Fiem Industries Limited (FIEMIND) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Fiem Industries Limited hosted by Monarch Networth Capital Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi. Thank you, and over to you, sir.

Thank you, Anushka. Good evening, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q1 FY '27 conference call of Fiem Industries Limited. We will start the call with the initial comment about the results and the future outlook of the company, and then we'll open the floor for question and answers. Now I hand over the call to Mr. J.K. Jain, the Executive Chairman of the company. Over to you, Jain, sir.

Thank you. Good afternoon, and welcome to the Q1 FY '27 Earnings Call of Fiem Industries Limited. Joining me on today's call are Rahul Jain, Managing Director; Rajesh Sharma, Joint Managing Director; Aanchal Jain, Joint Managing Director; Arvind Chauhan, Company Secretary; O.P. Gupta, CFO; and other members of the finance team. Our investor presentation and the results are now available on our website and the stock exchange. We trust you must have reviewed the same. Let me start with the broader economic backdrop. Geopolitical conflicts continued trade and tariff tensions remain elevated and the global supply chain faces brisk disturbance. At the same time, we saw significant increase in the input cost and continued pressure from the weaker rupee. Despite these headwinds, the Indian 2-wheeler industries delivered a record first quarter. Industry's volume reached to 7.25 million units, the highest ever for a first quarter. Growth was supported by GST rationalization, India retail financing and strong rural demand, while export and electric vehicles grew even faster. For us, this is an important signal. It demonstrates the underlying strength and resilience of the Indian automotive market even when the global backdrop remains uncertain. Against this backdrop, Fiem has a strong start to FY '27. Our sales grew 18.6% to INR 770 crores, while margins remained stable at 13.5%. TVS has an excellent quarter. The iQube crosses 1 million cumulative sales and the second model of the Norton Manx was launched for export to U.K. We are proud to be a part of this program with more projects expected to launch in the coming quarters. Honda remains a valued and long-standing partner. Our business grew in line with their volumes with several new models in pipeline. Hero remains our fast-growing customer with our business growing strongly, led by Vida EV platform. From next quarter, we will supply all Vida lamp for Hero new plant in Andhra Pradesh from our Hosur facility. The recent launch X440, which Hero is exporting to U.S. market also features Fiem front and rear lighting. Now let me turn my attention to the electric vehicle segment. The EV accounts for more than 9% of the 2-wheeler volume in Q1, up from around 6% a year ago. We believe EV adoption is a structural shift and an important opportunity for Fiem because EV platforms typically carry higher LED intensive lighting content. As we are participating across the EV ecosystem during the quarter, we commenced supplies for Ather new model, Konarc. We are also supplying to River for their new launch RX02 model. In addition, we have also commenced supply for Royal Enfield EV Flying Flea model. Our customers have also announced significant enhancement in their capacities. TVS is expanding 2-wheeler capacity from 6.8 million to 8.3 million units by year-end. Hero is tripling Vida's capacity from 15,000 to 45,000 units a month. These investments give us the confidence about the underlying growth opportunity. We are also enhancing our capacity by expanding our Hosur footprint at both our plants situated at Kelamangalam and Thally Road. While 2-wheeler remains our core growth engine, we continue to focus on building the 4-wheeler industry business. Supplies to Mahindra and Mahindra, we are scaling up as planned, while several other projects are progressing well. Our development program with Ford Motors and other leading OEMs are also moving forward. As we look ahead, we see strong momentum across the industries and a healthy opportunity for Fiem. The festive season is starting on a strong footnote and shift towards the premium and electric vehicle is increasing the content opportunity. With a strong order book and pipeline, we are well positioned to deliver the next phase of growth. With this, I now hand over to Mr. O.P. Gupta and the finance team to take you through the detailed financial performance.

Thank you, sir. Good afternoon to everyone. I would like to present the Q1 numbers for FY '27 in comparison to the corresponding quarter of last year. The company has registered quarterly sales of INR 769.9 crores in Q1 of FY '27 as compared to INR 649.07 crores over same quarter last year, registering a growth of 18.62%. The EBITDA in Q1 is INR 104.06 crores translating into an EBITDA margin of 13.5% as compared to INR 87.36 crores over same quarter last year with EBITDA margin of 13.46%. The PAT of the company has also increased to INR 65.19 crores as compared to INR 56.05 crores, representing an increase of 16.31%. The LED lighting share in total automotive lighting remained at 63% during the quarter. During the quarter, the company has made a CapEx of INR 41.15 crores. With this, I end the financial brief, and now the floor is open for question and answer.

