Fiem Industries Ltd
NSE:FIEMIND
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Fiem Industries Ltd
Earnings Call Analysis
Summary
Q2-2024
Fiem Industries has shown a robust performance in Q2 FY '24 with net sales reaching INR 506 crores, marking a 7.4% increase from Q1. The EBITDA stands at INR 66.4 crores, with a steady margin of 13.1%. The company’s profitability strengthened, with a 15% sequential increase in profit to INR 42 crores. EV segment sales rose by 23% year-on-year, reflecting strong market positioning and partnerships with leaders like Ola and DVS, as well as the addition of new customers such as Rate and Polaris. For the first half of the fiscal year, sales increased by 1.38% to INR 976.56 crores, and profits by 12.64% to INR 78.5 crores. With a CapEx of INR 51 crores invested, the outlook remains optimistic for the second half of the year.
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Good afternoon, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q2 FY '24 conference call of Fiem Industries Limited.
Participants, please note that this conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectation of the company as on date of this call. The statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
We will start the call with the initial comments about the results and the future outlook of the company, and then we'll open the floor for question and answers.
So without much delay, I'll hand over the call to Mr. J. K. Jain, CMD of the company. Over to you, sir.
Thank you. Good afternoon to everyone, and welcome to the Q2 FY '24 Earnings Call of Fiem Industries. Joining me today call are: Rahul Jain, Joint Managing Director; Rajesh Sharma, Joint Managing Director; Arvind Chauhan, Company Secretary; O. P. Gupta, CFO; and other members of the finance team. The investor presentation and the results have been published on both the company website and the stock exchange. I trust that all of you must have reviewed the same.
I am delighted to report that Fiem Industries has delivered a strong operational performance for the quarter with a net sales reaching to INR 506 crores in the Q2 FY '24. Our EBITDA stands at INR 66.4 crores with a margin of 13.1%.
Our strong operational focus has been met, that our profit remains robust with a 15% increase to INR 42 crores on a sequential basis. We continue to benefit from our diversified product and customer mix.
For the Q2 of the current financial year, two-wheeler industries has registered production volume of 5.6 million units. We expect a strong second half driven by the festive seasons and pickup in cooler demand.
During the quarter, EV volumes were 1 lakh, 80,000 units, which is an increase of 23% on year-on-year basis. Fiem is strongly positioned with EV market and continues to outpace a market trend driven by partnership with a leader like Ola and DVS. We continue to move ahead in working jointly with our OE customers.
Some of the models like CVS Rider, Suzuki Access and Honda Activa continue to do very well. We update you last quarter about the Harley Davidson Export l40, which was long by Hero Motoco. This model has found good traction in the market, and our volumes are ramping up.
Similarly, on new products, there is a strong pipeline. We are working closely with Yamaha on their recent launch Air. This is a premium scooter for both Indian and export market. With PBS, we have started supplying for Jupiter 125 scooter model and also for a new 3-wheeler model in DuraMax.
In the EV segment, we have added several new customers, notable being Rate, Polaris and numerous. Overall, we are very well positioned and we get into the second half of the year and remain optimistic about future growth.
I now hand over to Mr. O. P. Gupta and the finance team to update on operational performance. Thank you.
Thank you, sir. Good afternoon to everyone. First, I will present the Quarter 2 numbers for FY '24. The company has registered sales of INR 505.85 crores in Q2 of current financial year against INR 470.71 crores in Quarter 1, which is an increase of 7.4%.
The EBITDA stands at INR 66.36 crores, translating into an EBITDA margin of 13.12% as compared to an EBITDA of INR 61.66 crores, that is 13.1% in Quarter 1 of current financial year. Bet for Quarter 2 is INR 41.91 crores as compared to INR 36.44 crore in Quarter 1 of current financial year, which is higher by 15%.
Now I will present the H1 number for FY '24, the company has registered sales of INR 976.56 crores in the first half of current financial year as against INR 963.3 crores in the co-funding period of riser, which is an increase of 1.38%. The EBITDA has remained flat at INR 128 crores.
Before first half of current financial year is INR 78.5 crore as against INR 69.56 crore in the corresponding period of this year, which is higher by 12.64%. During the Quarter 2, the company has made a CapEx of INR 33 crores, and total CapEx in the first half of current financial year is of INR 51 crores.
With this, I end the financial brief, and now the floor is open for question and answers. Thank you.
[Operator Instructions] Starting with Garbi Goel.
