Buy This Multibagger Auto Ancillaries Stock, Given 243.09% In 3 Years, 200% Dividend Declared

Monarch Networth Capital, a leading brokerage firm has recently published a report that maintains a 'buy' call for FIEM Industries for a target price of Rs 1,690/share. Recently, the brokerage visited the Tapukara plant of FIEM Industries (FIEM). FIEM is net cash since FY21 and margin expectations remain stable at an industry-leading 12%. With 80 new projects in the pipeline and a new CAPEX plan to boost capacities.

FIEM Industries Ltd Stock Outlook

FIEM Industries Ltd's Current Market Price (CMP) is Rs 1,524.50/share after closing on Friday. The stock hit the 52-week low last year on 11 August at Rs 695.05/share, while the 52-week high it touched on July 8 at Rs 1,645/share. The CMP is nearly Rs 120/50 below the 52-week high. The ROE is 14.66%. PE ratio is 21.31. PB ratio is 3.12.

The stock in terms of returns has given good returns over the last 5 years. In the last 1 week, the share price moved up nearly 13.25%. and 46.28% in 3 months. Over the last 1 year, it gave a massive over 100% positive returns. On long-term investments, it has given multibagger returns of 243.09% in 3 years. However, in 5 years, the returns in less compared to 1 year & 3 years, nearly 70%.

As per the CMP of FIEM Industries and the brokerage's estimated Target price of Rs 1,690/share, the stock could jump nearly 11% in 12 months.

 

FIEM Industries Ltd Dividend

FIEM Industries Ltd for the year ending March 2022 has declared an equity final dividend of 200% i.e. Rs 20 per share. The dividend was announced on 30 May 2022, according to the board meeting of the company held on 27 May 2022. The ex-dividend date for the declared final dividend is 12 August 2022, next month. The announcement of the record date is yet to come.

The company has a good track record of dividend payout since 2007 and has declared 19 dividends for 15 years. Out of 19 Dividends, 3 are interim dividends and the rest16 are final dividends. Last year, the company declared a final dividend of 160% amounting to Rs 16 per share.

State-of-the-art facility and fungible lines make it future-ready

The brokerage said, "We were impressed by the future and EV-ready status of the Tapukara facility which is well organised and has automation to reduce manufacturing time and cost. Excess space for EV-led capacity expansion along with fungible assembly lines makes FIEM ready for rapid growth. FIEM's design team's success is clearly demonstrated through its existing lightings for Yamaha and Royal Enfield which have created highest recall value. FIEM's facilities are also smartly located in close proximity to leading 2W OEM plants. The most comforting factor observed at the plant was the deep-rooted relations FIEM enjoys with its old customers assuring future business security."

Rapid ramp-up of EV portfolio to power volume growth

The next leg of robust and swift growth for FIEM is expected to be driven by ramp-up in sales of its comprehensive EV portfolio catering to all well-known brands like Hero Electric, Okinawa, Ola, Revolt, Ampere, etc. We also learned at the plant visit that FIEM is witnessing heavy surge in demand from EV manufacturers gearing up especially for the festive quarter. Additionally, two existing customers TVS and Yamaha have rolled out ambitious plans to ramp up EV portfolio which will surely land up in FIEM's kitty. EV penetration in 2W sales is very low at 4.5% currently and is expected to reach 30% by 2030 (target by leading OEM's and government) for which FIEM will be largest beneficiary of this shift.

Electrifying growth; best in class margins and robust balance sheet

FIEM has ~80 new projects under its belt including 3 new models of Hero MotoCorp and expectations of few more models from existing combustion engine customers. Further, increased penetration of LED auto lightings will only zoom revenue growth. Due to all these factors, we expect FIEM to achieve more than 15%/ 20% CAGR growth for revenue/ PAT for next two years. FIEM turned net cash in FY21 after several year of efficient cash allocation and margin expectations remain stable at an industry leading 12%. With new CAPEX plan of Rs600mn to cater to rising demand, we expect FIEM to outperform in rather slow revival state of 2W industry.

Buy For A Target Price of Rs 1,690/share

Brokerage said, "We forecast a revenue/EBITDA/PAT CAGR of 15%/15%/20% over FY22-24E. We value FIEM at P/E multiple of 16x (equal to its 5-year average PER) and roll forward to our June 2024E EPS to arrive at a Target Price of Rs 1690 and a BUY rating. We believe that 16x PER is justified on the back of high earnings growth, improved return ratios due to increased sweating of assets, no huge CAPEX plans and net cash balance sheet."

According to the brokerage, the risk to their buy call is, Slower than expected recovery in 2Ws due to semiconductor shortage and slow pickup in EV sales.

About - FIEM Industries Ltd

FIEM Industries Limited (FIEM) is one of the leading manufacturers of Automotive Lighting, Signaling Equipments, Rear View Mirrors, Sheet Metal and Plastic Parts in India with latest addition as Canister. With a strong presence in the automotive components industry, the company has diversified into LED Luminaries for indoor and outdoor applications and Integrated Passenger Information System with LED Display (IPIS). The company was founded by Mr J.K. Jain, who is a first-generation entrepreneur.

Disclaimer

The stock has been picked from the brokerage report of Monarch Networth Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.