Thank you very much. [Operator Instructions] We take the first question from the line of CA Garvit Goyal from Serene Alpha.

Thanks for the opportunity. I have 2 questions. One is on the cost side of it that you mentioned, there is a significant increase in the cost due to slight [indiscernible] currency movement. How do you see margins for the rest of the quarter, sir, for this financial year?

Yes. So the margin guidance for the year is approximately …

Sir, your voice is low, sir.

Yes. The margin, can you hear us now?

Yes, yes. [indiscernible]

Okay. So the margin guidance for the year is around 14%. You would see that the first quarter has been generally a quarter where there is cost increase around employee cost and so on. But for the full year, we believe that we should be averaging around 14 [indiscernible].

So the cost increase that you witnessed in Q1, are we able to pass on the same to the customers? And if yes, then how many months it usually take, sir?

Yes. So there is 2 kinds of cost increase in Q1. One is employee cost and the other is raw material cost. The raw material cost, we believe, is something that we will be able to pass on to customers. It does happen with a lag with a couple of quarters it happens. So over the -- that's why we said over the full year, we should be able to realize this raw material cost.

Got it. Got it. And sir, in this quarter, what was our revenue contribution from 4-wheelers, sir?

4-wheeler revenue contribution is similar to what it has been over the last 1 year, which is around 2.5% -- it is not significant at this point of time. We believe that 4-wheeler business will really start being meaningful over the next 2 years. This year as well, we believe that it should be around the similar level. But next year onwards, we should see some significant increase.

I just wanted to understand more on 4-wheeler side. As far as I remember, last year, you said we will see meaningful contribution in 4-wheeler from FY '27 onwards. The reason I'm asking this question is if you look at your peers, they are growing significantly better. And I raised this point earlier also in the con call. So the point here is what kind of challenges are we facing in the 4-wheeler segment to scale up because now we are further delaying it by 1 year, right? We are saying we will be growing FY '28 onwards, right? So can you help us to understand what kind of challenges are there -- we understand this is a new segment we enter.

So you are absolutely right in asking the question. The 4-wheeler business is something that we have embarked upon. We do have a meaningful target in mind. We do have a business strategy. However, just as we look to scale up, there are a lot of initial sort of checklist. There are many processes to be followed, which is taking longer than what we would have expected. So we would have ramped up, as you rightly said, in FY '27 to a significant number, and that number will probably come next year now. But we continue to work very hard. We continue to put a lot of resources, and we continue to be very hopeful. It is just that the conversion cycle with customers is taking longer.

Okay. And just last thing, what kind of...

The way we look at this business is we actually look at it from a 10-year lens, whether it's another 12 months or 18 months…

Why I am asking this is, see, what is happening, LED penetration in every industry level is rising, right? So if the competitor will keep on increasing the market share, it will be -- over the period of time, it will be becoming difficult for us to get those market shares from them, right? Is what I am understanding, you can correct me if I am wrong, sir.

Again, you are right, it is never going to be easy. When we entered, we knew it is not going to be an easy market to get into. But I think our last 3 years of work will help us -- whether it takes another year or 18 months, we are committed to work hard in this segment, but it is challenging. And yes, you are also right that competition does keep -- there are more capacities coming and so on. So those are challenges which we'll be able to handle.

Got it, and full year top line target will be, for this year?

Just say that again, we couldn't hear.

Top line target for this year, sir?

We look at overall revenue guidance of around 15% to 20%.

Okay, got it, thank you sir and all the best for the future. I will join to the queue.

We take the next question from the line of Anubhav Mukherjee from Prescient Capital.

Congrats on a decent set of numbers. My first question is that in the Q4 FY '26 earnings call, just the previous quarter, management had given a guidance of INR 100 crores to INR 150 crores of revenue from the 4-wheeler lighting segment. So has there been any significant changes because we are like downgrading that guidance in just 1 quarter. So if you could give some color on that, that what has changed in just 1 quarter that we are sort of decreasing that guidance.

