Kotak Securities is bullish on FIEM Industries has recommended buy rating on the stock with a target price of Rs 800 in its research report dated March 25, 2019.
Kotak Securities' research report on FIEM Industries
Due to weak demand and high inventory, the two wheeler manufacturers are expected to cut production in the near term and that will likely keep FIEM’s growth subdued in the near term. However, we expect demand would likely pick-up in 2HFY20 supported by weak base and pre-buying ahead of BSVI implementation. In our view, continued LED transition will drive revenue growth for FIEM in FY20. Our recent interaction with auto ancillary players supplying automotive lighting to the auto industry pointed towards higher penetration of LED content in automotive lighting going forward. With stability in input cost and pass through with customers, we expect some improvement in EBITDA margins in FY20.
We see FIEM as a key beneficiary of LED adoption in the two wheeler industry and thereby remain positive on FIEM’s medium-to-long-term growth opportunity. At the CMP of Rs478, the stock is trading at a PE of 11.9x on FY19E earnings and 9.6x on FY20E earnings. We retain BUY on the stock with unchanged price target of Rs800.
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