CMP 560.25

Target Price 620.00

ISIN: INE737H01014

JUNE 9th

. 2015

FIEM INDUSTRIES LIMITED

Result Update (PARENT BASIS): Q4 FY15

BUYBUYBUYBUY

Index Details

Stock Data

Sector Auto Components

BSE Code 532768

Face Value 10.00

52wk. High / Low (Rs.) 945.30/452.00

Volume (2wk. Avg. Q.) 18000

Market Cap (Rs. in mn.) 6701.71

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY15A FY16E FY17E

Net Sales 8247.74 9171.49 9996.92

EBITDA 1033.35 1143.03 1261.31

Net Profit 422.64 471.55 522.20

EPS 35.33 39.42 43.65

P/E 15.86 14.21 12.83

Shareholding Pattern (%)

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.

In Q4 FY15, Net sales rose by 16.73% and stood

at Rs. 2325.05 million when compared to Rs.

1991.75 million in Q4 FY14.

During the quarter, Company’s net profit stood at

Rs. 134.21 million against Rs. 119.89 million in

the corresponding quarter of previous year.

Operating profit or EBITDA is Rs. 302.30 million

as against Rs. 256.73 million in the corresponding

period of the previous year, registered a growth

of 17.75%.

The company has reported an EPS of Rs. 11.22 for

the 4th quarter as against an EPS of Rs. 10.02 in

the corresponding quarter of the previous year.

Profit before tax (PBT) stood at Rs. 193.25 million

in Q4 FY15 compared to Rs. 164.88 million in Q4

FY14.

The company has recommended a dividend of @

70% i.e., Rs. 7.00/- Per share on Nominal Value of

Rs. 10 each for the financial year 2015.

Net profit rose by 13% to Rs 422.64 million for

the end of FY15 from Rs 374.01 million for the

end of FY14.

Net Sales and PAT of the company are expected to

grow at a CAGR of 14% and 18% 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. 560.25 6701.71 35.33 15.86 3.14 70.00

Automotive Axles Ltd. 719.00 10865.50 13.21 54.43 3.69 25.00

Rane Madras Ltd. 310.00 3258.30 11.84 26.18 2.13 45.00

Amara Raja Batteries Ltd. 884.65 151109.30 24.05 36.78 8.52 361.00

Recommendation & Analysis - ‘BUY’

For the 4th quarter of accounting year 2014-15, Fiem Industries Ltd posted a 16.73% growth in net sales to Rs.

2325.05 million from Rs. 1991.75 million in previous year period. Net profit stood at Rs. 134.21 million against

Rs. 119.89 million in the corresponding quarter ending of previous year. Operating profit is Rs. 302.30 million as

against Rs. 256.73 million in the corresponding period of the previous year, registered a growth of 17.75%. Profit

before tax (PBT) stood at Rs. 193.25 million, an increase of 17.21% in Q4 FY15 compared to Rs. 164.88 million in

Q4 FY14.

The major breakthrough in diversification of the product line as well as enhancing the presence of the Company

in the Key Sets will be for four-wheel as well as for two-wheel vehicles segment and being a new product line for

the Company, will add new dimensions to the growth of the Company. Based on the latest industry estimates, the

LED market in India is expected to reach to Rs. 104600.00 million by the year 2016. This estimate stand revised

upward vs. earlier forecast of Rs. 55000.00 million. It is believed that government intervention can drive the

much needed acceleration in the Indian LED lighting Industry. We expect that the company surplus scenario is

likely to continue for the next three years. We expect the company to post a CAGR of 14% and 18% in its top-line

and bottom-line respectively. Hence, we recommend ‘BUY’ for ‘FIEM INDUSTRIES LTD’ with a target price of

Rs. 620.00 on the stock.

COMPANY PROFILE

Fiem Industries Ltd. is one of the leading manufacturers of automotive lighting & signaling equipments and rear

view mirrors. The major business comes from the two-wheeler segment of the vehicle industry. It has a wide

range of lighting systems and rear view mirrors, sheet metals parts and plastic components for two and four

wheeler 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 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. 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 has

also acquired certification for conformity of production form RDW Netherlands. FIEM has also been accredited

with ISO14001-2004 Certification for Environment Management Systems. FIEM employees are constantly being

trained to meet the customer's specific requirements as per TQM. FIEM has become a Tier I Supplier not only in

India but also in Europe and USA.

