Fiem Industries Ltd
NSE:FIEMIND
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Fiem Industries Ltd
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Ladies and gentlemen, good afternoon, and welcome to the Fiem Industries Limited Q1 FY '23 Earnings Conference Call hosted by Monarch Networth Capital Limited. Disclaimer: This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded.
I now hand over the conference to Mr. Sahil Sanghvi. Thank you, and over to you, sir.
Yes. 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 comments about the results and the future outlook of the company, and then we will open the floor for question and answers.
So without much delay, I'll hand over the call to Mr. J. K. Jain, Chairman and MD of the company. Over to you, sir.
Thank you. Good afternoon, everyone. I welcome you all to the Q1 FY '23 Earnings 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, forecasts 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 2-wheeler industries to return back to the growth path.
Reflecting the above trend, the 2-wheeler industries in Q1 FY '23 has 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 perform at its potential and recorded that income of INR 445 crores in Q1 FY '23, which is a growth of over 52% over the same quarter last year. Net profit has also gone to INR 30.45 crores.
Our industry generally performed its best in Q4 being the last quarter for the financial year and is followed by relatively lean in Q1. However, we would like to inform you that this has been the best Q1 performance of the company. Seeing in this line, we clearly see the growth part for the current financial year. 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 digits during this financial year.
We continue to move ahead in working jointly with our key customers on the development of several new projects. The EV segment continues to grow driven by attractive incentive schemes provided by both state and central governments. This has helped us -- help to bring EV 2-wheeler prices closer to or at par with ICE 2-wheeler prices in the same segment. I am delighted to inform you that we are now supplying to more than 20 customers in the EV segment. This reflects our strong leadership in this area.
To sum up, I believe that the improving macro environment and a good monsoon will create increasing rural demand and thus help our industries for the next level of growth.
With this, I hand over to Mr. Gupta, our CFO, and the finance team to update on operational performance. Thank you.
Thank you, sir. Good afternoon to everyone. I would like to present the core numbers for FY '23 as compared to same quarter last year. The company registered sales of INR 441.98 crores in Q1 of current financial year against INR 272.25 crore in corresponding quarter 2021-'22, this represents 62.34% increase.
The EBITDA for the quarter stands at INR 57.55 crores, translating into an EBITDA margin of 13.02%. This compared with an EBITDA of INR 31.53 crores in Q1 of previous financial year and margin of 11.58%. PAT of the company has also significantly increased to INR 30.45 crores as compared to INR 11.77 crore in Q1 of FY 2021-'22. During the quarter, the company has made an insignificant investment in CapEx. We continue to be a net 0 debt company.
With this, I end the financial brief, and now the floor is open for questions and answers. Thank you.
[Operator Instructions] We take the first question from the line of Ashutosh from Equiris.
Sir, my first question is regarding the sequential decline, which we have seen compared to last quarter in our sales. Sir, if we see the 2-wheeler industry has grown by approximately 10% in the last quarter-on-quarter. And even our major customers, HMSI and Yamaha have also grown. So why have we seen a quarter-on-quarter decline in our numbers?
Yes, I'm Rajesh Sharma. I'll just reply you back on your question. There are certain models which we were exporting to Yamaha export, especially for Europe and U.S. Those are having some certain fixed quantity, which is being 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 the last quarter to this quarter.
And sir, HMSI also, we've 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 increase in Yamaha sale, which -- explain.
So how do we see this Yamaha sales going forward? I mean we were in talks of getting other models as well. So how do we see the sales to Yamaha going forward?
Yes. Yamaha is in progressive growth, and we will be continuing the growth with the new coming models also.
Okay. And sir, what would be our revenue from electric 2-wheeler during this quarter?
Yes, this is INR 18.5 crores.
We take the next question from the line of [ Mahek ] from Yellow Jersey Investment Advisors.
I had just a few questions. First would be, when you say you have SMT lines established from year 2006, '07. I wanted to know where did you get the SMT line, like can you could have the access to it? Or have you patented or something?
