FIEM reported strong 3QFY18 results. Company’s revenue grew by 22% YoY to Rs2,859mn. Auto segment growth came in robust, due to high volume growth by FIEM’s top customers. In the LED business, revenues remained weak YoY. Company’s EBITDA margin in the quarter was 12.5%, 130bps higher YoY (despite loss in LED luminaries business) and the same came as a positive surprise. FIEM’s EBITDA margin has come down since 3QFY17. At 12.5%, EBITDA margin is back within the historical range of 12-13%. Supported by 37% growth in EBITDA, PAT in the quarter grew by 40% YoY to Rs126mn. Two wheeler growth is expected to be robust in FY19/FY20. Introduction of LED lamps in mass volume two wheeler segment is expected to give further impetus to revenue in the coming years. Through partnership and JV’s, FIEM is looking at entering new product segments. We expect strong YoY growth in earnings to continue. We retain BUY on FIEM Industries with unchanged price target of Rs1,203.
Outlook and Valuation
* After posting weak results in the past few quarters, FIEM reported strong 3QFY18 results. Revenue growth remained strong and EBITDA margin improved significantly.
* In the auto business, we expect the company’s performance to remain robust on strong volume growth outlook for the two wheeler industry, transition to LED headlamps and venture into new product lines (through JV’s / technical arrangement).
* LED luminaries business performance is expected to remain weak in the near to medium term.
* We retain BUY on the stock with unchanged price target of Rs1,203.
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