Earnings Call Transcript Analysis Report #
Financial Performance #
Key Financial Metrics #
- Sales (Q3FY25): INR 590.1 crores.
- Quote: “The company has registered sales of INR590.1 crores in Q3 of current financial year…”
- EBITDA (Q3FY25): INR 77.88 crores.
- Quote: “The EBITDA is higher at INR77.88 crores…”
- EBITDA Margin (Q3FY25): 13.2%.
- Quote: “…translating into an EBITDA margin of 13.2%…”
- PAT (Q3FY25): INR 47.41 crores.
- Quote: “PAT has increased by 17.64% to INR47.41 crores…”
- LED Lighting Share: Increased to 61% of total automotive lighting.
- Quote: “The percentage of LED lighting within the total automotive lighting has increased to 61%.”
- Capex (Q3FY25): INR 36.94 crores.
- Capex (9M FY25): INR 108.78 crores.
- Quote: “During the quarter, the company has made a capex of INR36.94 crores taking the total capex to INR108.78 crores for 9 months of FY ‘25.”
- Cash on Books (as of Dec 2024): INR 217 crores.
- Quote: “This is INR217 crores.”
Comparison with Previous Periods and Year-over-Year #
- Sales Growth (Q3FY25 vs Q3FY24): 22.15% increase (INR 590.1 crores vs INR 483.11 crores).
- Quote: “…in comparison to INR483.11 crores in Q3 of FY ‘24, which is an increase of 22.15%.”
- EBITDA (Q3FY24): INR 64.48 crores.
- EBITDA Margin (Q3FY24): 13.35%.
- Quote: “…as compared to an EBITDA of INR64.48 crores that is 13.35% in corresponding quarter of previous financial year.” (Note: EBITDA margin slightly lower in Q3FY25 despite higher absolute EBITDA).
- PAT Growth (Q3FY25 vs Q3FY24): 17.64% increase (INR 47.41 crores vs INR 40.30 crores).
- Quote: “PAT has increased by 17.64% to INR47.41 crores as compared to INR40.30 crores in Q3 of FY ‘24.”
- Company Sales Growth vs Industry: Fiem outperformed the industry, achieving 22% sales growth in Q3FY25, while the 2-wheeler industry grew by more than 10% in the first 9 months of FY25.
- Quote: “Fiem has been able to outperform the industry achieving 22% sale growth in Q3 FY'25.”
Revised Guidance or Forecasts #
- Capex FY25: Guided INR 125-150 crores; spent INR 108 crores in 9M, with another INR 25 crores expected in Q4, aligning with guidance.
- Quote: “Now we had guided for INR125 crores to INR150 crores of capex. We’ve already spent INR108 crores for 9 months already. Another INR25-odd crores would be sort of spent in Jan to March.”
- Capex FY26: Estimated INR 75-100 crores.
- Quote: “And for the next year, the number could be anywhere from INR75 crores to INR100 crores additional.”
- Revenue Growth: Management expects to do better than the industry, aiming for 15-20% growth.
- Quote: “We’ve always done better than industry and 15% to 20% is something that we definitely would like to get to, definitely not less than that.”
Areas of Growth or Decline #
- Growth: Overall sales, LED lighting penetration, strong performance with Yamaha and Royal Enfield.
- Quote: “During the quarter, Yamaha and Royal Enfield posted a strong performance driven by the new model launches.”
- Decline: Replacement market sales saw a double-digit decline Y-o-Y in Q3FY25.
- Quote: “…on the replacement side, also, I see there is a double-digit decline Y-o-Y during this quarter.” This is attributed to the shift from conventional to LED lamps, reducing demand, and OEM agreements for mould usage.
Strategic Initiatives & Business Updates #
Major Strategic Announcements #
- Focus on strengthening electronic capabilities: “investment for strengthening our electronic capabilities in the area of advanced design software, electronic laboratory for EMI and EMC testing and validation.”
- Expanding R&D and design capabilities at subsidiaries FRT Italy and FIEM Japan.
- Continued focus on growing 4-wheeler business, initially by securing entry points with OEMs like Mahindra & Mahindra.
