FIEM industries : auto ancillary player

Q2 FY22 Concall summary (link):

Overall industry 2-W production volume – 5.6 M units / 8% growth YoY and 17% QoQ. Driven by good Monson. Festive season has worked well. Commodity price easing out and Chip availability will improve the things forward.
FIEM specific – 25% YoY and 18% QoQ growth for FIEM. Q2 always better than Q3. Good growth in plastic mould and Mirro segment – is reflection of industry growth particularly for or Honda and Suzuki. Export dip due to EU crisis. Harely division volume is going strong. Thailand and US market.
EBIDTA margin

• 13.52%, 12.48% in Q2’FY22. Historically it has been ~12%. Is the increased margin of 13%+ stainable? Guidance is for ~13%. Employee benefit cost is going high YoY and QoQ – 12.08%. increase due to sales.
• Raw material cost – are always pass-through.

EV lighting Industry –

• 560% growth on a very small base. Volume is 2.7 Lac. Deep penetration will help growth.
• 4% -5% contribution in overall revenue.

FIEM EV market share –

• working with 20 OEMs. Currently engagement with top 10. New competitions not yet. LUMAX, Uno Minda getting eating into our share – existing customers will continue fighting for turf. FIEM is sole supplier for Okinawa, Revolt. ~4% revenue from EV segment.
• Realization difference between EV and ICE – customer payes tooling cost for EV. Realization is better in EV.

LED share –

• 47%. Fast adoption of tech. Heading towards 60%. 100% new projects are all LEDs. Even for existing like Honda etc are also adopting to LED. LED has 2X and upwords realizations. Margin can move upwards.

Growth:

• 2W recovery from FY19, industry is really growing. Will be gradual but in the direction. New model for next FY. Further visibility by next Q.
• Working with Hero. Is in WIP. Few models to be launched next year. Will ramp up gradually. Contacted for new models only. Contacted for LEDs for Hero.
• Very less of replacement ~5%. Have been restricted by OEM for doing replacement market.
• Working on 4W penetration. Will be able to share updates once have one.

Product market share share by customers:

• Is there any slow down in Yamaha due to export slow down? Not much volume and value de-growth. In fact new models are launching Q1FY23.
• HMIS – our growth not matching with Honda growth. This quarter most growth is due to Honda.
• Ather – Not working with Ather.

Capacity Utilization – 80%+ Adding capacity in south since there are business opportunities.
CAPEX – 10.3 Crs incurred so far. Total projected Capex of 50 to 75 Crs. mostly in south India from internal accruals. Have 4 plants in south. Focus on adjacencies. May need significant large capex for new products. (visibility by year end).

• Margin profiles for new products – rear view mirror is an old product. Blended is 13% range.
• Railway business share – focus area is automotive only.
• Export is very minuscule. Indirect supply from domestic OEMs. Yamaha has significant re-routing for overseas.
• Customer specification is most critical factor – raw material indexation by customer + value-add based on a formula.
• Also, looking at other opportunities (in-organics??). Open for exploration.

Overall good top line growth and margin expansion. Sinc last couple of calls, management has been guiding about 15% -20% which looks to be feasible 2W industry inching back to historical volumes. Sustenance of margin could be key monitorable.

Also, purely from reported numbers perspective, most remarkable aspect has been good increase in cash and cash equivalent to ~135 Crs. primarily driven by reduction in trade payable (~55 Crs.), 20 Crs from JV sales and MF liquidation of 26 Crs. As a possibility, this Cash built -by is significant in case something metalizes on inorganic avenues that management is speaking about.

Thanks,
Tarun
Disc: Invested