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FIEM Industries Ltd.

Auto Ancillary
Promoted by J.K.Jain, FIEM Industries is one of the leading manufacturers of automotive lighting & signaling equipment
(73% revenues) and rear-view mirrors (13% revenues). The company predominantly caters to the needs of two-wheelers
segment (92% revenues) through eight manufacturing plants with four in southern India and four in northern India. It is
diversifying into higher margin LED segment which will drive the growth of the company. We met the management of FIEM
to get a sense of its business potential and strategy going ahead. Given below are key takeaways from the visit:-
Foraying into LED segment - to drive growth
Fiem's diversification into LED segment is expected to drive the
company's growth going forward. LED market in India is expected
to touch INR 24 bn registering a CAGR of 47% over FY11-15. FIEM
has entered into an exclusive manufacturing and marketing
agreement with Brightlite Systems Pte. Ltd., Singapore. It would be
developing the technology in-house and would only import the
chips required to build the LEDs. The target segment will be
institutional customers like Railways or such other GOI
corporations and corporate clients.
Expansion Plans in LED - Sales of INR 5000 mn in 3 years
The installed capacity for a mix of LED Luminaires is 45,000 pcs
per month. With this capacity, the company can achieve a turnover
of around INR 900 mn per annum. It plans to incur a capex of ~INR
700 mn to increase its capacity which would help the company to
achieve a turnover of INR 5000 mn over the next 2-3 years. The
company is also expecting to enjoy a margin of ~15-18% from the
LED segment as against the current margin level of ~9-12.6%.
MoU with Tri-ring Group - expanding the product portfolio
FIEM has recently signed a MoU with China based company Hubei
Tri-ring Auto-electrical Appliance Co Ltd. with an intention to target
the commercial vehicle and passenger car segment in India for
products such as horns, wide range of switches, outside & inside
door handlers with remote locks & electronic flesher and solenoid
valves. Tri-ring group is one of the renowned OEM suppliers in China
and engaged in manufacturing of large range of auto-components.
Shareholding (%) Sep-12
Promoters 69.96%
FIIs 6.51%
DIIs 0.00%
Others 23.53%
Relative Price Performance
December 31, 2012 Visit Note
Key Data
BSE Code 532768
NSE Code FIEMIND
Bloomberg Code FIEM IN
Reuters Code FIIN.BO
Shares Outstanding (mn) 11.96
Face Value 10
Mcap (INR bn) 2.22
52 Week H/L 216.55/123
2W Avg. Vol, NSE 46088
Free Float (INR bn) 0.67
Beta 0.32
(INR mn) FY09* FY10 FY11 FY12
Net Sales 2193 2959 4274 5351
Growth (%) 23.67% 34.92% 44.46% 25.21%
EBIDTAM (%) 8.91% 9.21% 8.75% 12.64%
Adj. PAT 46 106 112 212
Growth (%) (47.60%) 131.22% 5.76% 89.46%
Adj. EPS (INR) 3.85 8.84 9.25 17.68
P/E (x) 11.62 12.15 16.55 7.80
EV/EBIDTA 4.93 6.44 6.84 3.74
Net Debt/Equity 0.50 0.48 0.61 0.62
RoACE (%) 6.99% 11.63% 13.20% 22.83%
RoAE (%) 4.37% 10.29% 9.52% 15.77%
* Standalone financials
Sensex: 19466 CMP: INR 190
Marquee clients
The company supplies to almost all major OEMs in the domestic
market as well as few global OEMs. Its OEM customers in the two-
wheeler segment include Honda, TVS Motors, LML Ltd, Yamaha
India, Royal Enfield, and Kinetic Motors among many others. TVS
Motors and Honda together constitute ~67% of total revenue of
the company. The company commands 100% market share in
Mopeds, ~80% market shares in Scooters and ~25% markets share
in Motorcycles.