- Quote: “We continue to make our sincere effort in growing 4-wheeler business our first project of LED number plate of Mahindra & Mahindra has been approved for their 3XO, Thar, Scorpio and other models.”
New Products, Services, or Markets Discussed #
- 4-Wheeler:
- LED number plate approved for Mahindra & Mahindra’s 3XO, Thar, Scorpio, Supro (electric 3W), and Bolero models. Production to commence Q1FY26.
- New order for XUV700 refresh model (small lamp, not number plate).
- Quote: “Moreover, we have received another order for a new project XUV700 refresh model.”
- Working on more RFQs for 4-wheelers, expecting conversions in FY26.
- 2-Wheeler: Yamaha launched YZR 150cc and XTZ 250cc for Brazil and European markets, where Fiem supplies lights.
- Quote: “Yamaha launched [YZR 150cc and XTZ 250cc] for Brazil and European market.”
- New Technologies: Working on ambient lighting, laser, capacitive cuts, and microlens array. Proof of concept with two customers, and expecting RFQ for one technology shortly.
- Quote: “So currently, with 2 customers, we are working on proof of concept. And one of the technology has got more traction, and we will be shortly receiving a statement of requirement and RFQ from one of the customers…”
Significant Operational Changes #
- Investment in state-of-the-art electronic manufacturing facilities at North and South plants.
- Manufacturing facilities approved by Mahindra & Mahindra for 4-wheeler components.
- Upgrading electronic capabilities to include AUTOSAR, CAN, LIN arrangements, and embedded software.
- Quote: “Now electronic is coming with AUTOSAR, CAN and LIN arrangements, connectivity within the 2-wheeler with the ECU.”
Ongoing or Completed Projects #
- Mahindra & Mahindra: LED number plate project approved, production from Q1FY26. XUV700 refresh model order received.
- Gogoro: Partnership is on “pause” due to Gogoro’s global challenges and unclear India strategy. Investment is “insignificant” (under INR 10 crores) and reimbursable. Tech transfer expected in a couple of quarters but may be delayed.
- Quote: “It is right now on pause.” and “Gogoro may not be pursuing the Indian market so heavily.”
- Hero MotoCorp: Working on 3 upcoming models, validation and QAV by customer underway. Waiting for launches. Aiming for >10% revenue share from Hero in 3-4 years.
- Quote: “It is 3 models, upcoming models are being validated and QAV is being done by customers.”
- Mercedes-Benz: Low-volume development project. First two projects completed and delivered. Third project ongoing.
- Quote: “So first 2 projects are already complete and delivered to Mercedes. Third project is on, and that is also moving as per plan.”
- European OEM (4-Wheeler): Final samples submitted last week for approval.
- Quote: “We have last week submitted our final samples to them…all parts from our side are okay.”
Market & Competitive Landscape #
Insights about Industry Trends #
- Indian economy expected GDP growth of 6.7% in FY25.
- Income tax relief for the middle class likely to boost consumer demand, positively impacting the 2-wheeler industry.
- 2-wheeler industry grew >10% in 9M FY25, driven by rising rural income, urban demand, and new model launches.
- Quote: “The 2-wheeler industry has maintained its robust momentum, growing by more than 10% in the first 9 months of FY ‘25.”
- Shift towards LED lighting continues (61% for Fiem).
- Increasing electronics content in vehicles (AUTOSAR, CAN, LIN).
- Lighting market potential in India: INR 10,000-15,000 crores in the future (exterior and interior).
- Quote: “So the overall market potential of lighting only in India is going to around INR10,000 crores to INR15,000 crores in the future.”
Competitive Positioning Statements #
- Fiem outperformed the 2-wheeler industry with 22% sales growth in Q3FY25.
- Strategy for 4-wheelers: “first finding entry points into 4-wheelers. Revenue is not our immediate target…our plan is to move up the value chain and obtain orders for higher value.”
- Taking “early mover advantage” by upgrading electronic capabilities.
Market Challenges or Opportunities Mentioned #
- Opportunities:
- Strong growth in 2-wheeler market.
- Growing 4-wheeler business by entering new segments and with new customers.
- Increasing LED penetration.
- New technologies in lighting (ambient, laser, etc.).
