Add Fiem Industries Ltd For Target Rs. 1,875 - Choice Broking Ltd
FIEM Delivers Strong Performance; New business Wins & Increase in LED Share to Drive Future Growth
Growing share of high-value LED lighting: The percentage of total automotive lighting revenue derived from LED lighting increased significantly to 59.3% in FY25, up from 52% in FY24. Realizations for LED lighting are at least 2x higher compared to conventional lighting. The company's future new project pipeline is 100% LED. We believe this shift towards LED will contribute to a higher revenue scale potential
Management believes that there is currently no significant impact from China's export restrictions on rare earth magnets, as electric vehicles currently account for only 5% of total volume.
Strong New Business Wins: FIEM is a dominant player in the 2W industry and maintains strong relationships with key OEMs. The company has secured wins on multiple new models across key customers, including being a single source for certain lamps on the Honda Activa EV, supplying full lighting solutions for new Hero Xtreme 250 and TVS Apache 4G models, and being the single source for all deluxe models of TVS Jupiter 125.
Given this, we revise our FY26/27 EPS estimates upwards by 3.8%/4.6% to come up with a revised target price of INR 1,875; valuing the company at 18x (previously 15x) on FY27E EPS and maintaining our ‘ADD‘ rating
FIEM beats expectations on all fronts
* Revenue for Q4FY25 was at INR 6,394Mn, up 14.7% YoY and up 7.8% QoQ (vs CEBPL est. at INR 6,138Mn).
* EBITDA for Q4FY25 was at INR 854Mn, up 13.9% YoY and up 10.1% QoQ (vs CEBPL est. at INR 810Mn). EBITDA margin was down 9bps YoY and up 27bps QoQ to 13.4% (vs CEBPL est. at 13.2%).
* APAT for Q4FY25 was at INR 560Mn, up 21.2% YoY and up 19.2% QoQ (vs CEBPL est. at INR 501Mn).
Strategic Investments in Technology and Diversification Efforts:
FIEM has made significant investments in a new innovation and R&D center in Gurugram, consolidating mechanical, optical, and electronics capabilities. FIEM is also setting up a state-of-the-art EMC EMI electronic validation laboratory, for integrated electronic development. FIEM has also diversified into the 4W segment with production starting for the first LED product for Mahindra & Mahindra and confirmation for three new development projects for the Mahindra Bolero. We believe this pursuit will help reduce 2W dependency and make 4W an important business in the future.
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SEBI Registration no.: INZ 000160131
