Investors with a long-term perspective and an appetite for high risk can buy the Fiem Industries stock (market cap of about ₹800 crore).The company is a supplier of lighting, rear-view mirrors and plastic-moulded parts for two-wheelers. An expected turnaround in new vehicle sales after two years of fall (FY20 and FY21), improving share of revenues from the LED lighting segment and bettering financial metrics from the company’s deleveraging efforts are positives.
The company has been on a debt reduction run with the latest debt-to-equity ratio (as of September 2020) at 0.22 per cent. Interest cost reduction due to this has helped the ROE improve from 9.9 per cent in FY17 to 15 per cent as of FY20. After having more than doubled in the market rally since the lows of March 2020, the stock trades at a reasonable PE of about 17.8 times its trailing 12-month earnings. Peers such as Lumax Industries trade at 90 times due to a combination of a sharp price rise and depressed earnings.