PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Transcription

1 BUY CMP Target Price FIEM INDUSTRIES LIMITED Result Update: Q1 FY14 SEPTEMBER 12 th 2013 ISIN: INE737H01014 Index Details Stock Data Sector BSE Code Face Value Auto Components 52wk. High / Low (Rs.) / Volume (2wk. Avg.Q.) 9104 Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY13A FY14E FY15E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) SYNOPSIS Fiem Industries Ltd is one of the leading manufacturers of automotive lighting & signaling equipments & rear view mirrors. The major business comes from the two-wheeler segment of the vehicle industry. During the quarter the net profit is increased by 20% to Rs mn as against Rs mn in the corresponding period of previous year. Fiem Industries Ltd net sales registered 5.96% increase and stood at a record Rs million from Rs million over the corresponding quarter last year. Fiem Industries Ltd has recommended a dividend of Rs. 4/- per share of Nominal Value of Rs. 10/- each, amounting to Rs lacs on Equity Share Capital of the Company from the Profits of the Company. During last 5 years of turbulent economic scenario, the company has grown by a CAGR of more than 22%, demonstrating strong resilience and consistency in its overall performance. 1 Year Comparative Graph Around 71% of the Total Turnover of the company comes form Lighting and Signaling Equipments and close to 13% comes from the Rear View Mirrors. FIEM INDUSTRIES LTD BSE SENSEX The Company s esteemed customer M/s Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) has also bestowed on "Honda Global Support Supplier " Award. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 17% over 2012 to 2015E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Fiem Industries Ltd Swaraj Engines Ltd Rane Madras Ltd Amara Raja Batteries Ltd

2 QUARTERLY HIGHLIGHTS (STANDALONE) Results updates- Q1 FY14, Fiem Industries Ltd is a formidable name in automotive lighting industries with 8 state of the art manufacturing units. The Company is engaged into manufacturing of auto components and main product line are Automotive Lighting & Signaling Equipments, Rear View Mirrors, Sheet Metal Parts, Plastic Moulded Parts and some other components. Company supplies these parts to all leading OEMs in India and also exports to other countries and has reported its financial results for the quarter ended 30 JUNE, Months JUNE-13 JUNE-12 % Change Net Sales % PAT % EPS % EBITDA % The company achieved a turnover of Rs million for the 1 st quarter of the current year as against Rs millions in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs millions and a net profit of Rs million against Rs million reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs for the 1 st quarter as against an EPS of Rs in the corresponding quarter of the previous year. Break up of Expenditure: During the quarter Total Expenditure rose by 6 per cent and increase in Cost of Material consumed with consideration of other Expenses and Employee benefit expenses. Total expenditure in Q1 FY14 stood to Rs million as against Rs million in Q1 FY13. Employees benefits expenses incurred Rs against Rs millions in the corresponding period of the previous year. Purchase of stock in trade is at Rs mn in Q1 FY14 against Rs mn in Q1 FY13. In the same quarter of Q1 FY14 Other Expenditure faced at Rs million where as costs of material consumed at Rs. 907million in Q1 FY14 against Rs million are the primarily attributable to growth of expenditure.

