Fiem Industries Limited (FIEMIND.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Fiem Industries Limited Q2 and H1 FY '26 Earnings Conference Call 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 guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital Limited. Thank you, and over to you, sir.

Thank you Iqra. Good evening, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q2 FY '26 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 open the floor for question and answers. Now I'll hand over the call to Mr. J.K. Jain, Chairman and Managing Director of the company. Over to you, sir.

Thank you. Good afternoon, and welcome to the Q2 FY '26 Earnings Call of the Fiem Industries Limited. Joining me on today's call are Rajesh Sharma, Joint Managing Director; Vineet Sahni, CEO and Director; Arvind Chauhan, Company Secretary; O.P. Gupta, CFO; and other members of the finance team. Our investor presentation and results are now available on our website and the stock exchange. We trust you must have reviewed the same. The Indian economy has continued its upward momentum in Q2 FY '26 with a strong growth. GDP during this quarter is expected to grow at 7.2%. The government's recent GST reduction has provided a timely economic stimulus boosting affordability and confidence across sectors. This positive sentiment has clearly carried through to the auto sector, particularly the 2-wheeler industries. The 2-wheeler industries recorded robust growth with domestic production volume growing by 10.6% to 6.9 million units. Rural markets have shown solid recovery after a good monsoon, while urban demand has remained strong. Against this backdrop, Fiem has been able to post a very strong performance for Q2 FY '26. We posted highest ever quarter sale of INR 711 crores, which is a 17% increase on a year-on-year basis. Our PAT is the highest ever at INR 54 crores. This growth was fueled by very strong demand from our key OEM customers like TVS, Royal Enfield -- this quarter, we supported several significant new models launches that highlights our technological capabilities. The refresh Hero Glamour X125 was launched with Fiem Projector headlamp. Additionally, supplies has also started for Winker lamp for Hero Glamour and Xtreme model. We are also pleased to inform that during the recent Milan show, TVS Norton has launched 2 of their models with Fiem headlamps and tail lamp, featuring advanced animation and [ canes ]-based system technology. Similarly, Yamaha showcased its new Tracer 7 in Milan equipped with our headlamp and position light. In India, Yamaha has introduced XSR155 and their first EV model, both featuring LED headlamps and tail lamps from Fiem. This is in-house development demonstrates our strength in combining high-technology, lighting, electronics and volume manufacturing, positioning us well for the rest of the year. Our journey into the 4-wheeler segment continues with full vigor. Based on our quality and delivery performance, Mahindra has adopted our number plate lens in their Scorpio and car models. We have also commenced our supplies for RR and Fog for XUV700 refresh model. We are happy to inform that we have been awarded the following new businesses from Mahindra, high-mounted stop lamp for Bolero, high-mounted stop lamp for Scorpio, RR and Foglamp for Scorpio, side repeater lamp for Bolero series. As we move into the second half of this year, we remain confident about the industry's growth path. With a heavy order book, improving efficiency and continued focus on technology and quality, we are well positioned to deliver another strong performance in the coming years. With this, I hand over to Mr. O.P. Gupta and the finance team to update on operational performance.

Thank you, sir. Good afternoon to everyone. First, I will present the quarter numbers for FY '26 in comparison to the corresponding quarter of previous financial year. The company has registered sales of INR 711.42 crores in Q2 of current financial year against INR 607.45 crores in corresponding quarter of previous financial year, which is an increase of 17.2%. LED as a percentage of total lighting stands at 63.92%. The EBITDA stand at INR 99.1 crores, translated into an EBITDA margin of 13.93% as compared to an EBITDA of INR 80.27 crores that is 13.21% in corresponding quarter of previous financial year. PAT for quarter 2 is INR 63.78 crores as compared to INR 49.83 crores correspond quarter of previous financial year, which is higher by 28.02%. Now I would like to present the H1 numbers for FY '25. The company has registered sales of INR 1,360.49 crores in first half of current financial year as against INR 1,181.05 crores in the corresponding period of previous year, which is an increase of 15.19%. The EBITDA in first half of current financial year stand at INR 186.46 crores [Technical Difficulty] EBITDA margin of 13.7% as compared to an EBITDA of INR 159.04 at margin of 13.47% in corresponding period of previous year. PAT for first half of current financial year is INR 119.84 crores as against INR 99.03 crores in the corresponding period of previous financial year, which is higher by 21.01%. During the quarter 2, the company has made a CapEx of INR 21.28 crores and total CapEx in the first half of current financial year is INR 37.81 crores. With this, I end the financial brief and now the floor is open for question-and-answers.