Starting with on the Gogoro partnership. So supply was expected from other 23 to Gogoro. So 2 questions on this. One is, what was the revenue contribution from Gogoro in this quarter? And what is the expected number in H2, along with in August, Gogoro, how the partnership with 3G. And last month, Delhi government also now the requirement to replace the fleet of delivery partners and e-commerce players with EV. So what kind of upside in the revenue do you see on account of these developments for Fumin the near to media in terms?
Yes. About the Bogar, first of all, I just like to be because it is newly started, and they are ramping up your -- there's a noise background? Okay. So they are ramping up right now. They have produced a few numbers of vehicles and our suppliers are on with that might be the next new -- next quarter, we can see some sales percentage and same volume, this is what we expect as of now.
And what is your expectation on the new announcements like Gogoro made a partnership with SG and Delhi government also announced requirement in place the fleets tires?
As of now, no such announcement is being heard by us.
Okay. During second quarter, Indian 2-wheeler registrations almost grew by 12% Y-o-Y, and EV sales also grew by more than 20%, as you mentioned in your opening commentary. So can you help me to understand, despite uptick in our underlying growth drivers, why did our top line degrew by 3%? Is it due to any intense competition we witnessed during the quarter? Or what is the exact reason for it?
So actually, if you look at the industry data, you should, for our purposes, we focus on production data. because we are linked closely the production volumes. Now if you look at the production volume of the industry, if you take the full H1, for example, the industry has been flat. So we've actually, in that way, we've done better than the industry. And if you look at sequentially, we've grown. But I think overall, what you are talking about is probably the final and retail sales of some of the customers.
So on the production volume, the industry has been flat. But as we mentioned in our opening remarks, there has been a delayed festival this time. So there should be a good uptick in the second half, and you will see that growth coming.
Understood. And sir, can you share some clarity on the CapEx being incurred? And what kind of capacity expansions are we looking at?
So in -- if you look at first half, we have incurred already INR 52 crores of CapEx. This includes some of our normal CapEx, some of because of some other events. Overall, this year, we should have on our balance sheet approximately INR 100-odd crores of CapEx. So that would position us well for future growth.
Understood. And we are planning to increase our TV revenues. But looking at one of our peers, the margins seem a little bit of lower that side. So can you illustrate on what is the margin difference among 2-wheeler and PV segment that we cater to?
So TV we are -- we've actually announced that PV is a focus area, which we will be doing forward, making some strides in that segment. But right now, that business is almost minimal. So there is no way to compare. As we move into it, we should be able to guide you better with the margins.
Okay. And lastly, since first half is over and with festive season, as you mentioned, coming in the second half. So do you think we will be able to grow 20% in second as compared to first half based on the demand you are witnessing from our channels. So going by that, can we achieve a ball park sale number of 2,200 in FY '24?
I think we hesitate to give specific numbers. We are overall optimistic as we mentioned. But it would be tough to give a number because there are many variables in the overall industry. But overall, we say that the overall trend remains very optimistic. There could be a delay in the quarter and upwards.
So we can assume H2 will be better than H1 at least? Hello. Am I audible?
Yes. Do you have a question?
Yes, I was asking that means H2 should be better than H1, at least.
Yes. Yes.
Okay. Mossa, you can go and you can unmute yourself and go ahead.
So my question was, with the domestic 2-wheeler demand picking up, how do we see this turning out for our business?
So we -- I mean, we've been kind of guiding over the last several quarters that we believe that the demand should pick up, and there are signs of that recovery happening. So clearly, we've always outpaced the industry. So that will be very beneficial for us. We should sort of move forward with our growth plans. So overall, domestic industry will significantly over the next 12 to 18 months, we are on a very positive trend.
And if you could help me guide for the revenues for FY '24 and H1 FY '25. Any guidance for us?
I think what we've kind of mentioned in your question as well that it is -- we are not giving any specific data points on a specific number, but we generally outperformed the industry, and we are optimistic of doing that.
So are we expecting to keep the same numbers to increase any growth rate number that you.
You will see much better growth in is all I can say.
Mr. Viraj Kacharia. You may please unmute all.
Congratulations for good numbers in such a challenging environment. Just 3 questions. First is on -- if I look at our sales mix, right, in lighting it especially, the share of LED has seen a good drop compared to what it used to be for last few quarters. So LED revenue share used to be 35% and then 40% last quarter. It's now come down to 33%. So if you can just give some perspective what really happened? And similarly...
We would just request everybody else to be on mute. There's a lot of background noise. And please go ahead with your question.
Yes, my question was that clear?
Yes, LED was clear. You had another -- that is one. And second question just was related to the revenue part again. If you look at the others customers, right, and others products, I think last few quarters, you have seen a moderation in revenue share, both from other products and other customers as well. So if you can just also give some perspective what is happening there?