I think you are talking about the surface mounting, SMT lines, we already have since 2002 -- rather 2006 you mentioned.
So your question is about the sourcing of the line? What is your question exactly?
About the sourcing of the line, where did you get the SMT line?
No, no, this is -- actually, this is from world reputed manufacturers from various countries like Germany and other countries. So it is -- we cannot disclose the name of the manufacturer.
Okay. And my second question is that you are exiting from the JV, which used -- which produces Fuel Pump Module. So does this mean this product will no longer be in your product portfolio?
Yes. We already exited from this joint venture of Fuel Pump Module and all formalities has been completed during the month of June itself. We already got the payment of INR 26 crores.
So the expected revenue that we were expecting around INR 150 crores to INR 200 crores from Fuel Pump Module will no longer be coming?
Naturally, we are already exited, so that it will not be part of our group now.
Okay. And third, I wanted to ask what is your per annum capacity as per product-wise like headlamps, taillamps, rear view mirrors, what is the capacity per annum?
Yes. See, this -- I think the capacity -- the way you are asking is not relevant here in our industry. We supply as per the requirement of the OEMs. And the capacity changes when the product change for the particular production change. So you have to understand the factory itself first to understand the capacity.
We take the next question from the line of Akshat Mehta from Sameeksha Capital.
Yes. Am I audible?
Yes, yes, please go ahead.
So a couple of questions, sir. First is [indiscernible] LED share on a quarter-on-quarter basis, what I've seen is that your share...
Your voice is not.
Sorry, your voice is not audible. Can you -- a little bit louder can you speak?
If you can just come closer to the mic, if you're using a speaker and go ahead.
Yes, sir. So what I'm asking is that your -- if I look at your presentation, then on a quarter-on-quarter basis, your LED share has gone down by 1% from quarter 4 to quarter 1. So is this a normal thing that you kind of see on a quarter-on-quarter basis? And -- or is this -- there is some headwinds in terms of auto LED lamps since you -- for the year, you said that the total share ratio increase around 3% to 4%. And how do you see that being achieved during the year?
So your question about LED, this is in the same range of 44% because sometimes 1 product -- 1 product with the LED content is more is that LED and supplies more, so it fluctuates. But you have to see the overall trend. So in FY '19, '20, it was 39%; FY 2021, it was 40%; and we closed this FY 2022 with 44%. So the trend is increasing, but quarter-on-quarter, exact number, it remains a little bit fluctuated.
So sir, over the year, what you said is that 3% or 4% in FY '20 should be -- if the market is good, then there should be the increase in market share for LED, correct? So that guidance still stays?
That's right. That's right. So LED share will increase over the next couple of years, it is heading high. That's right to understand.
So 1 more clarification. So in the earnings call, you see a 44% share, while in the presentation you show around 30%, 32% share. So sir, what is the difference between the 2 numbers?
Actually, when you are referring the presentation, it is a total of the conventional, LED lighting, the mirror and this -- plastic parts or the others. Okay. Now when we are talking about this -- you are asking the specific question about the LED versus conventional. So 44% is the LED and rest 56% is the conventional light, I think, current fiscal year, yes.
Okay. Second question is, sir, on your other expenses part, sir. Your other expenses on a quarter-on-quarter basis has fallen down sharply by more than 1% of sales and INR 15 crores absolute as well. Sir, what is the change in the other expenses that has caused such reduction? And -- how is it -- is it sustainable during the other quarters? Or is it just a one-off item?
No. Actually, if you see the other expenses has gone down drastically because of certain expenses which were put in the last quarter of the customer. And this expense of INR 53 crores this year will continue to remain the same, even margin. It will be the same. The reduction has done only in this quarter will continue to remain the same.
Okay. Okay. Congratulations on good results.
We take the next question from the line of [ Anika Mittal ] from [indiscernible] Research.