- Export opportunities (e.g., Yamaha models for Brazil, Europe).
- Challenges:
- Gogoro’s global headwinds impacting India plans.
- Competitive environment: “we are in a super competitive environment where customer always want lower price.”
- Replacement market decline due to LED longevity.
Comments about Market Share or Positioning #
- While specific wallet share data for OEMs was not provided for the current year, management aims to compile it for annual results.
- For Hero MotoCorp, aiming for >10% of Fiem’s revenue in 3-4 years.
- Strategy for 4-wheelers is to establish presence across models first, then focus on revenue.
- Quote: “Our strategy is to make our presence in every model…content today is insignificant. And therefore, we are not chasing revenue as of now. We are chasing our presence in various models.”
Risk Factors & Challenges #
Concerns or Challenges Acknowledged by Management #
- Gogoro Partnership: Significant headwinds for Gogoro globally, India strategy unclear, project on pause.
- Quote: “Gogoro is facing significant headwinds in the international market…India strategy yet remains unclear and which is why we are not seeing any significant uptick…It is right now on pause.”
- Replacement Market: Decline in demand due to shift to LED and OEM agreements.
- Quote: “now all the lamps is being converted from conventional to LED. So demand is, of course, reducing.”
- Client Volume Fluctuations: Dependence on OEM model success and volumes can impact Fiem.
- Quote (regarding Hero): “volumes are always decided by the customer.” and (regarding product mix affecting margins) “Ola was doing, for example, 50,000 a month, which is now 25,000. So margins would change.”
- 4-Wheeler Entry: Acknowledged as a step-by-step process, revenue contribution will take time.
- Quote: “Revenue is not our immediate target…revenue will follow, but we are following our strategy of FIEM Group to go step-by-step in this field.”
Supply Chain or Operational Constraints #
- Raw Material Price Pass-Through: Handled via a defined quarterly process with OEMs.
- Quote: “ours is a pass-through process, any changes is pass through on a quarterly basis.”
- Honda Shutdown: A plant shutdown at Honda in December impacted some volumes for Fiem in Q3.
- Quote: “The last quarter, there was also shutdown at Honda, which has impacted some volumes. The plant shut down from December 22 onwards.”
Market Uncertainties #
- Timing of new model launches by OEMs (e.g., Hero).
- Gogoro’s future plans for India.
- Customer acceptance of new models impacting Fiem’s volumes derived from them.
Forward-Looking Statements #
Outlook and Future Projections #
- Positive outlook for the 2-wheeler industry in FY25 and FY26.
- Quote: “FY ‘25 is going to be very robust, and we see no reason why the demand momentum should not continue into FY ‘26 as well.”
- Expects continued growth momentum for Fiem.
- Quote: “Growth momentum is on positive. We are seeing positive offshoots everywhere, and we should continue.”
- LED share in lighting expected to keep increasing.
- Quote: “we think that this number [LED share] will keep inching upward as new models are been introduced.”
- Aim to achieve 15-20% revenue growth.
- Quote: “We’ve always done better than industry and 15% to 20% is something that we definitely would like to get to, definitely not less than that.”
Commitments or Targets Set by Management #
- 4-Wheeler Business: Production for Mahindra LED number plates to commence Q1FY26. Strategy paper on 4-wheeler revenue targets to be presented in about a year.
- Quote: “Our manufacturing facilities has now been approved by Mahindra & Mahindra and production is likely to commence from quarter first FY ‘26.”
- Quote: “I had requested for 1 more year to bring in our strategy paper because our presence is maturing…”
- Hero MotoCorp: Aiming for Hero to contribute more than 10% of revenue in 3-4 years.
- Margins: Intend to operate in a band of around 13-13.5% EBITDA.
- Quote: “We’ve kind of said that we ideally like to work in a band of around 13%, 13.5%…”
Planned Investments or Strategic Priorities #
- Capex: FY25: ~INR 130-135 crores (aligned with INR 125-150 cr guidance). FY26: INR 75-100 crores. This capex includes normal requirements for 4-wheelers but not a new greenfield plant.
- Quote: “No, this does not include any new greenfield 4-wheeler plant. This includes the normal capex,