So first question on the LED. The LED for the Q2 has remained 47%. And for the Q1, it was 53%. So it was not in the range of 30%, what we said. And we overall -- yes, sorry.
Sorry, if I look at the presentation, which we shared for Q2, the...
Actually yes, in the presentation, what you see is the automotive and the automotive on LED as a separate group. So what we are showing. You have to see what is the -- in total lighting, what is the LED versus the conventional? So what we are always saying that within the automotive lighting. 47% is the LED. So I think this is clear.
Sorry. So again, if I look at the -- even within to because -- yes.
Let me clarify if there is any confusion in the data points you are referring, we can clarify. But as of now, what I'm saying is that in the last quarter, the LED share was 53%, and now this is 47%. And we have to see the yearly basis because here and there in 1 quarter, don't make a difference. Overall, the LED trend is quite increasing. That is one of one thing.
And second thing, I think what you are referring is the other products. Yes, yes. So what is the other balance, which are less than 10%. So these remain changing because our major 3 categories are automotive lighting, rearview mirrors and the plastic parts. So rest, other, sir, it keeps ending based on the requirement.
Yes. Is it specific to 1 or 2 customers in others?
No, it depends, actually. It's sometimes it depends on the customer requirements on the -- so it goes into the others because these are other than the 3 main product lines.
Okay. And in your other customers?
Other customers are -- you can see top 5, we always give the percentage, but other customers, even the EV segment there -- we are adding in the other customers. So definitely, there will be a fluctuation in the share of the other customers we are adding with the fast pace, the EV segment customers.
So my question was that if you're adding new customers in EV, others, if you look at last 4, 5 quarters, we used to do around INR 55 crores to INR 60 crores of quarterly revenues from others. And that has kind of dropped to INR 44 crores in September quarter. So I was just trying to understand what is causing this drop in the current call.
So yes, that's -- your question is correct. But the reason is if there is any fluctuation within that metrics of the other customers, that numbers fluctuate. That is the only reason.
Yes. I'm just trying to understand what is causing the fluctuation because we are adding new customers. We are winning new orders. So...
See, depending upon the customer requirement, if suppose there is a high demand in some specific quarters, then in the next quarter that customers keep some low volume. It depends on that.
Okay. Just 2 more questions. One is on the CapEx side, right?
Sorry, but just to kind of make sure that -- you get the question there. There is no loss of market share in any of this. This is just 1Q -- I mean this quarter versus another Quarter 1 particular customer having some variation. So there is no -- the reason is not any fundamental market share change.
And what will be the share from EV customers in this? Other EV -- overall revenue from EV models?
EV, now we should be around 6% of our total revenue.
Okay. Now on the CapEx part, you said INR 100 crores is what we are looking at in terms of spending in the current year. And if I understand it right that earlier, our communication was that we have enough facility available at existing facilities and land bank to cater to any new orders. So if the market were to shift from 2nd conventional to LED, on the current asset base itself, we could do upwards of INR 2,500 crores to INR 2,000 -- INR 3,000 crores kind of a revenue base.
So this additional CapEx of, say, which we're doing total INR 100 crores, what is it towards if you can give some perspective?
Yes. Great question. Let us clarify the earlier guidance of our capacity utilization and our plant being sort of up to it for a much higher sales that remains. The enhanced CapEx that has happened, which you see right now is because of that fire incident that we reported last quarter to you.
So because of that, there is a replacement CapEx for some of those sort of plants. I mean, some of these machinery and that would be fully covered in the fire policy. So that will not be really a cash out for the company, but you will see gross fixed asset going up because of that.
Item of -- earlier guidance of a real CapEx from a cash flow perspective remains the same, which is that INR 50 crores to INR 75 crores over the next 2- to 3-year period. So anything else that happened is just for a replenishment. And again, I reiterate, there is no cash outflow for the company. We don't expect any cash up.
So this money, we will be reimbursed from the insurance company?
Absolutely. So we've raised a claim on the insurance that is part of our notes to the account. And as and when that process is completed, we will be able to give you full figures around it. But all of this will be fully replenished is our belief from the insurance company. So the INR 100 crore CapEx from our cash flow perspective is not INR 100 crore CapEx. You should look at it more like a.
Okay, last question to Mr. James specifically, sir, so if we look at the current management structure before the recent announcement, the business has been led and driven by you as CMD. And in last 6, 8 months, we also hired a senior person in the role of a CEO and Whole-Time Director. And just we kind of made a recent announcement about 2 new joint MDs being added in the management structure. So just trying to understand the thought process behind this structure and what role and responsibility would each of these senior person would be looking after?
