Fiem Industries

Fiem Industries reported a robust Q3 FY25, with sales increasing by 22.15% year-on-year to INR 590.1 crores, significantly outperforming the industry's 8% growth. Profit After Tax (PAT) also saw a healthy rise of 17.64% to INR 47.41 crores. The EBITDA margin for the quarter stood at 13.2%, a slight decrease from 13.35% in the corresponding quarter of the previous fiscal year. This strong performance was attributed to a favorable product mix and robust demand from key customers like Yamaha and Royal Enfield.

The 2-wheeler industry maintained strong momentum, growing over 10% in the first 9 months of FY25, driven by rising rural income, urban demand, and new model launches. Fiem Industries capitalized on this trend, achieving a 22% sales growth in Q3 FY25. A key driver for this growth is the increasing adoption of LED lighting, which now constitutes 61% of the total automotive lighting, up from 57% in Q3 FY24. Management expects this trend to continue, with new models predominantly featuring LED technology.

The company is strategically expanding its presence in the 4-wheeler segment, prioritizing market entry and value chain progression over immediate revenue targets. Its first LED number plate project for Mahindra & Mahindra's 3XO, Thar, Scorpio, and other models has been approved, with manufacturing facilities also approved and production slated to commence in Q1 FY26. Additionally, an order for the XUV700 refresh model has been secured, and final samples for a European OEM were submitted last week, with the process moving as per plan.

The partnership with Gogoro is currently on pause due to 'significant headwinds' faced by Gogoro in the international market and an unclear India strategy. While the financial investment in this partnership is 'insignificant,' under INR 10 crores and reimbursable, the technology transfer, initially hoped to happen quickly, is now expected in the 'next couple of quarters.' Management indicated that Gogoro might not heavily pursue the Indian market, suggesting a reduced volume potential from this collaboration.

Fiem Industries spent INR 36.94 crores on capex in Q3 FY25, bringing the 9-month FY25 total to INR 108.78 crores. The full-year FY25 capex is projected to be within the INR 125-150 crores range, with an additional INR 75-100 crores planned for FY26. This capex is for normal requirements, electronic capabilities, and 4-wheeler segment needs, not a new greenfield plant, and is funded entirely through internal accruals. The company maintained a healthy cash balance of INR 217 crores at the end of Q3 FY25, similar to the INR 220-230 crores reported at the end of September, despite the capex and a dividend payout.

The company is making significant investments in strengthening its electronic capabilities, including advanced design software, EMI/EMC testing, and electronic manufacturing facilities. R&D and design capabilities are also being expanded at subsidiaries in Italy and Japan. These initiatives are well-received by customers, with the company working on proof of concept with two clients and expecting an RFQ shortly for a technology that has gained traction. The long-term strategy involves establishing a strong domestic market presence with these new technologies before expanding internationally.

Despite the increasing LED mix and strong topline growth, EBITDA margins remained within the 13-13.5% band, as margins for LED and conventional products are broadly similar at the customer level. Management emphasized that product mix plays a crucial role in margin outcomes, rather than just volume growth. Regarding raw material cost fluctuations, the company has a defined pass-through process with OEMs, where any changes are discussed and implemented on a quarterly basis, ensuring that cost increases are passed on without significant delays or pushbacks.