[Operator Instructions] The first question is from the line of Shubham Sehgal from SiMPL.

[Technical Difficulty] provision reversal that we have taken for bad debt and warranties?

Sorry, can you repeat your question?

Yes. My first question was, could you just throw some light on [Technical Difficulty] bad debt and warranties?

No, I think your voice is not clear. It is breaking in between.

Is it better now?

Yes, but it is breaking even though it is breaking. Can you just repeat once again loudly?

Yes, yes, sure. So I was asking my first question is, could you throw some light on the provision reversal that you have taken for bad debt and warranties?

Your question is -- you are referring the balance sheet item?

Yes, yes. So we have taken a provision reversal for bad debt and warranties. So I just wanted to ask like could you throw some color on that?

Yes. So in normal course, small numbers for provision we take sometimes, but then if there are no bad debt, then those are reversed back. So which is why you must see that number, it must be around INR 2.5 crores, INR 3 crores. So there was no bad debt. For that, it was recoverable and hence it was reversed.

Okay. Okay. Got it. My next question was that if we see in the previous 4, 5 quarters, we've seen a very significant growth in sales for Royal Enfield. And even if we look at their production numbers compared to their production, we've significantly outperformed the sales figure. So I just wanted to know that how do we see this panning out as RE contributes now 6% of the sales. So do we see this figure being stable or increasing with time?

Yes. We have been taken the classic model lamps business and wherein our share of business is more than 90%, and we are very bullish to have a similar kind of growth with the RE as of now.

Okay. So I meant to ask that right now, Royal Enfield contributes around 6% to our sales. So do we see this figure being stable here? Or do we see this contribution increasing? Are we expecting more orders in new models, newer models or more share?

We expect that there could be an uptick on this 6% going forward.

I'm really sorry. Could you just repeat?

There could be an uptick on the 6% -- right now, as you rightly mentioned is 6%. We think given the volumes that are coming through and new models, it could increase.

Okay. And are there like any models in the pipeline or like are we being considered for any other models where we can get more share?

Yes, there are 2 or 3 models as of now under development and designing stage. So those models will be launched in the coming years.

Okay. All right. My next question was, could you provide any update on newer technologies that we've been working on? And when can we see any of them getting monetized? Like is it like a 1-year or 2-year thing? Or could it take around 4-year to 5 years? How do we see them panning out?

See one of the examples right now, as our CMD sir has already announced, TVS Norton has launched in Milan show. This technology is also being a new technology, which is being first time launched -- in 2-wheeler, especially the animation factors in headlamp and rear lamp, which is being run with the canes software. So this kind of technology is first time being introduced by Fiem in 2-wheeler business.

Okay. And so these will be there for TVS Norton models in Europe. And I think TVS is going to launch Norton next year in India as well. So we will be catering to that as well?

Yes. This will be -- there are 2 models, which will be for India as well as for global overall market.

Okay. Okay. All right. Got it. And like how do we see this panning out? Like do we see some significant upside here?

Yes, of course, there are further models which are under development right now. It is not only one animation. There are a few other technology which will be introduced soon in coming months it is being launched or once it is being commenced by the customer.

So we are the sole providers, right? And I mean we see that for a longer time being here?

Exactly.

The next question is from the line of Vijay Pandey from Nuvama.

First question was regarding the provision which we have made regarding the inventory write-off related to the fire incident. So have we recorded to the P&L as well? And is this in which line item it has been recorded?

So just to clarify, there is a damage of inventory of INR 21 crores and to the fixed asset INR 28 crores. So the P&L you are referring actually, this entry has to first debit the P&L account. And then because we have an insurance policy that is fully valid. So it is -- the entry is reversed and it is shown in the recoverable. You can see in the line item of the balance sheet, there is a financial assets, current financials where this recoverable amount is appearing

So that revenue which we are getting from the -- or the income which we are getting from the insurance, so that is shown into the P&L as of now? Or is it not yet shown?

No, I think -- no, it is not shown in the P&L. What I just explained, this is a book entry, and this is because we have a valid insurance policy. So you can see that entry which is recoverable in the financial assets.

