Buy FIEM Industries; target of Rs 1260: Centrum
Centrum’s research report on FIEM Industries
We maintain our Buy rating on FIEM Industries with TP of Rs1,260. We expect FIEM’s growth to continue aided by strong growth prospects of its two biggest clients namely Honda Motorcycle and Scooter India (HMSI) and TVS Motor. 2QFY18 top-line performance was above estimates as auto segment posted strong growth. Had it not been for issues in LED business, the performance would have looked much stronger. Recently FIEM has faced several issues in its LED business, due to an unfavourable business environment. LED business reported a loss at EBIT level due to declining sales. Despite slightly lower visibility in the LED business, we remain convinced of FIEM’s medium-to-long-term growth opportunity as the company continues to remain a strong 2W auto ancillary company. Also, the management is working on several fronts to get the LED business on track which will provide additional growth in the long run.
We remain convinced of FIEM’s medium-to-long-term growth opportunity. We value FIEM on our differentiated AOCF/EV methodology and arrive at a TP of Rs1,260. Key downside risk: slower-than-expected growth in HMSI and TVS Motor.
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