FIEMINDNSEQ1FY23August 18, 2022

Fiem Industries Limited

4,424words

110turns

12analyst exchanges

6executives

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Management on call

J.K Jain

CHAIRMAN AND MANAGING DIRECTOR

Rahul Jain

DIRECTOR

Rajesh Sharma

DIRECTOR

O.P Gupta

CHIEF FINANCIAL OFFICER

Arvind Chauhan

COMPANY SECRETARY OTHER FINANCE TEAM MEMBERS

Sahil Sanghvi

MONARCH NETWORTH CAPITAL LIMITED

Key numbers — 40 extracted

4.8 million

the growth path. Reflecting the above trend, the two-wheeler industries in Q1 FY'23 have grown to 4.8 million units, which is 38.4% growth on a year-on-year basis. This is a very encouraging trend. Your co

38.4%

the above trend, the two-wheeler industries in Q1 FY'23 have grown to 4.8 million units, which is 38.4% growth on a year-on-year basis. This is a very encouraging trend. Your company continues to perfo

Rs.445 crore

encouraging trend. Your company continues to perform at its potential and recorded that income of Rs.445 crores in Q1 FY'23 which is a growth of over 52% over the same quarter last year. Net Profit has also

52%

at its potential and recorded that income of Rs.445 crores in Q1 FY'23 which is a growth of over 52% over the same quarter last year. Net Profit has also grown to Rs.30.45 crores. Our

Rs.30.45 crore

FY'23 which is a growth of over 52% over the same quarter last year. Net Profit has also grown to Rs.30.45 crores. Our industry generally perform its best in Q4 being the last quarter of the financi

Rs.441.98 crore

the Q1 numbers for FY'23 as compared to same quarter last year. The company registered a sales of Rs.441.98 crores in Q1 of current financial year against Rs.272.25 crores in corresponding quarter 2021-22. This

Rs.272.25 crore

year. The company registered a sales of Rs.441.98 crores in Q1 of current financial year against Rs.272.25 crores in corresponding quarter 2021-22. This represent a 62.34% increase. The EBITDA for the quarter s

62.34%

urrent financial year against Rs.272.25 crores in corresponding quarter 2021-22. This represent a 62.34% increase. The EBITDA for the quarter stands at Rs.57.55 crores, translating into an EBITDA margin

Rs.57.55 crore

esponding quarter 2021-22. This represent a 62.34% increase. The EBITDA for the quarter stands at Rs.57.55 crores, translating into an EBITDA margin of 13.02%. This compares with an EBITDA of Rs.31.53 crores in

13.02%

rease. The EBITDA for the quarter stands at Rs.57.55 crores, translating into an EBITDA margin of 13.02%. This compares with an EBITDA of Rs.31.53 crores in Q1 of previous financial year and margin of 1

Rs.31.53 crore

at Rs.57.55 crores, translating into an EBITDA margin of 13.02%. This compares with an EBITDA of Rs.31.53 crores in Q1 of previous financial year and margin of 11.58%. PAT of the company has also significantly

11.58%

%. This compares with an EBITDA of Rs.31.53 crores in Q1 of previous financial year and margin of 11.58%. PAT of the company has also significantly increased to Rs.30.45 crores as compared to Rs.11.77 c

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Guidance — 20 items

J.K. Jain

opening

“Further, forecast of the normal monsoon has an increase in grain prices should result in uplift in the rural economy.”

J.K. Jain

opening

“Overall, with this solid base and the upcoming festival season of Gudi Padwa, Akshaya Tritiya and then Diwali, we expect industries to grow at double-digit during this financial year.”

Aashin

“So, how do we see this Yamaha sales going forward, I mean, we were in talks of getting other models as well?”

Rajesh Sharma

“Yamaha is in progressive growth and we will be continuing those with the new coming models also.”

Anika Mittal

“It is mentioned that sale consideration will be face value of fair market value whichever is higher, and company has invested Rs.26 crores in JV and received the same in Q1 financial year '23.”

Finance Team Member

“So, you take the figure in terms of amount, that will be catered to step the increase.”

Rajesh Sharma

“For coming festival season, there are a few models will be launched by the customer, out of which overall volume and marketing is very nice.”

Anubhav Mukherjee

“Can you elaborate like when we will be supplying, any qualitative data on the scope of business from Hero?”

Rajesh Sharma

“In last quarter also, we had informed we are working on four plus projects with Hero and very soon some of the supplies during this year, but next year will be of course complete.”

Rajesh Sharma

“So, might be next year will be the full volume which we can see.”

Risks & concerns — 4 flagged

My first question is regarding the sequential decline which we have seen compared to last quarter in our sales.

— Aashin

Sir, on HMSI, we have seen a quarter-on-quarter decline?

— Aashin

If you can help me with the wallet share of our top customers for Q1 and have we seen any decline in Yamaha wallet share?

— Rahil Shah

There is no decline in the wallet share.

— Arvind Chauhan

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Q&A — 12 exchanges

My first question is regarding the sequential decline which we have seen compared to last quarter in our sales. If we see the two-wheeler industry has grown by approximately 10% quarter-on-quarter, and even our major customers, HMSI and Yamaha have also grown. Why have you seen a quarter-on-quarter in our numbers?

