By Fiem Industries, a prominent name in the two-wheeler automotive lighting and rear-view mirror segments, has witnessed a remarkable surge in its stock value over the past few years, marking a significant milestone in its market journey.
The company’s shares, which were trading at a modest ₹101 apiece in April 2020, have since experienced a staggering 1,500% increase, currently hovering around ₹1,650. This remarkable rise has not only caught the attention of market watchers but also set new benchmark highs, underscoring the company’s growing influence in the automotive industry.
The stock’s performance has been nothing short of impressive, with Fiem Industries delivering positive returns for four consecutive calendar years. In 2020, the stock gained 20%, followed by a 100% increase in 2021.
The upward trend continued with a 54% rise in 2022 and a further 21% gain in 2023. This consistent growth has solidified the company’s reputation as a strong player in the market, attracting the attention of both investors and analysts.
As of the current calendar year, Fiem Industries’ stock has already jumped by 55%, rallying from ₹1,062 to ₹1,620. This significant growth reflects the company’s ability to capitalize on favorable market conditions and its strategic positioning in the two-wheeler segment.
Since its listing on the NSE in 2006, Fiem Industries has seen a mix of both positive and negative returns, with seven calendar years of negative returns. However, the remaining 11 years have been marked by positive growth, with 2014 standing out as the most successful year, recording a 140% gain.
Looking ahead, domestic brokerage firm Kotak Securities has expressed confidence in Fiem Industries’ continued strong performance. The brokerage firm highlights the company’s strategic position to leverage the recovery in the two-wheeler industry, driven by its robust presence among key players in the segment.
According to Kotak Securities, Fiem Industries has consistently outperformed industry growth, a trend that is expected to continue as the company benefits from the rising adoption of LED lighting in the automotive sector.
The passenger vehicle segment, in particular, presents significant medium-term growth opportunities for Fiem Industries. Kotak Securities believes that the company’s strong financial performance, coupled with healthy volume growth in the two-wheeler industry, will support its continued success.
As such, the brokerage has initiated coverage on Fiem Industries with a ‘buy’ rating and a target price of ₹2,140 per share, indicating a potential upside of 30% from the stock’s previous closing price of ₹1,650.
Fiem Industries’ growth story is closely tied to the recovery of the two-wheeler industry in India, one of the top manufacturers globally. The industry, which faced a significant decline during FY20 and FY21 due to the COVID-19 pandemic, has shown signs of recovery in recent years.
The two-wheeler segment is crucial for Fiem Industries, accounting for 97% of the company’s automobile business revenue. With strong volume growth recorded in Q1 FY25, Kotak Securities expects this positive trend to persist, supported by factors such as a good monsoon, improved consumer sentiment, and increased government spending.
Fiem Industries has also built strong, long-standing relationships with key players in the two-wheeler segment, including Hero MotoCorp, TVS Motor, Yamaha Motor India, and Suzuki Motorcycle. These relationships have played a significant role in the company’s historical growth, with its top four customers accounting for around 79% of its revenue in Q1 FY25.
In terms of financial health, Fiem Industries boasts a debt-free balance sheet and consistent cash flow generation. The company’s revenue has grown at an 11% CAGR over the past decade, despite challenges like the industry’s decline during FY21 and FY22. Kotak Securities projects a 15% CAGR in revenue from FY24 to FY27, driven by robust two-wheeler demand and increasing LED adoption.
With an improved EBITDA margin and strong ROE, Fiem Industries is well-positioned for continued growth. The company plans to invest ₹100 crore in FY25 and ₹250 crore over the next 2-3 years, funded by internal accruals. As Fiem Industries continues to capitalize on its strengths, it remains a compelling prospect for investors, with its stock expected to maintain its upward trajectory in the coming years.
