Tuesday, October 13, 2015

Hold FIEM Ind CMP: Rs.592.00:Target: Rs.659

FIEM Industries is one of the leading manufacturers of automotive lighting and signalling equipment, and rear-view mirrors in the two-wheeler segment. It has reported strong growth in its core business over the past three years, driven by the strong sales rise in the two-wheeler business of its key customer Honda. 

FIEM plans to expand into more products and the four-wheeler segment through new joint ventures; this is likely to help it maintain its growth trajectory in the core business. The company has also diversified into the high-margin LED luminaire business, which could boost growth further. 

Relative to peers, FIEM has grown at a faster rate over the past two years. Though there has been slowing down of two-wheeler demand currently, in the mid to long-term, we expect the demand to pick up. Also the current order book FIEM has for LED business is encouraging.

We have revised our earnings estimates for both FY16 and FY17 on the back of slower pick up in two-wheeler demand and slower traction/ higher competition observed so far in the LED business.

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