Sir, company has executed from one of its joint venture Aisan Fiem Automotives India Private Limited. I have a question regarding the valuation of the JV. It is mentioned that sale consideration will be face value or fair market value, whichever is higher, and company has invested INR 26 crores in JV and received the same in quarter 1 financial year '23. So is the JV is fair market value or is the face value?
Yes, your understanding is correct. Does this exit is on the higher of the face value or the fair market value? But you can see this -- this is the initial -- sorry, I think some disturbance. So this -- you -- we exited on the face value because face value was higher.
So then, sir, it's a fair market value [indiscernible]?
It's a specific -- confidential data, but we have to see what is the -- what we got. And this remains part of this JV agreement. So whatever we already shared, remains same.
Okay. And sir, my second question is regarding...
Sorry.
Sir, my second question is regarding customer base of the company. As Ola is entering into the 4-wheeler segment, this company will be supplier to the Ola 4-wheeler also?
We don't -- I mean.
It's too early to announce anything. Too early.
It is too early -- it is too early to comment on this subject.
Okay, sir. Sir, my next question is Ather is also a good EV player. Are you looking to supply to Ather or Ather is already in your customer list?
Ather as of now is not in our customer list, but we are already under discussion, right.
We take the next question from the [ Saurabh Sawla ] from [ Multi Arch ].
A couple of questions. First one was on the -- what is the mix or the contribution of LED lights in headlamps and in taillamps? And is it that it is materially high in taillamps or headlamps? Or is it other way around? And a related question was what is our market share in these LED lights and in halogen lights in the top 5 customers that we have?
About your first question, we don't separate the headlamp and taillamp because we are serving to the same customer for whatever the requirement is there. So for us, it's the same customer and the product is also for...
So regarding about the pricing of the headlamp and taillamp, this headlamp is naturally the higher realization.
The headlamp is a higher realization segment you are saying?
Yes, yes.
Yes. And so again, not specific to you, but in terms of the overall industry as well, the LED light penetration is higher in the taillamps or in the headlamps currently?
It is in both. Almost industries are, of course, working for taillamp first. But now the penetration year-on-year in increasing sort of front lighting also.
Is basically EV coming forward.
And the EV 100%, you can say all the EVs are coming with the LED lens on either of headlamp or taillamp.
Okay. And would it be fair to say that we have equally high market share in both the LED and the halogen segment? Or is it that we are much stronger in the halogen segment and we are kind of picking up in the LED part? The company's wallet share of the market...
We are equally strong in both the segments, conventional as well as LED.
Okay, okay. And sir, the last question, which I was -- I had was that in the previous conference calls, you have given wallet share amongst different customers and different segments. So if I compare your market share or wallet share in 2022 versus 2019, then we have lost some wallet share in the taillamp segment with Honda and TVS. And even with Yamaha, we have lost around 18% to 20% wallet share in taillamps and in the blinker segment. So can you help us understand that why we have lost this wallet share?
First of all, there is no loss of the wallet share. I think you must have some data -- you're referring 3, 4 years' back data. So if you want, we can give the current wallet share, customer-wise and the product-wise, it's already there. So if you have some doubt, you can -- we can clarify. So I think there is some error in data you are referring.
Okay. So I had the date of 2019 from the con call. So there, you had around 91% -- 82% market share in taillamp with Yamaha. And in Q4 '22, you had said that it is 64%. And similarly, for TVS, it was 77% in 2019 and 69% in 2022. So just wanted to understand whether there is inconsistency of data or you have actually lost wallet share in this?
No, no, nothing. Because what you are referring, actually the wallet share you're talking, you see the overall turnover also because turnover is increasing with every customer, how we can lose the market share.
Okay. So you are saying that maybe in some incremental models or the new launches you might not be present, and that's why this number optically is looking slightly lower.
Exactly this is not the case. What we are seeing is in terms of percentage. When the total sales volume increase, the percentage comes down. So you [indiscernible].
