Buy FIEM Industries Ltd Target Rs.1,620 - Sushil Finance
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Fiem Industries Ltd. (FIL) recently announced its Q4 FY22 performance. The Sales & EBITDA were above while PAT was in-line with our estimates. Following are the key highlights:
Result Highlights
* During Q4 FY22 & FY22, FIL reported top-line growth of 16.5% YoY and 29.0% YoY to Rs.489.5 cr and Rs.1,557.7 cr, respectively, primarily driven by new projects and rising contribution of automotive LED lamps replacing the traditional auto lamps.
* During Q4 FY22 and FY22, the contribution of Automotive LED lamps stood at 32.9% and 29.9%, respectively. The Management expects this share to keep rising, going forward and expects to reach 55-60% over the next few years.
* The capex planned for FY23 is Rs.50-60 cr which include Rs.30-40 cr to be spent on capacity expansion at Hosur plant.
* The company is catering to all the leading EV players including Ola, Okinawa, Bounce and Hero Electric and the Management stated that they are in talks with many other players as well. During FY22, the revenue from EV segment stood at Rs.40 cr as against Rs.7-8 cr in the previous year. The Management indicated a possibility of revenue contribution from EV to be 3x in the current fiscal.
OUTLOOK & VALUATION
FIL is a leading auto-ancillary player engaged in manufacturing of automotive lights, mirrors and LEDs. The company supplies to all the leading OEMs and derives more than 95% of its turnover from two-wheelers. With growing push for electric vehicles, the demand for LED lamps is also rapidly rising. This transition from conventional lights to LED lights is leading to an increase in the kit value of the company’s products. The Management expects the share of LED products to further increase over the next couple of years. The company stands virtually debt-free and consistently generates good operating cash flow. Considering the robust performance of FY22, we have raised our estimates for FY23. We now expect FIL to deliver an EPS of Rs.81.0 in FY23; maintaining our previous target multiple of 20x we arrive at a revised target price of Rs.1,620 showcasing an upside potential of ~54% from current levels with an investment horizon of 12-18 months.
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