Buy Fiem Industries Ltd For Target Rs.1,315.00 - Religare Se

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Pee Vee
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Buy Fiem Industries Ltd For Target Rs.1,315.00 - Religare Se

Post by Pee Vee » Tue Dec 27, 2016 11:07 pm

Fiem Industries is among the leading manufacturers of automobile lightings, signaling equipment and rear view mirror for two wheelers and four wheelers. It has also forayed in LED luminaires for indoor and outdoor applications and Integrated Passenger Information System with display and softwares for buses, metros and railways. It has 9 manufacturing units in India with diversified products base.

Recent developments:

* The performance of the LED segment has been encouraging. Revenue in H1FY17 came at Rs. 36.6 cr compared to Rs. 11 cr in H1FY16. The order book as on September, 2016 stood close to Rs. 56 cr. The company has already spent Rs. 102 cr in setting up the facility for LED lighting facilities. We expect more order inflow and LED business to report healthy growth in the coming years.

* Fiem Industries has signed a Technology License and Assistance Agreement with Aisan Industry Co. Ltd., Japan and Toyota Tsusho Corporation, Japan for manufacturing of Canister. Canister is an emission control system product, which will have huge market in India due to implementation of stricter emission norms from April, 2017. The company aims to supply the Canister to all its existing and new customers in two wheelers and three wheelers segments.

* Fiem Industries signed a Memorandum of Understanding with Sukam Power Systems in a bid to start a 50:50 Joint Venture Company in India for the purpose of selling and marketing LED lighting products under the brand name of 'Sukam Fiem'. This strategic marketing venture will equip Fiem Industries with Sukam's nationwide distribution network for the retail market and expand its presence in LED business.

Outlook and valuation:

We expect the company's H2FY17 performance to get negatively impacted due to demonetization as it largely caters to the two wheelers industry. However we believe, it will continue to benefit from gradual recovery in demand from two wheeler industry from Q1FY18 and new orders from LED segment. The LED business offers superior margins as compared to the automotive parts business. LED Lights contributed to 11.5% of the top line sales in FY16, as against less than the 4% in FY15. The company has invested Rs. 102 Cr in their LED facilities and we expect it to generate healthy revenues in the coming years. A higher turnover from the LED segment will improve operational margins and will impact the bottom line directly. Thus, with advance technology, investment in LED business and tie ups with foreign and domestic firms, we expect Fiem to report Revenue and Profit at CAGR of 18% and 23.5% respectively over FY16-FY19E. At CMP of Rs. 1,089, it is trading at FY19E P/E of 13.2x. We reiterate a Buy on the stock with a target price of Rs. 1,315 - See more at:

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