Basically, recently announced 2 new Joint Managing Directors are basically upgradation from the director to Joint Managing Director. So they are not new. They are the existing ones. But they are doing better, so we are upgrading them. They are taking more responsibilities.
Secondly, the other CEO we have appointed, that is for 4-wheelers, but that is going on, and it will give you results after some time. So that is what -- yes, over a period of time. It takes time.
Yes. We can have the next question from Anubhav Mukherjee.
Yes. So if we look at the 2 Yamaha in this quarter, it has like grown quite a bit year-on-year. And in the last quarter also, there was like updation that we would be like taking up new models of export and Indian models. So did that not satisfy this quarter because there is a significant growth from Yamaha year-on-year.
Yes. So in Mr. Jain speech, it has already been declared that RX155 has recently been launched, and this is doing good in the domestic market. It might be we can look after in the next quarter or next to next week, we will have a domestic and export businesses also.
Where in other side, if we see Europe market is going down, slowdown, and that is resulting in our export business, which is being declared that most of the premium segments products we were having, and we will be exporting to Europe countries. And this is not resulting in the minor sales of Yamaha for the -- especially for the export.
Domestic is, of course, increasing with the new models and time to come. New models will further be launched in the next quarter or next year.
Yes. And like there was also a mention of you export only model that we would be -- so are these in the pipeline kind of like give more details on that? Like for Yamaha?
Yes, we are having as of now 7 projects, which are under development right now, which will be launched in '24, '25 and both the years, 2 years planned -- a 3 years plan we have as of now in our head.
And these models are like mainly for the export market or like...
There will be domestic and export board.
Okay. Okay. And these are new models or like have you gained like existing export model or like international model?
There's 90% of the projects are new models, where in your case lift also.
Okay. And sir, even in HMSI, like both for this quarter and over H1, there is a year-on-year GDP growth of revenue from HMSI. So can you give some color on that? Like is it -- because it doesn't seem like HMSI at least this data does not show that much of a deep load. So is it like we have lost some share or how is it? Like all our models not doing very good?
No, there are model mix, which is doing good in some of the quarter where in overall business for 4.71 million, whatever is being declared by HMSI will be same and our share of business will remain also same. So we'll be not losing any business and where in our overall growth with respect to HMSI will remain the same.
We are expecting good sales during next quarter and second part of the year.
And CMS, if you see the production volume on a year-on-year basis, it's down 5.7%.
Correct.
Yes. And even sales is down like 5%, 6%, which we get, but like at least the data because you share the quarterly data have been sharing for like now some time at least what I can see is that year-on-year, our sales to HMSI has gone down by 12%, 13%. So it seems to be more than...
Said that, see, the overall trend, as I said, 6% down there and as is marginally more sometimes marginally less. Those are dependent on models, one particular model. So there is, I would say, nothing more to that those fluctuations, one model will do well. The other model will come back next quarter. Those differences happen.
Good then. And also for Hero MotoCorp, apart from that Harley model, they do have some other -- they made some other launches as well, including a scooter as well. So what are the suppliers for some of these models like or any other model apart from the Harley one?
Yes, we are working further on 6 models as of now, and those launches will be soon might be in next quarter or we are expecting 2 models launched in the next year.
Yes. Ghunit Nayo, you can ask your question.
So I had most of my questions I've been asked, I don't have a question, but I have a recommendation for the management. So I mean, we are sitting on a very huge cash pipeline shares also reasonably priced. So I mean, why don't we do a share buyback, which will act as a good reward for the long-term shareholders because some of our shares will be extinguished permanently and the valuations would in turn be better because of the buyback for an act as a reward for the long-term shareholders. And also, I mean, will also show us about the confidence of the company in itself.
So I would just recommend to would -- I mean to do a share buyback with the idle cash that is with the company.
Thank you. Thank you for the suggestion. We will -- I mean, obviously, these matters are discussed at the Board level all the time, and we will sort of take your suggestion. What we have to optimize as a company is future growth, where do we need capital. How are we looking at over the next 3- to 5-year plan before we make such decisions. But your suggestion is important.
Yes. Got with you, still hand raise, would you want to go ahead again?
Yes, yes, yes. Just you highlighted like European facing headwinds. So I want to ask whether you pose any kind of impact on our consolidated revenue in upcoming months due to a year headwinds?
No, I don't think -- we are not looking for that. It is only seasonal. We can say Europe is always we go 6 months up, 6 months now. So we are expecting and we are very much optimistic to have a very good market from Europe time to come.