It's being shown as a receivable.

Receivable.

Okay. Secondly, sir, I wanted to check in terms of passenger vehicles. So our passenger vehicle contribution has come down. We were maintaining at around 5% to 7% over the last 3, 4 quarters, but now it has come down to 2.3%. Any particular reason because we have got the orders from Mahindra. So just wanted to check what is the reason for this?

So this is a good question from your side. There's no particular reason. It's just mathematical calculation. The overall 2-wheeler sales have gone up exponentially as explained in CMD speech. The 4-wheeler, we have got orders, but they are under development, and they will fructify in some time. So the revenue is still to come. So what you see is just a mathematical calculation. So as a percentage, it is looking less. Absolute values have not changed. But 2-wheeler market in this quarter has done very well. Therefore, this is looking at a lower percentage.

Okay. And lastly, sir, any idea when can we have any update on the passenger vehicle part? I think we -- in last call, we said that within 6 months to 9 months' time, we'll have an update.

Yes. So we maintain that. In the last call also, I had said that by end of this financial year, we should be having a clearer picture on our business planning, and we maintain that statement. So we are in that process.

The next question is from the line of [ Angi Seth ] from [ Aero Investments ].

Congratulations on the great set of numbers. I had my first question, which is that what is like this time, the margin has been very well compared to the last quarter. So what has -- has there been any like changes in the product mix? Or like what is the contributing factor to this rise in margins?

So you're absolutely right. The margin has closed in 14-odd percent, which is a high target for us. So the number is driven by a product mix and also the fact that there is operating leverage now that is kicking in with the increased sales. So we do -- we are kind of now hoping to work more around this range. We've generally guided more 13% to 14%, but we are hoping to work around the 14% mark going forward.

Do you think this is sustainable, the margin?

Yes. We think given the new volumes and the rivals, we think we should be able to work around these levels.

All right. And one more question is there -- has there been any like RFQs that has converted to orders in this quarter?

[Technical Difficulty] Yes, we have already in the CMD speech, it is being informed. There are 2 models which from Hero is being launched. It is being already converted into a mass production and a sale [indiscernible].

The next question is from the line of Anubhav Mukherjee from Prescient Capital.

So, my question is on the Hero models only. So in the last quarter, Hero has launched quite a few products like the new Vida scooter, e-scooter then I think there was Glamour X 125. So are these the new models that we will be supplying to because in some of the earlier quarters, you also had mentioned you were working on some new models. So can you give some details on that?

Yes. So in CMD, sir, speech, it is being already disclosed. In the last quarter, Glamour X 125 and Xtreme, these are the 2 models which is being launched and it is under production right now. So wherein our projector headlamp is under production for Glamour as well as Xtreme, we are supplying the LED Winker lamps, which is also in production for both the plants. And others are already under development, which will be launched and will be announced soon.

Okay. Will you be able to share any indication of like how much Hero can scale up to in the next financial year? Or is it too premature?

For us, we believe that once the customer gets to at least a 10% of our revenue, that's when we can sort of give a more specific guidance. Right now, it's much lower than that. But overall, directionally, this volume will keep picking up. This quarter has been much better, and we expect the next half to be even better with Hero.

And sir, apart from Mahindra, have we progressed in getting any RFQs or orders from any other passenger vehicle OEMs?

Yes. We already have RFQ at quite advanced stage from Force Motors in a good manner. We have RFQ from Mercedes. So these are the 3 customers where RFQs are already in progress, and we are expecting some from other customers as well.

Okay. And sir, is there any time line in which like tentatively, we can see the start of production for these new OEMs?

So already, I think in last investor call, we had explained, we started our production for our first order -- and based on our quality and delivery reports, it has got adopted into other important models of Mahindra, which is Scorpio and Thar. And very soon, it will also be deployed in the balance model. And we are also opening a warehouse in Pune to support our customer. So that will be the next big step that we are taking. And after that, we have started another production for XUV700 refresh model, which is RR and Fog. Now this will continue because we have other orders from Mahindra and a long list of RFQ on which we are working.

The next question is from the line of Devish KL from Monarch AIF.

Sir, just want to know whether we lost any revenue from this fire or it was offset by higher production in the next few days?

No, there is no loss of revenue. You can see in the numbers.