Okay. I think the -- in some part, we answered that question in the last question as well. The -- what we are saying is that our revenue target is perhaps pushed out by 2 quarters. What we expected for it to fully materialize in FY '27 will spill over in '28 and which is why we believe that 4-wheeler business at a headline level will still be around 2.5% of our revenue, which is slightly lower. But again, the way to think about it is that what is the long-term trajectory, what are we doing over the next 2, 3 years, which we believe that we still have -- we are in a well position to capture market. And you must appreciate that some of these orders are going to be lumpy. At one point of time, we will end up with a large order -- so sometimes it takes more time. So we do expect FY '27 to be slightly lower than what we had indicated on the 4-wheeler.

[indiscernible] and HMSI has announced a very solid launch pipeline of 10 models, including like 7 models. So can you give some color on to like are we in product development for these new models? And also, how do you see your share of business in the new model compared to your existing share of business in HMSI?

Yes. Our overall wallet share, if you see the current quarter, overall wallet share has remained same or better and in line with the customer requirement. And we are working on a few models which are launched, and there are a few models which will be launched in the near future. So we are in pipeline. But of course, there are projects which are coming out with the LED lamps are under development and our RFQ stages. So we are together with HMSI and we are working very closely with them.

So do we see like -- maintaining our wallet share in HMSI in all of these new models as well?

We are very hopeful and we are working on that.

Great, and sir for Mercedes, we were doing some prototype development work. So can you share some progress on that? Has that progressed into actual order win?

Yes. See, Mercedes prototyping is already being done. The samples we have submitted for their testing and evaluation. This is almost 1.5 year to 2 years' time to need for their testing and validation at the vehicle level. And thereafter, they will issue the actual RFQ, RFI to proceed further on this actual product for mass production.

Okay. And sir, you mentioned Ather. So are we the sole supplier of auto lighting for Ather?

Yes. The project which is being launched, we will be the sole supplier for that model.

And for earlier existing models?

No. Existing model with some other competitors, but this is a model which is being gained by us with the latest technology, whatever is being required for the real market.

And sir, Yamaha this quarter was flat year-on-year. And in the previous quarter, you had mentioned that we have a very healthy pipeline with Yamaha for 8, 9 models. So can you give some color on how do you see revenue with Yamaha in the rest of the financial year?

Yes. Yamaha, this financial year, we hope we will be the same and with the growth, whatever is being presented during our last quarter. We have export model as well as domestic model. And during last quarter, export model is being reduced a little bit of and there are model which is being -- did good during domestic market, our presentation was a little less on that. If we ask clearly the Fascino model, we are not there, which is being done well, wherein R15 and [indiscernible], Aerox, these were the model which is being launched last-to-last quarter, a little bit slow during this quarter. And we hope the time to come, these all models will run good, and we will be achieving the target, which is being required for this year -- financial year.

Thanks, I will get back in the queue.

Thank you. We take the next question from the line of Viraj Kacharia from SiMPL.

Thanks for opportunity.

Sorry to interrupt Mr. Viraj, we are not able to hear you…

Market share.

Sorry to interrupt Mr. Viraj, but your voice is breaking, I would request you to join back the queue.

Is it better now.

Actually your voice is breaking when you are speaking.

Is it better now.

Can you speak again? Okay can you please join back the queue till then. Till then, we proceed with the next question. It is from the line of Arun Agarwal from Kotak Securities.

Thanks for the opportunity. Sir, my first question is on the auto light revenue. Now the share of the LED lights when you look auto lights revenue, for the past 7 quarters, they have been ranging in a band of 61% to 64%. But in the previous few years, we have seen a very sharp acceleration there. Now we understand one reason would be the improved demand for the entry-level 2-wheelers that have halogen lamps. But again, simultaneously, we are also seeing EVs doing very well. They are growing and outperforming the industry. So just wanted to understand how do you see this transition happening over the next 2 to 3 years? I mean what sort of -- how the share do you see moving this year and next year based on the order books that you have?

See, now the market is moving towards LED and in all the customers who is introducing new models are coming with LEDs only. And further on, EV market has been growing from 6% to 9%, wherein LED is mandatory, and we are working together with them. So we hope this is what being declared by market is by 2030 market will be almost 90%, 95% will be with LED only.

Okay. So even a lot of...

We are working on that and our share of business with respect to that will remain increasing trend only.

So I mean, we should understand that possibly you're saying that by 2030, 90%, 95% of our auto revenue should come from the LED segment. That's my understanding correct?

