Thread by @Finology_Quest

Fiem Industries Limited💡

Should you invest in this EV stock?

Here’s our analysis of Fiem Industries, the drivers, risks, positioning and more!⤵️

#StockMarketindia #StocksToBuy #TATAELXSI

EV is currently the hottest sector for investors to bet on, but with the ever-changing technology & rapid developments by companies, it is quite difficult to predict who is going to win the race.

We have a winner.

A company that is immune to these disruptions & will benefit from EVs.

Do you know it?

It is Fiem Industries.⚡️

It is in the business of manufacturing Automotive lights, Signalling equipment and rearview mirrors for automotive companies.

Apart from these, it also supplies LED luminaires and Integrated Passenger Information System for Railways & Buses.

This EV revolution would impact some companies positively and some negatively as EVs require much fewer components than normal ICE engine vehicles.

Therefore, some auto component manufacturers would become obsolete.

But, Fiem would be positively impacted since automotive lightning is required both and does not require any innovation.

So, In this battle of EVs v/s ICE engine vehicles, Fiem is bound to win.

𝗥𝗲𝘃𝗲𝗻𝘂𝗲 𝗕𝗿𝗲𝗮𝗸 𝘂𝗽

• The company derives the majority of its revenue from the Automotive component industry ( 99% ).

It derives only 0.91% from the LED luminaries segment.

• In the Automotive segment, the company earns the majority of its revenue from the Automotive lightning segment ( 67% ), while Plastic moulded parts and Rearview mirrors contribute 10% & 12% respectively.

• Fiem caters mainly to the domestic market as it gets around 98% of its revenue from domestic sales.

The share of exports is 2% of its revenue, and its exports are mainly to Yamaha and Harley Davidson, which is expected to rise in the coming years.

• Fiem’s revenue is concentrated mainly in the 2W segment (96%) which means that its sales are highly dependent on the 2W sales in India.

• The 2W industry in India was under prolonged stress even before the pandemic.

After the pandemic, due to lockdown and supply chain issues, the 2W sales witnessed a steep decline, but it did not really affect the sales of Fiem as its revenue grew at a CAGR of 4.73% between FY16-21.

Fiem’s business was not affected a lot during this period as it bagged a lot of new orders from established and new players like OLA electric.

𝗚𝗿𝗼𝘄𝘁𝗵 𝗗𝗿𝗶𝘃𝗲𝗿𝘀

• Auto lamps & LED lamps, together, constitute around 67% of the revenue.

• OEMs r now adopting LED lamps bcause conventional halogen headlamps use more power & drain batteries. It would increase d margins as kit value of LED lamps is 2x higher

In overall automotive lighting, 62% of revenue is from automotive lamps compared to 38% from LED lamps. It expects LED lamps’ share to rise to over 60% in future, and it would bring incremental revenue.

The company has around 50+ major automobile companies as its clients. Recently, it has also bagged Ola electric and has become its sole supplier for some auto components.

Some of its clients are:

• The growth in the EV segment would bring incremental revenue for the company as it has all the major 2W players in the electric vehicle industry under its belt.

• They are the sole supplier to EV scooter companies Okinawa, Ola and Electrotherm.

• FIEM is also in close talks with Hero Electric and engaging with TVS for their new EV lineup plan.

• Overall the company has a diversified client base with top customers like Honda, TVS and Yamaha.

• The company has an impressive order book with orders from players like Ola electric, Yamaha etc.

• It is also planning a Capex of around 75-100cr.

• The company has a strong R&D department with centres in India, Italy and Japan

Some examples of its R&D capabilities:

1. It has developed the world’s smallest LED Bi-Functional Projector Head Lamp module, patented by Fiem and Yamaha and is already a hit in the market.

2. It has developed LED Winkers, Tail lamps and moduler License Lamp for Harley Davidson

𝗞𝗲𝘆 𝗥𝗶𝘀𝗸𝘀

1. It gets more than 70% of its revenue from the top 3 clients and it is a huge risk for the company as if any player shifts to a different company, it would impact its business a lot.

2. The raw material costs of the company have increased in FY21, and it seems that it is struggling to pass on the costs to its customers as its margins have decreased.

3. Its business is highly dependent on 2W sales and, if this segment continues to struggle, its growth may suffer.

4. Also, it has a tiny share of exports of 2%, which means, the company is highly dependent on d domestic market. Any India-specific slowdown will impact revenues.

5. It has a low share of replacement market revenue (7%), which is a high margin business when compared to auto sales.

#Nifty #Markets #StockMarketindia

It seems Fiem will be a beneficiary of this EV revolution.

➡️On this Quest Course quest.finology.in/courses/electr… we have discussed more such EV stocks.