3 Latest Updates The Company recently has selected by its esteemed customer Honda as their Global Supplier for selected high end Motorcycle of 670 cc. Esteemed customer M/s Honda Motorcycle & Scooter India Pvt. Ltd.(HMSI) has also bestowed on us "Honda Global Support Supplier " Award. COMPANY PROFILE Fiem Industries Ltd. is one of the leading manufacturers of automotive lighting & signaling equipments and rear view mirrors. The major business comes from the two-wheeler segment of the vehicle industry. It has a wide range of lighting systems and rear view mirrors, sheet metals parts and plastic components for two and four wheeler and its diversified products portfolio ranging form rear view mirrors, head lamps, tail lamps, roof lamps, wheel covers, warning triangle, complete rear fender assembly, frame assembly, mudguards and various sheet metal & plastic parts etc. is capable of catering to the needs of almost all segments of automobile industry viz., four-wheelers, LCVs, HTVs and tractors. The company has one foreign subsidiary i.e. 'Fiem Industries Japan Co. Ltd.' incorporated in Japan. FIEM has acquired certifications such as ISO 9002, QS 9002, QS 9000, ISO/ TS 16949:2002, & ISO It has also acquired certification for conformity of production form RDW Netherlands. FIEM has also been accredited with ISO Certification for Environment Management Systems. FIEM employees are constantly being trained to meet the customer's specific requirements as per TQM. FIEM has become a Tier I Supplier not only in India but also in Europe and USA. FIEM is a known brand in Automotive Lighting and Rear View Mirrors in international OEMs and is considered as synonymous of High Quality & Low Cost manufacturing Company. Company has diversified into LED indoor and outdoor lighting business and manufacturing a large range of LED products like LED Home Lighting, LED Bulbs and tubes, LED Solar Street Lighting, Multi-Functional Torches cum Flasher Lights, LED Solar Lanterns, LED Display panels for buses and trucks and LED display signal systems for Railways etc. which also forms part of above turnover. Products Fiem Industries Ltd is one of the leading manufacturers of automotive lighting & signaling equipments and rear view mirrors for automobiles. Two Wheelers Kinetic Bajaj Hero Honda LML Yamaha TVS

4 Honda Suzuki Piaggio Royal Enfield Four wheelers Maruti Suzuki Tata Daewoo Reva car Pre, Automobiles H. Motors DCM Toyota Force Motors Ashok Leyland Peugeot Hyundai/ General Motors Trailer & Truck Trailer & Car Swaraj mazda International Tractor Ford HMT Tafe Indo Form/ Preet Tractor JCB Terex Vectr M7M VST Tractor Trailers Auxillary Lamps Halogen Lamps Work lamps Warning Tringles Reflex Reflector Led Lamps Led Luminaires Clients Two - Wheeler Segment (Domestic OEM Customers)

5 Two - Wheeler Segment (Global OEM Customers) Four - Wheeler Segment (Domestic OEM Customers) Four - Wheeler Segment (Global OEM Customers)

6 FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, E Value(Rs.in.mn) FY12A FY13A FY14E FY15E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital Reserves and Surplus a) Net worth (a) Non-Current Liabilities: Long-term borrowings Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions b) Long term liabilities Current Liabilities: Short-term borrowings Trade Payables Other Current Liabilities Short Term Provisions c) Current Liabilities Total (a+b+c) ASSETS: Non-Current Assets: Tangible Assets Intangible Assets Capital work-in-progress Other non-current assets Non Current Investments Long Term Loans and Advances d) Non-Current Assets Current Assets: Inventories Trade Receivables Cash and Bank Balances Short Term Loans and Advances Other Current Assets e) Current Assets Total (d+e)

7 Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12 FY13 FY14E FY15E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 DEC, 2012 to 30 SEP, 2013E Value(Rs.in.mn) 31-Dec Mar June Sep-13E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

8 Ratio Analysis Particulars FY12 FY13 FY14E FY15E EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) EV/EBITDA (x) Book Value (Rs.) P/BV Charts

9 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at 7.38 x FY14E and 6.53 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 17% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 4.72 x for FY14E and 4.36 x for FY15E. Price to Book Value of the stock is expected to be at 1.20 x and 1.01 x respectively for FY14E and FY15E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. INDUSTRY OVERVIEW The Indian market conditions are acting as a catalyst for luxury and premium carmakers, which receive a boost from new launches and numerous offers from carmakers, thereby giving impetus to the auto components industry. The industry is expected to invest around Rs 70 billion (US$ 1.17 billion) over the next three years on new projects, as per rating agency ICRA s estimates. The investments are foreseen on back of auto manufacturers, such as Maruti Suzuki, Hero MotoCorp and Ford, planning to establish green field facilities in Gujarat, prompting component makers to invest around these facilities. In addition, the automotive aftermarket is poised for robust growth, as per a McKinsey & Co report titled, Scaling the Indian Automotive Aftermarket: Path to Profitable Growth. The report highlighted that the growth outlook continues to be positive, driven by sustained increase in vehicle population and a shift towards higher-end vehicles. Market Structure The Indian auto component industry s turnover is reported to be US$ 40.6 billion in and is projected to touch US$ 115 billion by , according to data provided by Automotive Component Manufactures Association (ACMA). The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during Moreover, the industry s exports were recorded at US$ 9.3 billion in and are projected to touch US$ 30 billion by , as per ACMA.