Understood. And can you also comment upon those new products that we are manufacturing in partnership with Gogoro. So basically, what is the competitive landscape there? Who are the existing players in India who are already manufacturing the product and supply the 2-wheelers?
See, this Gogoro what we are supplying as of now, all the lightings, mirrors, plastic parts as well as the 2 products, which has been recently been launched together with that is motor controller and Hot. And this home and motor controller is exclusively as of now for Bugrov. And with the support of Gogoro Technology, we will be introducing these projects to other OEMs also.
That thing I understand, but I was asking from the competitive landscape point of view, like who are the existing players manufacturing these products and supplying to 2-wheelers in India?
There is a technology partner and Tata is behind this hub border and motor controller. So we cannot see any competition within this market because there are unique technology, which is available as of now with the partner. So we are looking for a good market based on that.
Understood. And can you also discuss the competitive landscape for our LED lightings and the other automotive lightings that the products we are currently doing on like, are you seeing any new competitors coming into the market or establishing or trying to assess the market share from you?
No, it is very difficult, and we are very much open about this, and we are working for next 10 years of technology as of now in our R&D. So we cannot see any partner can take our business there, and we are taking the business from good customers and good results out of -- coming out from the customers' positiveness.
Viraj, you have your hand raised. Do you want to ask question?
Yes. I just had 2 queries. One, sir, you talked about 6 models for Hero, which you will be looking to commercialize. So these are existing brands of roar these are new models altogether.
These are new models of iron.
Okay. And in terms of existing brands, is there any tax on in terms of -- because the existing vendor that they had having a lot of facing a lot of issues and going under restructuring so.
Correct. We are working very closely with Hero right now, but we cannot declare anything, but we are very open and we have a capacity available to manage all the business, which has been -- which is covered and which is customer is looking for this.
Okay. And second question was lastly in terms of unit realization, especially in auto LED lighting. So what we understand is there has been further technology changes and the prices of unit LED is on a downward trend. So if I look at Q2 generally last few quarters, have you seen any moderation in realization because of this as?
No, there. We haven't seen any realization down trend at all. I think the realization has been fairly stable. LED, In fact, we are working with customers and more and more sophisticated some of the ticket are increasing.
Customers are only LEDs.
India is not working for the domestic market. We are working on some specification in standard, which is being applicable for the world. And those are all being covered within the regulatory requirement, wherein no low trend LEDs can be applied. So we cannot see anything, which is being downtrend.
And downturn, yes.
A number of you want to ask a question?
Yes. I just had 2 follow-up questions. Sir, like since you also mentioned that you are developing technology, which is accepted globally. And like this India manufacturing opportunities like really accelerating, like we do hear a lot about in China plus 1 and also manufacturing shipping from Europe to India. So is there a possibility apart from like our existing OEMs, we -- can we like -- or are we approaching totally new OEMs to supply LED lighting? Is that a possibility?
Yes. We are working with European like Paseo and BK, these are already customers wherein we are developing a few products, and we will be supplying to them. So we are expecting good volume and good business from global OEMs also.
But sir, the only thing is that Tiago is there in India. And I think we have been our customers. So can we approach like completely new European or like American OEMs for supply of LED lights -- yes, is that a possibility like -- yes.
Right. As of now, like in America, also debt sun is our customer, and Triumph is also in our pipeline. So we are very regularly working on that, and we are definitely looking for the good business from worldwide market, wherever it is possible to.
And we are working many new European OEMs also. But at the moment, we can't declare the same.
Correct.
And sir, apart from this Gogoro opportunity, are there any other broader diversification we are looking at like any completion?
Yes.
There is a lot of discussion. There are a number of initiatives that the company is running. A number of dialogues happening because there is a lot of changes in the landscape happening with EVs and others. But we would be able to sort of come up with the concrete plan only post our internal deliberation. So I think at this point of time, there is Gogoro. But I mean there is a whole lot of other initiatives happening.
We have already like Trans is our partner wherein we are as of now supplying bank angle sensor where we have already signed a document for a total sensor as well as USB. So soon, we would be develop a few products for customers and supply to all the OEMs in EVs and others.
Yes. So anyone else would like to ask a question can raise their hand. And I think we have no further questions. Thank you to the management also for patiently answering all the questions. And thank you to all the participants for joining the call. Jain, sir, would you like to give any closing comments?
Yes, please. I would like to thank everyone for participation in today's conference call. I do hope that we have provided a satisfactory answer to all your cures. I wish you and your family a very happy Diwali. Thank you, and have a good day.
Thank you. Thank you, sir.
Thank you.
Yes.