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Centrum Broking
FIEM Ind (Buy)
CMP: ₹962.50
Target: ₹1,260
Fiem Industries is engaged in lights, signalling equipment and parts; rear view mirror and parts; plastic molded parts, and light-emitting diode (LED) luminaries business.
We expect FIEM’s growth to continue aided by strong growth prospects of its two biggest clients namely Honda Motorcycle and Scooter India (HMSI) and TVS Motor. Q1FY18 top-line performance was above estimates as auto segment posted strong growth. Had it not been for issues in LED business, the performance would have looked much stronger.
Recently FIEM has faced several issues in its LED business, due to an unfavourable business environment. LED business reported a loss at EBIT level on account of sales returns worth ₹8.2 crore, along with declining sales. Despite slightly lower visibility in the LED business, we remain convinced of FIEM’s medium-to-long-term growth opportunity as the company continues to remain a strong 2W auto ancillary company. Also, the management is working on several fronts to get the LED business on track.
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