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Company Report

Fiem Industries Ltd.

CMP Target Price Rs.327.35 Rs.420.00

14th December, 2013

BUY

Fiem Industries is the leading OEM supplier of automotive lighting and rear view mirrors. During the last 5 years of turbulent economic scenario, the company has grown by a CAGR of more than 22%. The company has registered robust results for the quarter ending September 2013 despite of touch economic environment and high input costs. The revenues from operations on jumped by around 25% at Rs.179.12 crores vs Rs.143.29 crores y-o-y. Operating profit climbed sharply at about Rs.21.14 crores as against Rs.16.07 crores in the previous year quarter. Raw material cost as a percent of total sales declines at 57.99% in quarter ending September 2013 as compared to 61.39% in Q2FY13. The net profit skyrocketed at Rs.9.08 crore for the quarter as compared to Rs.6.26 crore. EPS for the quarter stood at Rs.7.59. Operating profit margin stood at 11.80% witnessing an expansion of 58 bps y-o-y. Net profit margin stood at 5.07%; expanding 70bps y-o-y. Two-wheeler segment constitute a major part in overall business of the company and in that too it is leader in scooters, hence this has remained a contributory factor in growth of Automotive Lighting and Mirrors business. Fiem Industries has diversified into LED indoor and outdoor lighting business and manufacturing a large range of LED products like LED Home Lighting, LED Bulbs and tubes, LED Solar Street Lighting, Multi-Functional Torches cum Flasher Lights, LED Solar Lanterns, LED Display panels for buses and trucks and LED display signal systems for Railways etc.

BSE Code NSE Code Market Cap (Rs Cr.) 52 Week High/Low Industry Face Value Shares O/S 532768 FIEMIND 391.58 351.45/179.05 Auto Ancillary Rs.10.00 1.20 Cr.

EPS Book Value P/E P/B

23.17 128.86 14.13 2.54

Shareholding Pattern

Valuation
With strong position in Auto-component business, expanding product portfolio, firm tie-ups with global players and increasing geographical presence; Fiem Industries Ltd. growth looks promising. We believe the company is trading at an attractive valuation at 12.44x and 10.65x of FY14EPS of Rs.26.31 and FY15EPS of Rs.30.75. We initiate a BUY on the stock with a target price of Rs.420 (appreciation of about 28%) with the medium to long term investment horizon.

Research Analyst: Vineeta Mahnot

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Business Details
The Company was originally incorporated in India as Rahul Auto Private Limited on February 6, 1989 in New Delhi under the Companies Act, 1956. The company is promoted by J.K. Jain, its Chairman and Managing Director. The Company is one of the leading manufacturers of automotive lighting & signaling equipments and rear view mirrors. They changed the name of their company to FIEM Industries Private Limited w.e.f. May 7, 1992. Subsequently, the company was converted into a public company with effect from November 30, 1993 pursuant to which, the name of their company was changed to FIEM Industries Limited. The Company is one of the leading manufacturers of automotive lighting & signaling equipments and rear view mirrors. Its major business comes from the two-wheeler segment of the vehicle industry. It have a wide range of lighting systems and rear view mirrors, sheet metals parts and plastic components for two and four wheeler our diversified products portfolio ranging from rear view mirrors, head lamps, tail lamps, signaling lamp, roof lamps, wheel covers, warning triangle, complete rear fender assembly, frame assembly, mudguards, LED Display Panels and various sheet metal & plastic parts etc. is capable of catering to the needs of almost all segments of automobile industry viz., four-wheelers, LCVs, HTVs and tractors. Major product portfolio includes: TWO WHEELERS - lighting & signaling equipments and rear view mirrors. FOUR WHEELERS - lighting & signaling equipments and rear view mirrors. AUXILLARY LAMPS WARNING TRIANGLES REFLEX REFLECTORS LED LAMPS Its existing plants are located at Kundli (Sonepat, Haryana) (Unit I), Hosur (Tamil Nadu) (Unit II & III) and Mysore (Karnataka) (Unit IV), Hosur (Tamil Nadu) (Unit V) and Nalagarh (Himachal Pradesh) (UnitVI), Rai (Sonepat, Haryana) (Unit VII) & Tapukara (Rajasthan) (Unit VIII). The proximity of the plants to its OEM customers offers logistic support.

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Foray in LED Luminaries

The Company has forayed in a new segment of LED luminaries few years back for indoor and outdoor applications such as Recess Panels, down lights, spot lights, LED Bulbs & Led Tube Lights, Bay Lights, Flood Lights, Solar Based Lantern and Street lights etc. LED lighting is proving helpful in power saving and putting a cap on power tariff as compared to CFL; thus catering to large masses. Long Life, Eco Friendly, lower carbon footprint, mercury free and much better performance than other similar category products are the added advantage. The company is looking for big business from Railways, Central & State Government, Metro, Overseas Market etc. The company intends to bring a very large range of LED products in the near future to attain significant market share. The company manufactures all the components of LED Luminaries including LED driver in house. LEDs lighting is an energy-efficient lighting technology which is poised to replace conventional GLS, CFL and HID Lamps in many key applications. LED lighting industry is still at a nascent stage in the country; therefore company is looking to convert this opportunity into growth engine.

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Strong Client base

With its wide range of products, the company caters to all segments of auto industry like two-wheelers, threewheelers, four-wheelers, commercial and passenger vehicles. The company is the leader in the scooter segment with 85% market share and India is one of the biggest two-wheeler market. It is attracting lot many global OEMs who are looking for geographical expansion and also putting their plants in the country. The company exports to multinationals too. Its major markets include UK, Italy, Germany, Indonesia, Japan and Australia. The company has esteem client list under its two wheeler segment which includes Kinetic, Bajaj, Hero Motors, LML, Yamaha, TVS, Honda, Suzuki, Piaggio and Eicher Motors. It has also forayed in four-wheelers segment and made long list of prestigious clients including global customers like Maruti Suzuki, Tata Motors, Force Motors, DCM Toyota, Ashok Leyland, Peugeot, Hyundai, General Motors, Swaraj Mazda, Mahindra etc.