Proximity of manufacturing plants
FIEM has eight manufacturing plants located in Karnataka, Tamil
Nadu, Haryana and Rajasthan and all of these plants are fairly
large sized plant. The proximity of its plants to the OEM customers
provides it with logistic support leading to reduced inventory
carrying costs and shortened delivery time. Last year, the company
had started its Alwar plant which is built on 10 acre and it caters
exclusively to Honda Motorcycle.
Outlook & Valuation
The automobile industry is likely to see a muted growth in FY13
but the long term growth remains strong. However, we expect the
two-wheeler segment to maintain its double digit growth. With
the recent tie ups with global players, stable growth coming from
automobile sector and foraying into the higher margin LED segment,
the company is well placed with its expanded product portfolio
to reap the benefits going forward. Currently the stock is trading
at a P/E of 9.42 TTM earnings.
Banke Bihari Dhanuka
banke.dhanuka@spagroupindia.com
Ph. No. 91 33 4011 4800 (Ext. 859)
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Fiem Sensex
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Advantages of LED
There are numerous advantages of using LED over conventional
bulbs which includes:
Estimated reduction in electricity more than 50%
Reduction in life cycle cost ( operating life more than 50000
hours)
Long life
High reliability
More luminous intensity upto 108 Lumen per watt from
conventional 14.8 lumen per watt
No mercury inside so no generation of toxic waste
Easy to solar compatibility
4 times more life over CFL
Light weight
Low carbon emission
More than 60% energy saving against CFL
Zero maintenance
Zero mercury & UV
Comparison of payback time between LED lamps (Indoor/
Outdoor) over conventional CFL lamps.
Sl.
Parameter
2X2 Ceiling Light
No. Conventional LED
1 Wattage 110 W 40 W
2 Life 3000 Hrs 50000 Hrs
3 Price (INR) 1500-3500 5500
4
Unit consumed in 24 hrs for
total burning hrs (50000)
5500 2000
5
Energy saved in INR in 50000 hrs
(Electricity charges INR 8/- per unit)
28000
6 Payback Time @24 hrs. 6.5 Months
Auto Ancillary
Segmentwise Revenue
92%
4%
4%
2 Wheeler 4 Wheeler Export
Quarterly Financials
Particulars (INR mn) Q2FY13 Q2FY12 YoY % Q1FY13 QoQ %
Net Sales 1433 1358 5.50% 1435 (0.12%)
Other Income 1 0 500.00% 1 20.00%
Total Income 1434 1358 5.57% 1436 (0.10%)
Stock Adjustment (32) (16) (106.41%) (8) (312.82%)
Raw Material Consumed 892 827 7.84% 869 2.65%
Employees Cost 176 41 326.88% 176 0.00%
Operating & Mfg. Expenses 237 317 (25.44%) 233 1.63%
Total Expenditure 1272 1170 8.76% 1270 0.19%
Operating Profit 162 189 (14.20%) 166 (2.35%)
OPM (%) 11.3% 13.9% 11.6%
EBIDTA (excluding OI) 161 189 (14.75%) 165 (2.49%)
EBIDTAM (%) 11.2% 13.9% 11.5%
Interest 32 59 (45.98%) 50 (36.42%)
Depreciation 44 44 0.00% 44 (0.23%)
PBT 86 86 0.12% 72 19.92%
Income Tax 24 26 (8.91%) 21 9.81%
APAT 63 60 3.99% 50 24.21%
PATM (%) 4.4% 4.4% 3.5%
Eq. Capital (INR Mn) 120 120 - 120 -
EPS (Adjusted) 5.23 5.03 3.99% 4.21 24.21%