Rajesh Sharma

I'm Rajesh Sharma. I'll just reply on your question. There are certain models which we were exporting to Yamaha especially for Europe and US. Those are having some certain fixed quantity, which has been completed by us in last quarter of last financial year. And now we are in regular supplies, regular models for other countries and for India. So, that is the only point which has been contributed the minus for last quarter to this quarter. Sir, on HMSI, we have seen a quarter-on-quarter decline? HMSI is marginal. If you see that is again model-specific, but the key difference is only a slight d

I had just a few questions. First would be, when you say you have SMT line established from year 2006-04, I wanted to know where did you get the SMT line like we could have the access to it or have you patented it or something?

Arvind Chauhan

I think you are talking about the surface mounting SMT line. We already have since rather 2006 you have said. Your question is about the sourcing of that line or what is your question actually? About the sourcing of the line, where did you get the SMT line? No-no, actually this is from world reputed manufacturers from various countries like Germany and other countries. We cannot disclose the name of the manufacturer. My second question is that you are exiting from the JV, which produce fuel pump module. So, does this mean this product will no longer be in your product portfolio? Yes, we alread

If I look at your presentation, your LED share has gone down by 1% from Q4 to Q1. So, is this a normal thing that you kind of see on a quarter-on-quarter basis or there are some headwinds in terms of auto LED lamps? Since for the year, you said that the total share should increase around 3% to 4%? And how do you see that being achieved during the year?

Arvind Chauhan

So, your question is about the LED. This is in the same range of 44%, because sometimes one product where the LED content is more, then supplies are more, so it fluctuates. But you have to see the overall trend; see, in FY'2020 it was 39%, in FY'2021, it was 40% and we closed this FY'2022 with 44%. So, the trend is increasing, but quarter-on-quarter exact numbers remains a little bit fluctuation. Sir, over the years, what you said is that 3% or 4% in FY'20, if the market is good, there should be the increase in market share for LED. That guidance still stays? LED share will increase over the n

Sir, company has exited from one of its joint venture, Aisan Fiem Automotives India Private Limited. My question is regarding the valuation of the JV. It is mentioned that sale consideration will be face value of fair market value whichever is higher, and company has invested Rs.26 crores in JV and received the same in Q1 financial year '23. So, is the JV fair market valuation is that of face value?

Arvind Chauhan

Yes, your understanding is correct. We exited on the face value because face value was higher. Then sir, it is the fair market value? It is a confidential data, but we have to see what we got. And this remains part of this JV agreement. So, whatever we already shared, it remains same. My second question is regarding customers wins of the company. As Ola is entering into the four wheeler segment, will company supply to the Ola two-wheeler also? It is too early to comment on this subject. Ather is also a good EV player. Are you looking to supply to Ather or Ather is already in your customer list

A couple of questions. First one was what is the mix for the contribution of LED lights in head lamps and tail lamps? And is it that it is materially high in tail lamps or head lamps or is it other way around? And a related question was, what is our market share in this LED lights and halogen lights in the top five customers that we have?

Arvind Chauhan

So, regarding the pricing of the head lamp and tail lamp, this head lamp is naturally the higher realization. The head lamp is a higher realization segment you're saying? Yes, yes. Again, not specific to you, but in terms of the overall industry as well, the LED light penetration is higher in the tail lamps or in the head lamps currently? It is in both. Almost industries are of course working for tail lamp parts. But now the penetration year-on-year is increasing for the front lighting also. All the EVs are coming with LED lamps on head lamp or tail lamp. Would it be fair to say that we have e

I wanted to know about the projects which we continue to do on an ongoing basis. Last time you mentioned 80 projects for various models which are in R&D phase. So, can you please tell us something about how they are shaping up and how is the schedules for coming festival season?

Rajesh Sharma

There are of course 80 projects are declared during our last con call, after that also 17 projects is being awarded by the customers, that is an addition. Some of the projects will definitely be launched within this year and some in subsequent years... 2024. How are the schedules looking for the coming festival season? For coming festival season, there are a few models will be launched by the customer, out of which overall volume and marketing is very nice.

Yamaha has grown substantially for you over the years. So, do you see like from a longer-term perspective not something in very near-term, any other OEMs that can grow for you similar to Yamaha?

Rajesh Sharma

Yes, we are working with Yamaha of course and other Japanese customers, and we are expecting now very good volume from the domestic as well as export market, and we are under development of few projects which will definitely be launched by next financial year. Finance Team Member: Additionally, there are 20 OEMs which are already signed up in the EV segment. These are of course small in terms of value right now, but as this volume grows, this should be a big kicker. Moreover, we have already announced about the Hero. Can you elaborate like when we will be supplying, any qualitative data on the

In case of HMSI, we've seen some fall in the revenue from Q4 to Q1 despite the volume going up. Is it the certain models where we supply, there was a production impact due to chip shortage?

