Fiem Industries | This mirror maker is raking in business by making parts from electric vehicles. Should you buy the stock?

Even though the market trend looks uncertain given the limited movement of Nifty50, investors are looking for better opportunities to enter the market. A question that often comes to the back of an investor’s mind is: what stock should I buy now? Among others, a gem that has probably gone unnoticed by many is Fiem Industries.

Analysts believe Fiem’s ​​bright business outlook could help the mirror maker’s stock to double in nearly a year.

On June 4, the automotive LED lighting maker’s certificate ended down 3.7% at Rs 1,005.30 on BSE. Over the past year, the certificate has increased by almost 50% while it has jumped by around 118% over the past three years.

About the company

Fiem Industries manufactures automotive lighting, signaling equipment, mirrors, sheet metal and plastic parts for two, three and four wheelers in India. It has diversified its product portfolio by entering LED luminaires for indoor and outdoor applications and integrated passenger information systems for railways and buses.

The company’s main customers in the two-wheeler field are Honda, TVS, Yamaha, Suzuki, Eicher Royal Enfield, Harley Davidson and Mahindra, among others, and those in the four-wheeler field are Tata Marcopolo, Force Motors, Honda Siel, Hyundai, Daimler and Mahindra Reva, among a few others.

Top Fiem customer contribution (Source: company investor presentation)

In the fourth quarter of FY22, 96.64% of the company’s revenue came from the two-wheeler segment, while 3.36% came from four-wheeler.

Fiem industries, income splits Fiem’s ​​revenues collapsed in the fourth quarter of FY22 (Source: Company Investor Presentation)

What analysts say

The company has around 80 new projects under its belt and is also working on three Hero MotoCorp models. Fiem has grown its electric vehicle (EV) portfolio relatively quickly and caters to well-known brands such as Hero Electric, Okinawa, Ola, Revolt, Ampere, Tork, Polarity and Bounce, Monarch Networth Capital said.
Fiem, EV, electric vehicle, customers, customers Fiem customers in the EV space (Source: Company Investor Presentation)

Some analysts believe that with big names in its electric vehicle portfolio and an increase in export orders, Fiem’s ​​growth runaway remains long.

Electric vehicles contributed about Rs 400 million to Fiem’s ​​total sales in FY22, and the company expects that to triple in FY23, Monarch Networth’s Anubhav Rawat pointed out. Capital in a research report.

Sales of electric cars (including all-electric and plug-in hybrid cars) doubled in 2021 to a new record high of 6.6 million, with more sales each week than in all of 2012, the agency said. Energy International in a press release in May.

Despite strains on global supply chains, sales continued to rise strongly through 2022, with 2 million electric cars sold globally in the first quarter, up three-quarters from the same period a year earlier. The number of electric cars on the world’s roads at the end of 2021 was about 16.5 million, triple that of 2018, the agency said.

With EVs being the future, Fiem is beating the blues with smart strategies of building a robust EV portfolio, better product lineup and focusing on export-oriented sales at Yamaha, Harley and Piaggio, analysts say.

Fiem, Global Customers, OEM Fiem’s ​​global two-wheeler OEM customers (Source: company investor presentation)

Fiem is trading at a valuation of 10 times its price to earnings multiple, according to Monarch Networth Capital which retained its ‘buy’ rating on the stock with a target price hike to Rs 1,580 from Rs 1,420 This implies a 57% rise from Friday’s closing price.

A look at the company’s financial health

Q4 FY22 Q3 FY22 Q4 FY21
Net profit (in Rs cr) 32.00 24.04 25.48
Operating income (in Rs cr) 489.51 388.84 421.22

Meanwhile, Kkunal Parar, VP of Research at Choice Broking, sees a cup and handle formation on the charts for Fiem, which is seen as a bullish signal extending an uptrend, and it is used to spot the opportunities to go long.

“From a one-year horizon, the stock is facing strong resistance at the Rs 1,375 level and sustainment above this level would cause the stock to touch Rs 1,965, which is almost twice the current market price,” Parar said. This means the stock has the potential to generate returns in excess of 95% over a one-year period.

He sees the first support for the stock at Rs 856 and the second at Rs 800.

Analysts have strongly expressed optimism about the company’s business prospects and the stock’s uptrend, and believe the scrip has the potential to deliver stellar returns.

Industry outperformance and pricing power are also factors that have analysts bullish on Fiem.