10 More so, the tyre production in India is anticipated to reach 191 million units by the end of FY 2016, highlighted an RNCOS research report titled, 'Indian Tyre Industry Forecast to 2015'. The manufacturers are expected to invest huge amount into the industry over the next few years, with a major proportion of this investment directed towards the radial tyre capacity expansion. India: The Global Auto Hub Indicative of growing relevance of Indian technological expertise; Pratt & Whitney, the US-based aerospace engine manufacturer, is exploring opportunities to source components for its global operations from India. Wheels India entered into a 10 year technical agreement with Turkish manufacturing and engineering company EGE Endustri, one of the major suppliers to original equipment market (OEM) in Europe. As per the agreement, Wheels India would get technology access in the Lift axle market Honda Cars India Ltd (HCIL) plans to export diesel engine components to Asian and European markets from India Apollo Tyres has opened a sales office in Bangkok, Thailand, making it the hub for Association of Southeast Asian Nations (ASEAN) operations. This is the second hub outside the company's operations in India Furthermore, the amount of cumulative FDI inflow into the Indian automobile industry during April 2000 to April 2013 was worth US$ 8.32 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India. Key Developments & Investments Valvoline Cummins will begin production of automotive lubricants at its new manufacturing and packaging plant at Ambernath, near Thane district. Western India is a manufacturing hub that has the largest consumption of industrial lubricants among all regions, according to Mr Sam Mitchell, President of Ashland Consumer Markets, a unit of Ashland Inc Italian auto component maker Streparava Holding SPA announced that it has bought out its Indian partner Sansera Engineering from the joint venture (JV) that makes engine parts Hyundai Motor India Foundation has opened an automobile servicing training centre at the Government Industrial Training Institute (ITI), Ulundurpet, Tamil Nadu (TN). The firm plans to set up 10 more such centres at various ITI's in the state this year.

11 Robert Bosch GmbH is to set up a joint venture (JV) with two Japanese companies to develop lithium-ion batteries to double the range of electric vehicles, the companies. The plan is to boost the capacity of lithium-ion batteries to enable electric vehicles to travel about 400 km per charge from the current range of 180 to 240 km, while reducing weight and volume JSW Steel will complete its new plant in Bellary, Karnataka by December The 2.3 million tonne (MT) capacity plant, being set up at an investment of US$ 1 billion, is specially designed to make products for the Indian automotive industry The Mangalore-based Arvind Motors Pvt Ltd (dealers of Tata Motors) will launch its new 3S (sales, service, spares) facility in Mangalore Government Initiatives The Union Budget presented by Mr P Chidambaram, the Union Finance Minister, Government of India, in the Parliament on February 28, 2013, had a few add-ons for the industry. The analysis by Deloitte on the Union Budget highlighted the following: The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended upto March 31, 2015 The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 percent to 100 percent on cars/ motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to 75 percent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from 10 percent to 25 percent An increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely for taxi purposes An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent Additionally, the Automotive Mission Plan (AMP) , highlighted that the contribution of automotive sector in the gross domestic product (GDP) is expected to double, reaching to touch a turnover worth US$ 145 billion in 2016, with special focus on export of small cars, multi-utility vehicles (MUV), two & three wheelers and auto components.

12 Road Ahead Global and Indian manufacturers are focussing their efforts to develop innovative products, technologies and supply chains in the industry. With an ever-increasing influx of car makers, Mr Srivats Ram, MD, Wheels India, observed that this is an opportunity for us to build our internal strength. Over the medium term, factors such as growing thrust on localisation and expanding businesses in new geographies should allow the components industry to grow at a relatively faster pace than the auto OEM segment, according to a study by ICRA. Overall, the market foresees better demand for times to come. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

13 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods Ashish.Kushwaha IT, Consumer Durable & Banking Anil Kumar Diversified Suhani Adilabadkar Diversified M. Vinayak Rao Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO s, QIP s, F.P.O s,takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai Tel. : / / Telefax : info@firstcallindiaequity.com