FIEM Industries Limited (NSE:FIEMIND) is an auto ancillary company which provides end-to-end lighting solution for automobiles. It also manufactures signaling equipment, rear view mirrors etc. In this piece, I will give you a summary of what I understood about the company, its 2020 Annual Report etc.
In focus:
- FIEM has a market share of about 27-30% in 2-Wheeler lights segment, as per management.
- Generates 96% of its revenue from 2-Wheeler segment.
- Despite pandemic, very strong order book – with a new customer Kawasaki.
- According to management – the order book is so strong, they are unable to meet the demand.
- LED acceptance in future is a positive sign for the company. As LED constituted about 23-25% of FIEM’s revenue in the last quarter (Revenue Mix Chart below by TijoriFinance).
- Management is having an aim to take the share of LED lights in revenue to 50% in 3-5 years.
Customers:
– TVS
– JCB
– Tata
– Bajaj
– Honda
– Suzuki
– Yamaha
– Eicher Motors
– Hero MotoCorp
– Kawasaki (New)
– Harley Davidson
– Mahindra & Mahindra etc.
They have many big names in both 2-wheeler and 4-wheeler segments.
In the News:
Current Chairman & Managing Director of FIEM – J. K. Jain gifted his daughter-in-law a Rolls-Royce Ghost during her wedding with his son. The wedding was attended by top Bollywood celebs like Anil Kapoor, Arjun Kapoor, Arijit Singh, Atif Aslam etc. – Economic Times and Times of India (2014)
FIEM Industries is providing lighting to One Electric – which claims to make one of the fastest electric bikes in India – Livemint (2020)
It is one of the 8 stocks in which Mutual funds made fresh investments – Moneycontrol (2020)
Important Points from 2020 Annual Report:
1. Has global presence in India, Italy, Hong Kong, Japan.
2. Company is basically run by the Jain family. 4 out of 13 people on the Board of Directors are from Jain family.
3. Top shareholders include SAIF India, DSP Small Cap Fund, Bajaj Allianz Life Insurance etc.
4. Salary/Remuneration of the top management has increased at a CAGR of 7.42% from 2016. During the same period company’s revenue grew by 8.72% and net profit grew by 7.1% CAGR.
5. No new capex (Capital Expenditure) in FY19-20.
6. Huge spending in ‘Design Charges’ (R&D) in FY19-20. More than 4X from last year. In FY19-20 it was ₹242.86 lakhs while in FY18-19 it was ₹55.95 lakhs.
7. Despite a slowdown in the auto sector, debtor days is continuously improving since 2016.
8. Current Ratio and Debt/Equity Ratio has also improved in last 3 years. As per management – “No fresh loan taken during the year, repayment of earlier loan during the year has resulted in improvement of the ratio”.
9. Revenue from their different businesses:
Important Points from Financial Statements:
1. Capital work-in-progress has dropped significantly. In 2019 it was ₹790.95 lakhs and in 2020 it is just ₹25.21 lakhs.
2. Inventories have dropped, mainly because of the drop in “Work-in-Progress”.
3. Current Trade Receivables almost halved in 2020 – which also reflected in the improvement of the Debtor Days, which I wrote about earlier (above).
4. Massive decrease in Current Borrowings to just ₹1.08 lakh from ₹3,846.66 lakh.
5. Cash reserve increased nearly 3700%. Cash and cash equivalents in 2019 were ₹119.17 lakhs, while it jumped to ₹4,521.05 in 2020. This jump mainly happened due to no new bank loans (Current Borrowings) taken up by the company, few loans already paid out and also a significant improvement in debtor days.
6. Non-current borrowings almost halfed.
7. New lease liability (non-current) of land & building was seen in 2020 (₹2,509.02 lakhs) which was ₹0 in 2019.
8. Almost 3X increase in provisions (liability). This is mainly due to a 4X increase in Gratuity payment.
9. They gave back almost 1/3rd of their PAT (Profit After Tax) in dividend.
10. Net Cash flow from operations increased by 75%.
11. Customers who account for more than 10% of company’s total revenue are Honda and TVS. In % terms it is 39.06% from Honda (increased nearly 2%) and 25.83% from TVS (decreased nearly 2%). So almost 65% of FIEM’s revenue comes from just these 2 companies.
12. Out of 3 Joint Ventures (JV) they have – 2 reported higher loss and 1 reported higher profit than last year. Financial statements of 2 JVs (1 made loss & 1 made profit) were not audited by the FIEM auditor.
My take:
FIEM Industries came up while I was researching some companies with consistent profit growth and ROCE. What attracted me more was its exposure to the 2-wheeler segment – which I feel will be an interesting bet during post-pandemic time. For tracking it more I have bought few shares at an average price of ₹591.
As always, this is my personal thoughts about the company. Please don’t take this as investment advice; am in no way a certified investment advisor. This is just a personal chat between me & you – about helping and motivating you to start your investment journey as fast and with as little money as possible. And I would highly recommend you to go through their Annual Reports before making any investment decision.
If you have any questions or feedback, tweet them at @InvestRepeat. Also, you can join my private Telegram channel (Username: InvestRepeat).
Your man,
SIR
