business comes from the two-wheeler segment of the vehicle industry. It has a widerange of lighting systems and rear view mirrors, sheet metals parts and plastic components for two and fourwheeler and its diversified products portfolio ranging form rear view mirrors, head lamps, tail lamps, roof lamps,wheel covers, warning triangle, complete rear fender assembly, frame assembly, mudguards and various sheetmetal & plastic parts etc. is capable of catering to the needs of almost all segments of automobile industry viz.,four-wheelers, LCVs, HTVs and tractors. The company has one foreign subsidiary i.e. 'Fiem Industries Japan Co.Ltd.' incorporated in Japan.FIEM has acquired certifications such as ISO 9002, QS 9002, QS 9000, ISO/ TS 16949:2002, & ISO 9001. It hasalso acquired certification for conformity of production form RDW Netherlands. FIEM has also been accreditedwith ISO14001-2004 Certification for Environment Management Systems. FIEM employees are constantly beingtrained to meet the customer's specific requirements as per TQM. FIEM has become a Tier I Supplier not only inIndia but also in Europe and USA.FIEM is a known brand in Automotive Lighting and Rear View Mirrors in international OEMs and is considered assynonymous of High Quality & Low Cost manufacturing Company. 'Business Sphere Magazine Group' hasconferred 2012-13 Award to the Company for ‘Bellwether in Auto lighting for 40 years."
Company has diversified into LED indoor and outdoor lighting business and manufacturing a large range of LEDproducts like LED Home Lighting, LED Bulbs and tubes, LED Solar Street Lighting, Multi-Functional Torches cumFlasher Lights, LED Solar Lanterns, LED Display panels for buses and trucks and LED display signal systems forRailways etc. which also forms part of above turnover.ProductsFiem Industries Ltd is one of the leading manufacturers of automotive lighting & signaling equipments and rearview mirrors for automobiles. Two Wheelers Kinetic Bajaj Hero Honda LML
Yamaha TVS Honda Suzuki
Piaggio Royal Enfield
Four wheelers Maruti Suzuki Tata Daewoo Reva car Pre, Automobiles H. Motors DCM Toyota Force Motors Ashok Leyland Peugeot Hyundai/ General Motors Trailer & Truck Trailer & Car Swaraj mazda International Tractor
Warning Tringles Reflex Reflector Led Lamps LED Display Panels LED Indoor & Outdoor Lighting LED Multifuntion Flashlight & Torches Solar P.V. Module/LED Street LightClients
Two - Wheeler Segment (Domestic OEM Customers)
Two - Wheeler Segment (Global OEM Customers)
Four - Wheeler Segment (Domestic OEM Customers)
Four - Wheeler Segment (Global OEM Customers)
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q2 FY16,Fiem Industries Ltd. supplies auto components partsto all leading OEMs in India and also exports to othercountries. The company also supplies throughHonda Trading to Honda Vietnam and HondaThailand. The component for supplying to HondaMotorcycle is developed by FIEM’ s in-house designand development center., has reported its financialresults for the quarter ended 30th September, 2015.The company has achieved a turnover of Rs. 2361.14 million for the 2nd quarter of the financial year 2015-16 asagainst Rs. 2104.70 million in the corresponding quarter of the previous year. The company has reported anEBITDA of Rs. 296.71 million and increase of 14.55% over the prior period of previous year. In Q2 FY16, netprofit stood at Rs. 125.42 million against Rs. 106.71 million in the corresponding quarter of the previous year.The company has reported an EPS of Rs. 10.48 for the 2nd quarter as against an EPS of Rs. 8.92 in thecorresponding quarter of the previous year.Break up of Expenditure
During the quarter, total Expenditure rose by 12 per cent mainly on account of increased in Cost of Materialconsumed by 15%, Employee benefit expenses 26%, and along with other Expenses 24% are the primaryattribute for the increase of expenditure. Total expenditure in Q2 FY16 stood to Rs. 2148.56 million as against Rs.1922.51 million in Q2 FY15.
