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Equirus Securities
FIEM Ind (Long)
CMP: ₹1,018.95
Target: ₹1,336
FIEM Industries (FIEM) is among top three automotive lighting players in India, deriving about 90 per cent of sales from 2Ws and having HMSI as its largest customer. We expect FIEM to be a key beneficiary of increasing LED usage in 2Ws, partly due to mandatory AHO (Automatic Headlamp On) requirements fuelling demand for energy-efficient Day Running Lights (DRLs)/LED headlamps. We also see FIEM’s large exposure to HMSI as a key positive; HMSI has taken the lead in LED headlamps with its scooter GRAZIA, and should launch more models with the same feature. Over FY07-FY17, FIEM posted a sales/EBITDA CAGR of 22 per cent/21 per cent led by the addition of new product lines apart from lighting. While a decline in non-automotive lights hit the company’s FY17 performance, we expect a recovery ahead. Initiate coverage with ‘long’ and March 2019 price target of ₹1,336.
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