Okay. Okay. And sir, final question I had was your -- one of the competitors has entered with TVS in the LED segment. So any comments on that?
It's not like because every customer is looking for multiple sources. And somewhat, we have taken the business from other competitors and some there -- some of the business has gone to other companies.
We take the next question from the line of [ Naresh Kataria ] from [ Money Curve Investments ].
I wanted to know about the projects which we continue to do on an ongoing basis [indiscernible] 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 the schedule is in the coming festival season?
See, there are, of course, more than 80 projects are declared during our last con call, wherein after that also 70 projects is being awarded by the customers. These are all addition. And some of the projects will definitely be launched within this year. And some of in simultaneous years.
In 2024.
Okay. Sure. And how are the schedules looking for the coming festival season?
Coming festival season, there are few lamps -- few models will be launched by the customer, out of which you can see. Overall volume and market is...
Very good.
Very nice.
We take the next question from the line of Anubhav Mukherjee from Prescient Capital.
Hello? Am I audible?
Yes, yes, please.
Sir, like 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?
Yes. We are working with Yamaha, of course, and other Japanese customers. And we are expecting a good volume from the domestic as well as export market. And we are under development of new projects, which will definitely be launched by next financial year...
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 segment grows, volume grows, this should be a big pickup.
And moreover we have already announced about the Hero.
Sir, can you elaborate like when will we start supplies? And any qualitative data on like the scope of business from Hero?
In last quarter also, we had informed -- we are working on 4 plus projects with Hero. And very soon with this new -- our supplies will start. Some of the supplies during this year. But next year will be, of course, the complete builders.
Okay. And sir, like you mentioned international models, sir. Sir, can you elaborate a bit more like have we added any new OEM for like exports or any like new businesses in the export area?
See, we are working with all the customers as of now. We are not only concentrating on domestic market, they are concentrating on the export business, too. And we are -- our presence is with almost all the customers as of now to gain the -- more and more business from export segment also.
Okay. And sir, finally, sir, on the EV side, have we added any EV OEM in the passenger vehicle segment because like a lot of -- like Tata Motors is like going very strongly in the EV segment and even M&M is planning to launch a lot of new models in the EV segment. So sir, are we like there in the passenger vehicle segment on the EV side or adding any new business? .
We are working for 2-wheeler mainly. And of course, where we will get the opportunity, we are already looking in the market where we can penetrate in the passenger car also.
But as of now, do we have any, like business or any model that we...
The business -- EV business was started with Mahindra Reva and we are the sole supplier for headlamp and taillamp as of now. So our entry is already available in the EV car.
We take the next question from the line of Ashutosh Tiwari from Equirus Securities.
So just on this Honda, HMSI basically, is it like during the last quarter some models where we are a supplier, there was an impact on production due to chip shortage, something?
Just repeat the question, please?
I'm asking that in case of HMSI, because you've seen some fall in the revenue Q4 to Q1 despite the volume going up for HMSI. Is it the certain models where we supply, there was a production impact due to chip shortage?
Yes. Of course, there are a few models wherein chip shortage is being -- there at HMSI and certain volumes drop where we were -- our presence was there, especially H'ness and...
Sir, which model, sir? Which model?
H'ness. H'ness, if you've seen, 350 cc H'ness.
Okay. Okay. And secondly, we also got orders from Harley-Davidson in U.S.A. and Thailand plant. Are we -- 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 going your potential over there?
See, Harley-Davidson, of course, will not be having so much of volume because it is not committing vehicle. But we are expecting good volumes because 4 or 5 models will be launched.
Okay. On the Yamaha side, you mentioned that certain models you're supplying to Europe for fixed quantity, that has gotten over last quarter, but we also had talked about new models being added from there. So any timeline for that?
Yes. We are working further on 10 new models and for the developments are under process right now. And some of the models will be launched within this year and some of the next year and continue...
So considering all this, do you think that the revenue -- Yamaha revenue will grow in this year basically versus last year, like it -- full year revenue?