FIEM is a known brand in Automotive Lighting and Rear View Mirrors in international OEMs and is considered as

synonymous of High Quality & Low Cost manufacturing Company. 'Business Sphere Magazine Group' has

conferred 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 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. which also forms part of above turnover.

Products

Fiem Industries Ltd is one of the leading manufacturers of automotive lighting & signaling equipments and rear

view 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

� Ford

� HMT

� Tafe

� Indo Form/ Preet Tractor

� JCB Terex Vectr

� M7M VST Tractor Trail

• Auxillary Lamps

� Halogen Lamps

� Work lamps

• Warning Tringles

• Reflex Reflector

• Led Lamps

• LED Display Panels

• LED Indoor & Outdoor Lighting

• LED Multifuntion Flashlight & Torches

• Solar P.V. Module/LED Street Light

Clients

• 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- Q4 FY15,

Fiem Industries Ltd. supplies auto components parts

to all leading OEMs in India and also exports to other

countries. The company also supplies through

Honda Trading to Honda Vietnam and Honda

Thailand. The component for supplying to Honda

Motorcycle isdeveloped by FIEM’ s in-house design

and development center., has reported its financial

results for the quarter ended 31st March, 2015.

The company has achieved a turnover of Rs. 2325.05 million for the 4th quarter of the financial year 2015 as

against Rs. 1991.75 million in the corresponding quarter of the previous year. The company has reported an

EBITDA of Rs. 302.30 million and increase of 17.75% over the prior period of previous year. In Q4 FY15, net

profit stood at Rs. 134.21 million against Rs. 119.89 million in the corresponding quarter of the previous year.

The company has reported an EPS of Rs. 11.22 for the 4th quarter as against an EPS of Rs. 10.02 in the

corresponding quarter of the previous year.

Break up of Expenditure

During the quarter, total Expenditure rose by 17 per cent mainly on account of increased in Cost of Material

consumed by 17%, Employee benefit expenses 20%, other Expenses 25% and along with depreciation and

Amortization expenses by 33% are the main attribute for the increase of expenditure. Total expenditure in Q4

FY15 stood to Rs. 2100.25 million as against Rs. 1791.76 million in Q4 FY14.

Rs. In million Mar-15 Mar-14 % Change

Net Sales 2325.05 1991.75 16.73

PAT 134.21 119.89 11.94

EPS 11.22 10.02 11.94

EBITDA 302.30 256.73 17.75

Break up of Expenditure

Rs. In millions

Q4 FY15 Q4 FY14

Cost of Material Consumed 1228.17 1052.33

Purchase of Stock in Trade 86.35 93.55

Employee Benefit Expenses 259.25 215.52

Depreciation & Amortization

Expenses 77.36 57.95

Other Expenses 347.24 278.88

FINANCIAL STATEMESTS & ESTIMATIONS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2014-2017E FY14A FY15A FY16E FY17E

I. EQUITY AND LIABILITIES:

A) Shareholders’ Funds:

a) Share Capital 119.62 119.62 119.62 119.62

b) Reserves and Surplus 1851.46 2153.72 2455.24 2749.87

Sub-Total Net worth 1971.08 2273.34 2574.86 2869.49

B) Non-Current Liabilities:

a) Long-term borrowings 579.57 514.67 463.20 426.15

b) Deferred Tax Liabilities [Net] 275.11 276.11 284.39 297.48

c) Long Term Provisions 11.36 20.07 26.49 31.79

Sub-Total Long term liabilities 866.04 810.85 774.09 755.41

C) Current Liabilities:

a) Short-term borrowings 292.52 343.41 381.19 417.78

b) Trade Payables 774.86 883.70 954.40 1011.66

c) Other Current Liabilities 545.22 579.62 602.80 620.89

d) Short Term Provisions 97.91 122.25 141.81 160.95

Sub-Total Current Liabilities 1710.51 1928.98 2080.20 2211.28

TOTAL EQUITY AND LIABILITIES (A+B+C) 4547.63 5013.17 5429.15 5836.18

II. ASSETS:

D) Non-Current Assets:

a) Fixed Assets 3130.06 3387.90 3614.89 3831.78

b) Other non-current assets 1.04 1.49 1.86 2.12

c) Non Current Investments 1.30 3.78 8.26 11.14

d) Long Term Loans and Advances 57.06 78.62 95.92 113.18

Sub-Total Non-Current Assets 3189.46 3471.79 3720.92 3958.23

E) Current Assets:

a) Current Investments 0.00 0.00 0.00 0.00

b) Inventories 423.49 513.88 596.10 679.55

c) Trade Receivables 763.70 866.68 953.35 1031.70

d) Cash and Bank Balances 18.14 33.18 46.16 63.70

e) Short Term Loans and Advances 145.22 123.16 107.15 96.43

f) Other Current Assets 7.62 4.48 5.47 6.56

Sub-Total Current Assets 1358.17 1541.38 1708.22 1877.95

TOTAL ASSETS (D+E) 4547.63 5013.17 5429.15 5836.18

Annual Profit & Loss Statement for the period of 2014A to 2017E

Value(Rs.in.mn) FY14A FY15A FY16E FY17E

Description 12m 12m 12m 12m

Net Sales 7184.16 8247.74 9171.49 9996.92

Other Income 6.66 9.00 10.35 11.70

Total Income 7190.82 8256.74 9181.84 10008.62

Expenditure -6299.40 -7223.39 -8038.81 -8747.31

Operating Profit 891.42 1033.35 1143.03 1261.31

Interest -144.39 -120.41 -123.54 -130.21

Gross profit 747.03 912.94 1019.49 1131.10

Depreciation -217.85 -306.33 -340.03 -375.39

Profit Before Tax 529.18 606.61 679.46 755.71

Tax -155.17 -183.97 -207.92 -233.51

Net Profit 374.01 422.64 471.55 522.20

Equity capital 119.62 119.62 119.62 119.62

Reserves 1713.11 2015.47 2317.79 2619.10

Face value 10.00 10.00 10.00 10.00

EPS 31.27 35.33 39.42 43.65

Quarterly Profit & Loss Statement for the period of 30 SEPT, 2014 to 30 JUNE, 2015E

Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E

Description 3m 3m 3m 3m

Net sales 2104.70 2028.75 2325.05 2194.85

Other income 0.48 6.43 0.14 0.46

Total Income 2105.18 2035.18 2325.19 2195.31

Expenditure -1846.16 -1784.04 -2022.89 -1916.10

Operating profit 259.02 251.14 302.30 279.20

Interest -28.13 -28.79 -31.69 -29.95

Gross profit 230.89 222.35 270.61 249.26

Depreciation -76.35 -76.62 -77.36 -91.28

Profit Before Tax 154.54 145.73 193.25 157.97

Tax -47.83 -44.81 -59.04 -47.87

Net Profit 106.71 100.92 134.21 110.11

Equity capital 119.62 119.62 119.62 119.62

Face value 10.00 10.00 10.00 10.00

EPS 8.92 8.44 11.22 9.20

Ratio Analysis

Particulars FY14A FY15A FY16E FY17E

EPS (Rs.) 31.27 35.33 39.42 43.65

EBITDA Margin (%) 12.41% 12.53% 12.46% 12.62%

PBT Margin (%) 7.37% 7.35% 7.41% 7.56%

PAT Margin (%) 5.21% 5.12% 5.14% 5.22%

P/E Ratio (x) 17.92 15.86 14.21 12.83

ROE (%) 20.41% 19.79% 19.35% 19.07%

ROCE (%) 41.01% 44.76% 45.19% 45.68%

Debt Equity Ratio 0.48 0.40 0.35 0.31

EV/EBITDA (x) 8.44 7.26 6.54 5.93

Book Value (Rs.) 153.21 178.49 203.76 228.95

P/BV 3.66 3.14 2.75 2.45

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs. 560.25, the stock P/E ratio is at 14.21 x FY16E and 12.83 x FY17E

respectively.

� Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.39.42 and

Rs.43.65 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 18% over 2014 to 2017E

respectively.

� On the basis of EV/EBITDA, the stock trades at 6.54 x for FY16E and 5.93 x for FY17E.

� Price to Book Value of the stock is expected to be at 2.75 x and 2.45 x respectively for FY16E and FY17E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.620.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The Indian auto components industry has experienced healthy sequential growth over the last one-and-a-half

years. The growth can be attributed to factors such as strong buoyancy in the end-user industry, recovery of the

global economy, improved consumer sentiment and return of adequate liquidity in the financial system. The

revival of the auto industry was initially driven by the fiscal stimulus programme of the government.