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Consolidated Profit & Loss Account

Rs. Crore Particulars
Net sales Growth Expenditure EBITDA Growth EBITDA margin Other income Depreciation & Amortisation EBIT EBIT margin Interest PBT Tax PAT Minority interest Adjusted PAT Growth
Net Profit margins Exceptional item Reported PAT

FY11
427.39 389.99 37.40 8.75% 0.46 12.98 24.88 5.82% 9.52 15.36 4.30 11.06 0.00 11.06 2.59 0.00 11.06 11.96 9.25

FY12
535.13 25.21% 467.46 67.67 80.94% 12.65% 0.31 16.88 51.10 9.55% 20.78 30.32 9.18 21.14 0.00 21.14 91.16 3.95 0.00 21.14 11.96 17.68

FY13
606.42 13.32% 536.11 70.31 3.90% 11.59% 0.35 18.35 52.31 8.63% 12.97 39.35 11.63 27.72 0.00 27.72 31.10 4.57 0.00 27.72 11.96 23.18

FY14E
703.45 16.00% 620.44 83.01 18.06% 11.80% 0.42 22.26 61.17 8.70% 15.56 45.61 14.14 31.47 0.00 31.47 13.52 4.47 0.00 31.47 11.96 26.31

FY15E
791.38 12.50% 696.41 94.97 14.41% 12.00% 0.55 24.89 70.63 8.92% 17.32 53.31 16.52 36.78 0.00 36.78 16.88 4.65 0.00 36.78 11.96 30.75

Equity Capital Adjusted EPS

Ratios
Particulars
Return on Equity Return on Capital employed Debt/Equity Asset turnover Current Ratio Book value per share Interest coverage For Private Circulation Only

FY11
8.82 9.71 1.04 1.20 1.31
104.84 2.61

FY12
14.70 16.67 1.13 1.28 1.46
120.23 2.46

FY13
16.49 17.31 0.80 1.40 1.30
140.53 4.04

FY14E
16.26 17.52 0.80 1.40 1.31
161.84 3.93

FY15E
16.48 17.82 0.78 1.36 1.34
186.59 4.08

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Balance Sheet
Rs. Crore Particulars
Share Capital Reserves & Surplus Shareholders funds Borrowings Deferred tax liability Minority Interest Sources of funds Gross block Accumulated Depreciation Net block Capital work in progress Investments Deffered tax assets Goodwill on consolidation Inventories Sundry debtors Cash and bank balance Other current assets Loans and advances Total current assets Current liabilities and provisions Net current assets Misc exp Uses of funds

FY11
11.96 113.43 125.39 130.74 14.66 0.00 270.78 290.17 59.53 230.64 13.18 0.02 0.00 0.00 42.09 45.34 4.78 0.45 20.73 113.39 86.45 26.94 0.00 270.78

FY12
11.96 131.83 143.79 162.69 19.30 0.00 325.78 357.69 76.17 281.52 1.37 0.02 0.00 0.00 46.02 66.86 5.48 0.28 16.88 135.51 92.65 42.87 0.00 325.78

FY13
11.96 156.11 168.07 134.20 24.21 0.00 326.48 384.47 91.81 292.66 1.48 0.02 0.00 0.00 48.68 69.34 1.60 0.65 18.84 139.09 106.77 32.33 0.00 326.48

FY14E
11.96 181.60 193.56 155.63 25.76 0.00 374.95 445.22 114.07 331.15 4.38 0.45 0.00 0.00 57.66 79.89 3.29 0.82 23.06 164.73 125.75 38.98 0.00 374.96

FY15E
11.96 211.20 223.16 173.17 25.76 0.00 422.09 497.72 138.96 358.76 7.78 1.24 0.00 0.00 74.91 105.94 4.28 1.07 27.82 214.02 159.72 54.30 0.00 422.09

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Quarterly Financial Highlights

Rs. Crore Particulars
Revenues Expenditures Operating Profit Adjusted Net Profit OPM% NPM % Adjusted EPS Q2FY14 179.12 157.98 21.14 9.08 11.80 5.07 7.59 Q2FY13 143.29 127.22 16.07 6.26 11.22 4.37 5.23 Q1FY14 152.01 134.24 17.77 6.05 11.69 3.98 5.06 YoY% 25.01 24.18 31.57 44.99 58bps 70bps 44.99 QoQ% 17.83 17.68 19.02 50.08 11bps 109bps 50.00

Past Price movement of the stock

365 360 355 350 345 340 335 330 325 320 315 310 305 300 295 290 285 280 275 270 265 260 255 250 245 240 235 230 225 220 215 210 205 200 195 190 185 180 175 170 165 December 2013 February March April FIEM INDS (329.6000, 337.7000, 325.0000, 327.3500, -2.0500) 365 360 355 350 345 340 335 330 325 320 315 310 305 300 295 290 285 280 275 270 265 260 255 250 245 240 235 230 225 220 215 210 205 200 195 190 185 180 175 170 165 September October November December

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Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advise. Reader is requested to rely on his own decision and may take independent professional advise before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication. Disclosure of Interest Statement 1. Analyst Ownership of the Stock 2. Hem & its Group Company Ownership of the Stock 3. Hem & its Group Companies Director Ownership of the Stock 4. Broking relationship with company covered Company Name No Yes Yes No

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