Okay. And on the HMSI side, so HMSI forms 25% of our revenue [indiscernible] over the past few quarters, many quarters our revenue HMSI line with the production growth of HMSI. So is it fair to say that in Honda, we have lower share of LED?

No. We have -- we don't have lower share of specific products. We have maintained our market share. But -- and overall, our overall market share is absolutely in line with what is happening. However, there are always a couple of quarters where one product line does better than the other, and those minor variations are there. But overall, our market share remains absolutely the same.

Okay. And within the overall Honda LED share remains as it is?

Yes.

The next question is from the line of Shubham Sehgal from SiMPL.

I just had a follow-up. As you mentioned that we will be having share in the TVS Norton model. So what can we expect the realization to be compared to a normal model like this higher technology that we have? Like can it be like almost double, triple or just an approximate sense if you could give?

This is now too early to announce any numbers. This is totally be depend on the customer launches and the OEMs. So what...

But definitely higher realizations.

Yes.

Okay. My next question was, so the new models that have been launched by Yamaha in India recently. And also, I think they've announced further upcoming models in the pipeline. So do we have any share in them? And what are our expectations from these models?

Yes. So in the speech, this has already been cleared that XSR155 is being having our headlamp and taillamp. And their first model of EV is also being launched a few days before is also being supplied by all the lens from Fiem only. And further on, there are new models which are under development. And once these will be launched, we'll definitely declared all the models. These are all for domestic as well as for supermarket.

Okay. Domestic plus export you're saying, right?

Yes, yes.

Okay. Okay. All right. And just last one clarification. So you mentioned that we have an RFQ from -- is it the same development product that we have been talking about? Or has something changed here? Have we progressed here? Like has something changed here?

Yes, these are the same around -- we have more than 100 projects as of now that will be generating the revenue in years to come, maybe around INR 1,000 crores to INR 1,200 crores.

The next question is from the line of Khush Nahar from Electrum PMS.

Congratulations on a good set of numbers, sir. So my questions are more around the 4-wheeler part of business. So could you elaborate more in terms of -- so I remember that last time we had mentioned that we have around INR 700 crores of RFQ on the 4-wheeler side. So right now, have we added more in terms of that, if you could quantify? And also in terms of our plans because I think the next leg of growth might be driven by the 4-wheeler segment. So any time lines over there, if you can give us?

Yes. So as explained, some of the RFQs have already got converted into business nominations for us, which was there in CMD speech. We have graduated from license plate lamp to high-mounted stop lamps, which is a normal progress in 4-wheeler business. We got this for the flagship model of Mahindra, which is Bolero, which is a big win for us. And then post that, we have got for Scorpio as well. We have got RR that is reflex reflector and fog for 2 models, side repeated lamps. Plus we are now receiving RFQ for other models as well. The RFQ value remains similar as we shared with you before because some of them have got converted and some new RFQs have come from Force Motors. So this is a cycle which we are following. And soon, we'll be converting the current RFQ into business award.

Any time on the plant, so I know that the management will give a more clear picture by the end of the financial year. So once we decide to go ahead, how much time would it take to set up a dedicated plant for 4-wheeler and if any ballpark number on the investment that is required.

So yes, we will be more equipped to give you a direction by end of this financial year because we are getting good response from customers. Customer is trusting us, and we are delivering to the expectation of customers step-by-step because we don't want to rush up. We want to go step-by-step process, which we are following. And we are generating more RFQs and also converting it into business nominations. So we should be able to give you better direction by end of this financial year.

The next question is from the line of Mihir Dhami from Augmenta.

I was asking Yamaha had some very good production numbers in this quarter sequentially. So this quarter, it wasn't reflected in our numbers. I understand last quarter, we had very good numbers at that time, but what was the reason for it?

So there are a few models which is being export model volumes, which has increased, and we exported good volume for 4 models for Brazil as well as for Europe. And the domestic market is also being done good for the models which are being under our mass production products.

Okay. I was asking this quarter wasn't good for Yamaha in our portfolio? Any reason for that?

So this is a volume only which is being exported by us. There are a few models which is being launched last quarter as we already disclosed. So those models is being converted into sales figure.

Okay. And another question was 2-wheeler production data in October was quite strong. So do you expect quarter 3 to be particularly strong versus this quarter?