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Financials
Income StatementY
Year End March FY09* FY10 FY11 FY12
Net Sales 2193 2959 4274 5351
Growth in Sales (%) 23.67% 34.92% 44.46% 25.21%
Cost of goods sold 1353 1828 2611 3184
Employees Cost 241 342 467 619
Other Expenses 404 516 822 872
Total Expenditure 1998 2686 3900 4675
EBIDTA (without OI) 195 272 374 677
% Growth (7.26%) 39.41% 37.30% 80.91%
EBITDA Margin % 8.91% 9.21% 8.75% 12.64%
Depreciation/Amortization 88 93 130 169
EBIT 107 180 244 508
EBIT Margin % 4.89% 6.08% 5.71% 9.49%
Interest Expense 40 33 95 208
Other Income 10 9 5 3
EBT 77 155 154 303
Tax Expenses 31 49 43 92
PAT 46 106 111 211
Exceptionals 0 0 (1) (1)
APAT 46 106 112 212
% Growth (47.60%) 131.22% 5.76% 89.46%
APAT Margin % 2.09% 3.58% 2.62% 3.97%
Balance Sheet
Year End March FY09* FY10 FY11 FY12
Sources of funds
Share capital 120 120 120 120
Reserves & Surplus 840 978 1134 1318
Total Networth 960 1098 1254 1438
Secured Loan 493 542 807 950
Total Debt 493 542 807 950
Other Liabilities 0 0 15 32
Total Liabilities 1453 1640 2076 2420
Application of funds
Net Block 1372 1535 2306 2815
Capital Work-in-Progress 132 252 132 14
Current Assets 763 738 1040 1284
Current Liabilities 712 766 1350 1572
Net Current Assets 51 (29) (310) (288)
Net Deferred Tax Asset (103) (119) (147) (193)
Other Assets 0 0 94 71
Total Assets 1453 1640 2076 2420
Cash Flow
Year End March FY09* FY10 FY11 FY12
EBT 77 155 154 303
Less: Other Income/Exceptionals 10 9 5 3
Add:Depreciation 88 93 130 169
Add: Interest paid 40 33 95 208
Direct taxes paid (22) (34) (15) (45)
Change in Working Capital 42 136 (201) (157)
Cash Flow from operations (a) 236 392 167 481
Change in Fixed Assets (66) (255) (900) (675)
Change in CWIP (96) (120) 121 118
Cash Flow from Investing (b) (162) (376) (780) (557)
Debt Raised/(Repaid) 13 50 646 204
Dividend paid (30) (30) (30) (36)
Interest paid (40) (33) (95) (208)
Others (11) (1) 123 123
Cash Flow from Financing (c ) (68) (14) 643 83
Net Change in Cash (a+b+c) 5 2 31 7
Opening Cash 10 15 17 48
Closing Cash 15 17 48 55
Key Ratios
Year End March FY09* FY10 FY11 FY12
Per Share Data (INR)
Reported EPS 3.85 8.84 9.25 17.68
Adj. EPS 3.85 8.84 9.25 17.68
Growth (%) (47.60%) 131.22% 5.76% 89.46%
CEPS 11.20 16.59 20.22 31.86
DPS 2.50 2.50 2.50 3.00
BVPS 68.29 79.91 104.84 120.23
Return Ratios (%)
RoACE 6.99% 11.63% 13.20% 22.83%
RoANW 4.37% 10.29% 9.52% 15.77%
RoIC 5.32% 9.08% 11.90% 19.42%
Liquidity Ratios
Net Debt/Equity 0.50 0.48 0.61 0.62
Interest Coverage Ratio 2.68 5.40 2.57 2.44
Current Ratio 1.07 0.96 0.77 0.82
Quick Ratio 0.69 0.61 0.46 0.52
Efficiency Ratios
Asset Turnover Ratio 1.43 1.91 2.30 2.38
Inventory Days 41 34 30 30
Debtor Days 47 39 33 38
Creditor days 78 84 73 70
Valuation Ratios
P/E (x) 11.62 12.15 16.55 7.80
P/BV (x) 0.66 1.34 1.46 1.15
P/CEPS (x) 4.00 6.47 7.57 4.33
Dividend Yield (%) 5.58% 2.33% 1.63% 2.17%
EV/Net Sales (x) 0.46 0.61 0.61 0.48
EV/EBIDTA (x) 4.93 6.44 6.84 3.74
Auto Ancillary
* Standalone financials
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Auto Ancillary