Rajesh Sharma

There are few models wherein chip shortage is there at HMSI and certain volumes is dropped where our presence was there. Especially 350 CC H'ness. Secondly, we also got order from Harley-Davidson, USA and Thailand Plant. Have we already started supplying over there and is it meaningful to our revenue? Yes, we have already started supplying to them, but it is a ramp up right now. So, might be next year will be the full volume which we can see. What would be the potential over there? Harley Davidson of course will not be having so much of volume because it is not in commute vehicle, but we are e

Just a couple of questions from my end. If you can help me with the wallet share of our top customers for Q1 and have we seen any decline in Yamaha wallet share?

Arvind Chauhan

There is no decline in the wallet share. So, I'm just sharing our wallet share with our top four customers. I start with HMSI, head lamp we are 40%, tail lamp 76%, side indicator 85% and for rearview mirror we are the sole supplier 100% wallet share with HMSI and for RR and Position Lamp 100%. For TVS, head lamp is 73% and tail lamp is 69%, blinker 82% and RVM 55%, License Lamp 50% and DRL is 100%. Just want to understand on Yamaha? For Yamaha, head lamp is 91%, tail lamp is 64%, side indicator is 5% and RVM is 32%, position lamp for Yamaha is 57%. For Suzuki, head lamp is 80%, tail lamp is al

Sir, my question on the revenue side and margin side. As we are seeing good traction on the OEM two-wheeler for the EV in coming months and next year, so, how much revenue we are targeting and how much margin we are expecting going forward?

Arvind Chauhan

So, as far as the revenue is concerned, we are always growing better than industry, so, naturally we will grow better than industry and our margins are best, already our EBITDA margin is 13.02% in this quarter. So, we will try to maintain better margins. If you can share how much wallet share we are doing for the Hero Motor Corp? For Hero, we have not yet started, although where we have mentioned earlier that we have been awarded three, four projects, which we hope that we will start by next year onwards.

In the last call, you had guided for 15% to 20% revenue growth, supposed to be fairly easy given the situation we were in, and a margin of 12% to 12.5%. You're already in that range in terms of margins. And the revenue growth also, you seem to indicate good outlook. So, are you going to revise this further upwards, any chance of revenue and margin guidance band moving upwards? Finance Team Member: We generally don't give a specific revenue guidance, but given the overall industry, what we did say was that given what we see over the next couple of quarters, we felt confident that we can get the

Management

Thank you, Diksha. Just wanted to thank the management for patiently answering all the questions and thank all the participants for being on the call. Jain sir, would you like to give any closing comments?

J.K. Jain

Yes. Thank you, everyone, for participating in the con call. I do hope we have been able to reply all your queries adequately. We are available for any additional questions you may have. Thank you and goodbye.

Speaking time

Rajesh Sharma

Arvind Chauhan

Moderator

Saurabh Savla

Mahek

Anubhav Mukherjee

Ashutosh Tiwari

Rahil Shah

Akshat Mehta

Anika Mittal

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Opening remarks

Sahil Sanghvi

Thank you, Diksha. Good afternoon, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q1 FY'23 Conference Call of Fiem Industries Limited. We will start the call with the initial comment about the “Results” and the “Future Outlook of the Company,” and then we will open the floor for “Questions and Answers.” So, without much delay, now I'll hand over the call to Mr. J.K. Jain -- Chairman and M.D. of the Company. Over to you, sir.

J.K. Jain

Thank you. Good afternoon, everyone. I welcome you all to the Q1 FY'23 Earning Call of the Fiem Industries Limited. Joining me on today's call are Mr. Rahul Jain – Director; Mr. Rajesh Sharma – Director; Mr. O.P. Gupta, CFO; Mr. Arvind Chauhan -- Company Secretary and Other Members of the Finance Team. The “Results” and the “Investor Presentation” has been uploaded on the stock exchange and the company website, which I'm sure you all must have gone through. Q1 FY'23 has begun on an optimistic note. The overall macro indicators of the economy are strong with the record direct tax and GST collection. Further, forecast of the normal monsoon has an increase in grain prices should result in uplift in the rural economy. All of this is boosting consumer confidence and income, which should help two-wheeler industries to return back to the growth path. Reflecting the above trend, the two-wheeler industries in Q1 FY'23 have grown to 4.8 million units, which is 38.4% growth on a year-on-year basi

O.P. Gupta

Thank you, sir. Good afternoon, everyone. I would like to present the Q1 numbers for FY'23 as compared to same quarter last year. The company registered a sales of Rs.441.98 crores in Q1 of current financial year against Rs.272.25 crores in corresponding quarter 2021-22. This represent a 62.34% increase. The EBITDA for the quarter stands at Rs.57.55 crores, translating into an EBITDA margin of 13.02%. This compares with an EBITDA of Rs.31.53 crores in Q1 of previous financial year and margin of 11.58%. PAT of the company has also significantly increased to Rs.30.45 crores as compared to Rs.11.77 crores in Q1 of FY 2021'22. During the quarter, the company has made an insignificant investment in CAPEX. We continue to be a net zero debt company. With this, I end the financial brief and now the floor is open for questions-and-answers. Thank you.

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