The industry currently accounts for almost seven per cent of India’s gross domestic product (GDP) and employs

about 19 million people, both directly and indirectly. The ever-increasing development in infrastructure, big

domestic market, increasing purchasing power and stable government framework have made India a favourable

destination for investment, as per the vision of Automotive Mission Plan (AMP) 2006–2016.

Market Size

The Indian auto-components industry can be broadly classified into the organised and unorganised sectors. The

organised sector caters to the original equipment manufacturers (OEMs) and consists of high-value precision

instruments while the unorganised sector comprises low-valued products and caters mostly to the aftermarket

category.

The Indian auto component industry is expected to register a turnover of US$ 66 billion by FY 15–16 with the

likelihood to touch US$ 115 billion by FY 20–21 depending on favourable conditions, as per the estimates by

Automotive Component Manufacturers Association of India (ACMA). In addition, industry exports are projected

to reach US$ 12 billion by FY 15–16 and add up to US$ 30 billion by FY 20–21.

Revenues for the auto industry in 2014-15 are expected to grow by 11-12 per cent supported by healthy

recovery by major original equipment manufacturers (OEMs) in the medium and heavy commercial vehicles

(M&HCV) and passenger vehicle (PV) segment.

Investments

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period

April 2000 – February 2015 were recorded at US$ 12,232.06 million, as per data published by the Department of

Industrial Policy and Promotion (DIPP).

Some of the major investments made into the Indian auto components sector are as follows:

• Amtek Auto Ltd has acquired Germany-based Scholz Edelstahl GmbH through its 100 per cent Singapore-

based subsidiary Amtek Precision Engineering Pte Ltd.

• MRF Ltd plans to invest Rs 45000.00 mn (US$ 711.16 million) in its two factories in Tamil Nadu as part of its

expansion plan.

• Uno Minda has formed a joint venture with Kosei Aluminum Co. Ltd, a Japanese alloy wheel maker, to

manufacture and sell alloy wheels in India. This new project will set up a total investment of Rs 2000.00 mn

(US$ 31.61 million), with Uno Minda holding a 70 per cent stake and Kosei Aluminum 30 per cent.

• German luxury car maker Bayerische Motoren Werke AG’s ( BMW ’s) will set up a local sourcing parts from at

least seven India-based auto parts makers in response to promote ‘Make in India’.

• Motherson Sumi Systems Ltd has acquired assets of German auto parts maker Scherer & Trier GmbH &

Company KG of US$ 44.8 million, which includes two factories, one each in Germany and Mexico. The

acquisition will be made through its Netherlands-based subsidiary Samvardhana Motherson Automotive

Systems Group BV.

• Hero MotoCorp is investing Rs 50000.00 mn (US$ 790.22 million) in five manufacturing facilities across

India, Colombia and Bangladesh, to increase its annual production capacity to 12 million units by 2020.

• Suzuki Motor Corp. plans to plant automobiles for India and Africa. It also aims to introduce 10 new models

in India and aims to control 50 per cent of the local passenger car market by 2020.

Government Initiatives

The Government of India’s Automotive Mission Plan (AMP) 2006–2016 has come a long way in ensuring the

growth of this sector in the global market. It is expected that this sector's contribution to the GDP will double

reaching a turnover of US$ 145 billion in 2016 due to the government’s special focus on exports of small cars,

multi-utility vehicles (MUVs), two and three-wheelers and auto components. Also, the deregulation of FDI in this

sector has helped foreign companies to invest huge amounts in India.

“The government has instilled confidence in the market with assurance of positive policy changes. We hope that

by the fiscal year 2014–15, capacity utilisation will go up to 90 per cent," as per, President, ACMA.

Road Ahead

The rapidly globalising world is opening new avenues for the transportation industry, generating the need for

more efficient, safe and reliable modes of transportation, which is subsequently adding to the auto component

industry’s growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indian

auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer

verticals and opportunities for component manufacturers will open up as the automobile market will shift

towards electric, electronic and hybrid cars, and newer technologies will have to be adopted via systematic

research and development.

Indian auto component makers are well positioned to benefit from the globalisation of the sector as exports

potential could be increased by up to four times to US$ 40 billion by 2020.

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purchase or sale of any financial instrument or as an official confirmation of any transaction. The information

contained herein is from publicly available data or other sources believed to be reliable but we do not represent that

it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be

in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for

the recipients’ investment decision based on this document.

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