See, it will be almost similar, not higher than that, but we are looking for good volume this year also.
We take the next question from the line of [ Rahil Shah ] from [ DXB Investment ].
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 you seen a decline in Yamaha wallet share?
No, there is no decline in the wallet share. So I'm just sharing the -- our wallet share with our top 4 customers. And for HMS -- yes -- So I'll start with HMSI, headlamps, we are 40%; taillamps, 76%; side indicator, 85%; and for rear view mirror, we have [ for supply ] 100% market share, wallet share with HMSI. And for RR and position lamp, 100%. So for -- And for TVS -- Yes.
And for TVS and Yamaha?
Yes. For TVS, headlamp is 73%; and taillamp is 69%; blinker, 82%; and RVM 55%. [indiscernible] 50% and DRL is 100%.
Okay. And just want to understand -- yes, Yamaha.
Yamaha's headlamp is 91%, taillamp is 64%, side indicator is 5% and RVM is 32%. Position lamp for Yamaha is [indiscernible]. And for Suzuki also --. Yes, for Suzuki, it's -- headlamp is 80%, taillamp is also 80% and blinker is 23%, RVM 100%. And RR is also 100%.
Okay, sir. And also, sir, what is your sense on Ola and how do you see the demand coming in Ola with especially a new scooter being launched. But we have seen some key people resigning from Ola as well. So what is the outlook on Ola. And how do you see the volumes with them?
We are expecting very encouraging results in times to come. They are working. Because every company, especially EV companies were suffering because of semiconductors, which is always be recovered. So might be in the near quarters, we can see the good results from Ola.
Okay. Okay. And sir, what would be the overall utilization level for the company as a whole? what would be operating at?
It's around 75% range.
75%. And sir, finally, just wanted to get your sense on the overall outlook for the 2-wheeler industry as to how do you see the recovery? How fast can we see the recovery in 2-wheeler coming in the future?
Yes, we believe that after a long period, our 2-wheeler industry is returning back to the growth environment. We have a very robust pipeline of new projects and we are working closely with our OEM customers. This includes the facelifts and new models. The strong pipeline should help us to grow significantly over the next few years. Further, EV will also act as a major growth driver for our industry where we are well positioned.
We take the next question from the line of Jyoti Singh from Arihant Capital Markets Limited.
Sir, my question on the revenue side and margin side. As we are seeing good traction on the OEM 2-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?
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, we -- our EBITDA margin is 13.02% in this quarter. So we'll try to maintain better margins naturally.
Okay. And sir, if you can share how much wallet share we are doing for the Hero -- Hero Motor?
Hero, we have not yet started. Although as we have mentioned earlier that we have been awarded 3, 4 projects, so which we start -- which we hope that it will start by next year onwards.
[Operator Instructions] We take the next question from the line of [ Chetan Dhruva ].
One quick question, sir. My question is, in the last call, you had guided for 15% to 20% revenue growth, which was supposed to be fairly easy given the situation we were in and the margin of 12% to 12.5%. You're already in that range in terms of margin. And the revenue growth also you seem to indicate a good outlook. So are you going to revise this further upwards? Any chance of that revenue and margin guidance moving upwards based on how you see now?
We generally don't give specific revenue guidance. But given the overall industry, what we did say was that given where we see -- what we see over the next couple of quarters, we feel confident that we can get there. So I think our revenue guidance remains broadly in the same region. And also on the margin front also, we've maintained 12.5%, 13% or higher is something that we aspire for and we would rather just keep it at this. But overall, the outlook, what we see over the next couple of quarters is fairly positive.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Sahil Sanghvi. Over to you, sir.
Yes. Thank you, Diksha. So I just wanted to thank the management for basically answering all the questions and thank you to all the participants for being on the call. Gentlemen, would you like to give any closing comments?
Yes, yes, please. 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 that you may have. Thank you, and goodbye.
Thank you, sir.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.