FIEM Industries - upward of 30-35% return over 15-18 months

FIEM Industries

Investment Rationale:

Strong Client Base: FIEM has a strong client base of more than 50 OEMs and is supplying to its prestigious customers since its inception. It has significant market share for supply of automotive lighting & signalling equipments and rear view mirrors to Two-wheeler and Four-wheeler OEMs. The company is the leader in the scooter segment with 85% market share and India is one of the biggest two-wheeler markets.

India is attracting lot many global OEMs who are looking for geographical expansion and also putting their plants in the country

HMSI – biggest revenue share: HMSI currently accounts for ~45% of FIEM’s revenues. HMSI is virtually the leader in every country it operates in, except China. For HMSI, India is the fifth largest overseas two-wheeler market. Aggression of HMSI has already started to play out reflected from the fact that its market share has inched up to 22% in FY15 from 8% in FY07. HMSI had signed a State Support Agreement with Gujarat government in September for setting up their two-wheeler manufacturing plant at Vithalapur village with an investment of Rs.1,100 cr. It will start production in fiscal year 2016. To cater to this demand, FIEM is putting a Rs.75 cr plant at Viramgam, near HMSI’s plant. Honda Motorcycles and Scooter India (HMSI) two wheeler giant is planning to add 9 new two-wheelers in its portfolio in 2015. The commissioning of the plant at Vithalapur by HMSI in 2016 will give a further impetus to sales of FIEM as it is the main supplier of automotive lighting & signaling equipments and rear view mirrors to HMSI in India. Honda Motorcycle & Scooter India is aiming to sell 6.4 million vehicles by 2016, and sees the year 2015, as a game changer led by 9 new models lined up for launch in 2015

Entry into LED – space growing at a fast pace: FIEM has diversified into the LED luminaire business and integrated passenger information systems (IPIS) segment that caters to buses and railways. This could potentially be a game changer for the company. Revenue and profitability to get a boost on the back of LED

Integrated Passenger Information Systems – a new segment : Integrated Passenger Information System with LED Display (IPIS or PIDS) is an electronic information system which provides real-time passenger information. Passenger information delivered at relevant locations along bus routes is an important part of this strategy. Based on industry estimates, the Indian Railways is looking to invest ~Rs.200 bn over the next five years on display system modernization across trains and rail platforms. FIEM has played a key role in helping its partners deliver an effective solution. The company has successfully installed this Passenger Information System in many DTC buses in Delhi operating at different routes and has also installed the same in many of the school buses of Delhi. Association of State Road Transport Undertakings has also inspected the Company’s LED based Destination system and found it satisfactory. It has also received approval for Integrated Passenger Information System with LED Display (IPIS) from Ministry of Railways - Research Design and Standard Organization (RDSO) for manufacture and supply of this system (consisting of Train indication, Coach Guidance & PC based announcement). FIEM is looking for big business opportunities from Railways, Central & State Government, Metro, etc

New ventures – to add value gradually, still at start-up mode: FIEM has signed an MOU with Honda Locks Mfg. Co. Ltd. Japan and Toyota Tsusho Corporation, Japan for a potential JV in India for manufacturing Key Sets, Door Mirrors and Outside Handles. These are group companies of Japanese conglomerates Honda and Toyota respectively. The Key Sets will be for four-wheelers and two-wheelers. It has also signed an MOU with Yamato Industrial Co. Ltd., Japan for manufacturing automotive parts, including Control Cables, Pipes, Resin Dies, Throttle Wires, Sensors & Switches. these two new potential JVs will help FIEM diversify its product base further and offer export opportunities

revenue growth at 24% CAGR in FY15-17E with PAT registering a growth of 39% is expected. At CMP of Rs.600 can give upwards of 30-35% return in next 12-15 months.

Note: 70% + sales are from HMSI and TVS a concentration risk to be kept in mind.

 

The stock has already gained ~ 14% since then.

 

Looks like it has a lot of steam left. Good pick.

 

Is there more steam left in stock?

 

Am fairly convinced about the stock gaining still...

 

Can we enter @ current price?

 

Depends on your investment objective and risk apetite. If you can digest an upto 10% correct ( the market will surely fall atleast when the FED invokes the rate increases) and are willing to hold 15-18 months, one can initiate a creeping buy.

It is a Fundamentally good company.

Low Leverage. - 0.55
Reasonable valuation - PE 17
52 week high - 945
PBV - 3.3
good consistent profit growth of 31.50% over 5 years and sales growth 23%

Interestingly screener.in doesnt list even one cons.

 

Thanks sachin, Please also let me know if you have any ideas.

 

FIEM is now trading at 665. If it falls "when the FED invokes the rate increases", we can sell fiem and reenter at low levels.

 

Intraday high of 719/-

 

The rise continues - 739/ currently.

 

Lumax Ind is better than FIEM

 

Maybe the case so why dont you back this claim with the investment rationale

 

FIEM is better than Lumax ind, can be compaired with Suprajit.However,technically Fiem is better placed.

 

@Mr Pathak- Sir you have a real knack of endorsing promising picks. How do you do that? What are the hurdles you use in the screen?

 

@mr pathak, the stock touched 770/- today. So your floor target return (30%) almost hit. But guy you do disappoint me for two reasons

First : you seem to have disappeared
Two : you mention over 15-18 months when the stock hits 30% return within 2 months.

 

FIEM @805/-

 

Simply Sooper Stock Picking. 33% in only 2 months. Unbelievable but missed out on gains :/

I think feelings of member is hurt. Only time can cure such wounds.

 

Kindly refer to my post of 30th Nov. on this find (FIEM) of Mr Pathak. Loss of forum members !

 

Dont worry Srouta Sir, he is here only. With us.
He interacts with us everyday. Only the costume has changed.