No. Let me rephrase that. So a, LED will progressively move higher. In the last 2 years, you're right, it has stagnated because some models have continued to do well. But that trend should go towards more LED as we move forward in the next few years. And by 2030, it's not like that everything will move 100% to LED, but the new models are increasingly moving there. But the old existing model might remain. But if you see the next 24-month trend, we think we must -- we should move towards 70% kind of a figure going forward in the next 24 to 30 months towards LED.

But another point is like [indiscernible], if you see spare market, spare market is being liable to be together with them for 15 years [indiscernible] we have to be run both models also and cater the market -- aftermarket business of all the OEM customers.

Yes, I understand that. But the question was that in the last 2 years, it's been a bit stagnant. So I just wanted to understand if there's anything we're missing out on that. Anyway, sir, next question is on the employee cost. Now we saw a pretty sharp jump. I think a part of that would be the minimum wage hike that we have seen. And we also had the annual increments as well in this, right, sir?

That's right in this quarter.

Sure. And sir, so I mean this minimum wage hikes have been done across all our plants in all the states or there are some more we can expect in the coming quarter?

No, Arun, this is Arvind. See, the first state who implemented this revision in the minimum wages is the Haryana and our 2 factories are in Haryana Rai and Kundli and this is progressively done by other states also, but it is not in that -- almost 35% increase in Haryana and other states are also [indiscernible]…Tamil Nadu …

But that impact has come in Q1 or we'll see a little bit spillover in Q2? Just trying to understand that -- let me put the question in another way. The run rate of employee cost this quarter, will that be similar in the next 3 quarters or we could see a bit of increase in second quarter as well from what was in Q1?

Yes, you are correct in the reading. It will remain in the same range in the next 3 quarters.

Okay. Okay. And my last question is with respect to Yamaha. Now I understand you have already answered that question. But just wanted to understand that any specific reason for why the exports suffered for Yamaha because I mean, we have seen a very huge variation. The domestics were up by 40%, 50%, but exports were sort of 2%, 3% up. So based on the current monthly production schedule, do you see that trend improving immediately in the coming quarters or there's some more time for exports to improve?

I think we had already replied this answered. Another point is like export model is based on the cycle, which is being required by the continents. Europe is always be [growing] during winter seasons, wherein others are doing [indiscernible] in the summer season. So this is a cycle wherein we hope -- we see always 6 months is very good for export market, another 6 months for Europe and U.S. is always a little less. And similarly, like in India market, as of now, [indiscernible], FZ, Aerox, wherein we are 100% is a little bit lower during this quarter, wherein model R15 and Fascino did well. So yes, so we are very much bullish about Yamaha business, and we hope we will recover each and everything during next quarters coming year.

Sure sir, thank, just one last thing. full year CapEx would be how much, we did INR 41 crores, I think in Q1. So full year guidance?

This year, we should target around INR 100-odd crores. We did about INR 110-odd crores last year. This year, again, it should be INR 100 crores.

And this would include the CapEx -- sorry, capacity increase in Hosur plant we are talking about?

Yes. It's a large proportion of it is going towards South India Hosur, where there is a significant capacity requirement for EVs for TVS and many other OEMs that we deal with. So most of this CapEx, some part of it is also in Tapukara, but most of it is towards Hosur.

Alright sir, thank you, sir.

We take the next question from the line of Viraj Kacharia from SiMPL.

Yes. Just 2 questions. Most of my questions have been answered. See, if we look at the space, competitive space for the 2-wheeler lighting, especially the top 4 customers we cater to, what we've seen is that the competition has been having a very high win rate, be it with [indiscernible] or now similarly with TVS or Suzuki. So just kind of perspective in terms of market share, if you can give some color, have you seen any share erosion or so any color you can give on that? That is one. And Second is in the annual report, we talked about us launching this hands-off detection system with sensors and small PCU. So is it something a new product initiative, which we have come up with? Or any color you can give what is the thinking? And could we see something similar range being expanded and launched in the market?

Yes. So the wallet share, which with the new -- with all customers, whatever 4 new -- 4 customers -- top line 4 customers are similar, and we are growing together with them in the same pace what we did in last so many years. We are very closely working and all new models, which is being required, which is coming out with all customers like Honda, Yamaha, Suzuki or TVS, we are together with them and more than -- more than 100 models are together with us.

Okay. Can I just make one small request. See, I think 2, 3 years back, we used to share this segment...

Viraj, your voice is breaking in between.

Sir, am I [indiscernible].

Yes go ahead please.