At the current market price of Rs. 687.00, the stock P/E ratio is at 16.86 x FY16E and 15.05 x FY17Erespectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.40.74 andRs.45.65 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2014 to 2017Erespectively. On the basis of EV/EBITDA, the stock trades at 7.87 x for FY16E and 7.17 x for FY17E. Price to Book Value of the stock is expected to be at 3.32 x and 2.91 x respectively for FY16E and FY17E. We recommend ‘BUY’ in this particular scrip with a target price of Rs.770.00 for Medium to Long terminvestment.INDUSTRY OVERVIEW
Indian Economy and Outlook2014-15 has been a year marked by excitement and its share of challenges. The decisive political mandateaccorded in the general elections set the stage for surging hopes for a rapid economic turnaround of the IndianEconomy. While many macro-economic indicators have improved during the course of the year, the journey torealize the growth potential of the Economy is slow and yet to take momentum.The IMF estimated that India’s Economy will grow at 7.5% per annum over the next two years. This puts India’sprojected growth in 2016 ahead of the organization’s estimates for China (which stand at 6.8% and 6.3% for2015 and 2016, respectively), leaving India the fastest growing major emerging economy in the world. The IMF’sreasoning is based primarily on high expectations for Indian Prime Minister, who has been in office for almost 13months after winning May 2014 general election. The prime minister’s first year in office is marked by modestattempts for economic reform, but has fallen short of the expectations of many observers. Most notably, PrimeMinister has taken concrete steps to make manufacturing sector a greater proportion of India’s GDP (primarilyvia his “Make in India” initiative). With launch of the ‘Make in India’ initiative, the Prime Minister of India, aims togive global recognition to the Indian Economy and also place India on the World map as a manufacturing hub.India has also set for itself an ambitious target of increasing the contribution of manufacturing output to 25% ofgross domestic product (GDP) by 2025, from 16% currently.
Despite the positive expectations surrounding the Indian prime minister’s economic reform initiatives andfavourable external factors, the Indian Economy still suffers from negative factors. While the headline indicatorspoint towards steady improvement, the recovery on the ground has been rather slow. Lower inflation has notresulted in significant improvement in demand conditions. The demand conditions have been quite challengingacross sectors as borne out by the slow improvement in industrial production. Some of the other key underlyingdrivers like credit growth and fixed capital formation also highlight a very sluggish environment. The new Indiangovernment, despite its overwhelming legislative mandate, has found it difficult to dismantle older regulationsthat make India an unfavourable or excessively risky investment destination.INDUSTRY STRUCTURE AND DEVELOPMENT
Automobile & Auto Components IndustryThe Indian automobiles Industry mainly consist of four different segments which are as follows:• Two-wheelers which comprise of mopeds, scooters, motorcycles and electric two-wheelers.• Passenger Vehicles which include passenger cars, utility vehicles and multi-purpose vehicles.• Commercial Vehicles that are light and medium-heavy vehicles.• Three Wheelers that are passenger carriers and goods carriers.The automobile industry is one of the key drivers that boost the economic growth of the Country. Since the delicensing of the Sector in 1991 and the subsequent opening up of 100 percent FDI through automatic route,Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in thecountry led by Japanese and Korean Companies.Today Indian automobile Industry counts as under:• Seventh-largest producer in the world with an average annual production of 17.5 Million vehicles.• The Indian automobile market is estimated to become the 3rd largest in the world by 2016 and will account formore than 5% of global vehicle sales.• India is the second-largest two-wheeler manufacturer, the largest motorcycle manufacturer and the fifth largestcommercial vehicle manufacturer in the world.The domestic auto components industry also consists of unorganized players, who are largely small and mediumenterprises. However, it is the organized segment that contributes about three fourth of the industry’s totalrevenues. More than 600 organized players are registered with the Auto Component Manufacturers Association.
The Indian auto components industry has experienced return of moderate growth over the last one-and-a-halfyears. The growth can be attributed to factors such as strong buoyancy in the end-user industry, recovery of theglobal economy, improved consumer sentiment and return of adequate liquidity in the financial system. Therevival of the auto industry was initially driven by the fiscal stimulus programme of the government.With the government’s ‘Make in India’ initiative boosting manufacturing, commodity prices under control andgrowth in industrial activity visible – all being indicators of a positive outlook – the Indian auto sector expectedfor a better ride this fiscal. Buoyancy in the Industry and a return to the former 2011-12 highs expected onlyafter stability and reforms drive in the economy.Road AheadThe rapidly globalising world is opening new avenues for the transportation industry, generating the need formore efficient, safe and reliable modes of transportation, which is consequently adding to the auto componentindustry’s growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indianauto component industry is set to become the third largest in the world by 2025. Also, by that time, newerverticals and opportunities for component manufacturers will open up as the automobile market will shifttowards electric, electronic and hybrid cars and newer technologies will have to be adopted via systematicresearch and development.Indian auto component makers are well positioned to benefit from the globalisation of the sector as exportspotential could be increased significantly in the days to come because of positive momentum in the Economy and‘Make in India’ initiative.India is probably among the most competitive country in the World for the Automotive Industry. It covers near to100% of technology or components required to make a car.
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