Kotak Securities
FIEM Ind (Buy)
CMP: ₹850
Target: ₹1,254
FIEM Industries is a leading player in automotive lighting/signalling equipment segment, catering largely to the two wheelers. The company also supplies rear view mirrors, sheet metals parts and plastic components to two-/four-wheeler segments.
Recently, FIEM ventured into the LED lighting business. We expect the two-wheeler industry to grow at a healthy rate over FY17-FY19E and FIEM would be a key beneficiary of the same. FIEM has been reporting strong revenue growth over several past years and we expect the same to continue going ahead as FIEM’s key customers are likely to grow ahead of the industry.
The government’s focus on increasing LED penetration and FIEM’s upcoming new joint ventures will also add to the growth. On the back of expected strong growth in earnings, return ratios will likely improve in FY18/FY19. Strong cash flows will aid FIEM in becoming net debt free by FY18.