Fiem Industries LtdQ2 FY23Auto Components

Fiem Industries Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

N/A

1 of 3 growth signals are positive — mixed outlook.

Revenue guidance

Category 3

→EV two-wheeler sales grew 66% YoY in Q1 FY'24 despite Fame II subsidy reduction; expected to stabilize and grow during the year.
→FY24 outlook is very positive with growth drivers including:
→ - Auto industry growth.
→ - Over 80 new projects in order book.
→ - Increasing LED content usage (5-7% annual increase expected).
→ - Indirect exports through OEMs like Yamaha, Honda, Suzuki, Piaggio.
→ - Higher market share in electric vehicle (EV) segment.
→ - Entry and growth in four-wheeler lighting segment.
→Gogoro partnership revenues expected from FY25 onwards with product expansion and localization planned.
→New models with Yamaha and Hero (including Harley) are expected to contribute to revenue in the coming years.
→Company targets consistent margin profile alongside revenue growth.

Category 3

→FY24 outlook is positive with expected revenue growth driven by:
→ - Auto industry growth.
→ - Over 80 new projects currently in hand.
→ - Increasing LED share in products, contributing to better margins.
→ - Indirect exports via OEMs like Yamaha, Honda, Suzuki, Piaggio.
→ - Higher market share in the EV segment.
→ - Entry and growth in the four-wheeler segment.
→EBITDA margins are expected to normalize around 13% to 13.5%.
→Gross margin fluctuates due to product mix but LED share is increasing, aligning with improved margins over next 18 months.
→New product launches, especially in EV and four-wheeler lighting, are expected to contribute positively.
→Cautious on short-term margin dips; favorable medium-term trajectory expected with scale and product mix improvements.
→Stock split or bonus shares currently not planned but may be considered by the Board in the future.
→Overall, management optimistic about double-digit growth in revenues and profits going forward.

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→There is no mention of any current plans for fundraising through debt or equity.
→The company states it is currently conducting market studies and preparing a business plan.
→Management will update investors on any CAPEX or related funding plans once they are ready.
→The company is currently a zero-debt company with very little interest cost limited to bill discounting.
→Future funding or capital raising plans have not been disclosed; the board will consider options like stock splits or bonuses at an appropriate time.

Yes

→Current order book stands at approximately Rs. 9.5 billion as declared in the last quarter.
→Around 85 to 90 projects are currently on line.
→Expecting to realize 25% to 30% of sales revenue from the current order book within this financial year.
→The balance revenue will be realized in the next year and subsequent years.
→The company has a healthy pipeline of new projects, with over 80 projects in hand driving growth.
→Continuous engagement with four-wheeler customers has resulted in inquiries and RFQs, indicating potential future orders.
→The company is focused on ramping up production for existing partnerships like Gogoro with SKD transitioning to CKD in 6-8 months.

→No immediate CAPEX is planned as the company is currently conducting market studies and preparing a business plan.
→Management will update investors once the plans are finalized and ready.
→The company is progressing with localizing Gogoro SKD to CKD production over the next 6-8 months, which involves investment in domestic production capabilities.
→Fiem is gradually building its four-wheeler business team and enhancing technical capabilities in a step-by-step manner, indicating future strategic investments in that segment.
→Overall, while no explicit current CAPEX is underway aside from ongoing initiatives, the company is actively exploring new business opportunities and technology localization that could require investment soon.

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