Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FIEM Industries Ltd (BOM:532768, Financial) achieved its highest ever sales, surpassing INR2,000 crore, and a net profit of INR156 crore in FY24.
- The two-wheeler industry is experiencing strong growth, with production volumes reaching 21.5 million units in FY24.
- The company has secured orders from reputed OEMs in the Indian passenger car segment, marking a significant milestone.
- FIEM Industries Ltd (BOM:532768) plans a major capital expenditure program of INR250 crore to INR300 crore over the next three years to drive future growth.
- The company has made significant strides in the four-wheeler passenger car segment in the European market, receiving orders from reputed OEMs.
Negative Points
- Despite consistent bottom-line growth, the company has only achieved lower double-digit top-line growth, raising concerns about its growth strategy.
- There have been apparent delays in the Gogoro project for manufacturing hub motors and motor controllers, with no meaningful contribution to the top line so far.
- The company faces challenges in the competitive four-wheeler segment, which may impact its market position.
- Gross margins have seen a sharp moderation in Q4, with a decrease of almost 200 basis points year-on-year.
- The company has not provided specific guidance on the expected revenue from the four-wheeler segment, indicating uncertainty in this new venture.
Q & A Highlights
Q: Our company has consistently delivered bottom-line growth year after year. However, I am concerned about our top-line growth. Can you elaborate on why we are not pushing more aggressive strategies for top-line growth and what steps we are planning to take to improve our growth trajectory further?
A: We have outperformed the industry over the last many years. Looking ahead, we have made significant investments over the last 12 months, including a large CapEx program. We are targeting several new areas, including the four-wheeler segment and hub motors, which could be significant growth drivers. You will see the output of these investments over the next couple of years.
Q: What is the area that the INR250 crore to INR300 crore CapEx will go into?
A: The CapEx will be used to enhance our existing capacity, particularly in South India, and for new projects, including the four-wheeler segment and hub motor units. This combined investment will drive our future growth.
Q: There have been delays in the Fiem and Gogoro project for manufacturing the hub motor and motor control. Can you explain why there has been no meaningful contribution to our top line so far and when we can expect to see some revenue from this area?
A: The initial market plan for B2B faced bottlenecks due to higher prices and poor market acceptability. Gogoro is now working on launching a new, competitively priced vehicle. We expect to see meaningful contributions within the next six months.
Q: Can you provide an update on the development timelines and current state of the USB charger and G-APS being developed with TOYODENSO? What new innovations are we working on at our R&D centers?
A: The USB charger and G-APS are already in the market and under supply for five years. We are working on new projects, including laser technology, night vision, and ambient lighting technology, which are the future of the industry.
Q: What is the guidance for FY25 in terms of top-line growth?
A: We anticipate organic growth of around 12% to 15% for the coming year. However, if new opportunities arise, we will capitalize on them.
Q: Can you provide details around the total capacity, current capacity utilization, and growth in the coming years?
A: Our current capacity utilization is around 80%. We are investing in expanding our capacity, particularly in South India, to meet future growth demands.
Q: What kind of growth do we expect in the next three to five years in each of our revenue streams?
A: We expect organic growth driven by the two-wheeler industry and new areas like the four-wheeler segment and hub motors. We anticipate 12% to 15% organic growth, with additional growth from new initiatives.
Q: Can you elaborate on the ambient lighting opportunity and what we are doing to address it?
A: Ambient lighting is a growing market with high potential, especially in new EVs. We are working aggressively with customers and expect this segment to contribute significantly to our revenue in the next three to five years.
Q: What is the underlying two-wheeler OEM growth assumption for the 12% to 15% organic growth target?
A: We are assuming an 8% to 10% growth in the two-wheeler OEM segment, which aligns with the current industry outlook.
Q: How does the increasing trend in automotive LED lighting impact our margins and revenue?
A: The percentage of total automotive lighting from LEDs is increasing, which leads to higher realizations. We expect this trend to continue, with LED lighting making up 75% of our automotive lighting in the next two to three years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
