Fiem Industries Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Neutral

Robust Growth, Margin Squeeze Ahead

Fiem Industries reported ₹5,931 million in revenue for the quarter, up 21.7% year-on-year but down 3.2% quarter-on-quarter, missing estimates of ₹6,124 million. The growth was driven by higher LED lighting sales. Gross profit rose 16.3% YoY to ₹2,248 million, though margins fell to 37.9% due to higher raw material costs. EBITDA increased 19.5% YoY to ₹776 million, but margins dipped to 13.1% due to rising employee and other expenses. Net profit (PAT) stood at ₹470 million, up 16.1% YoY but down 6.3% QoQ, with margins at 7.9%. While costs impacted profitability, stable raw material prices helped improve margins sequentially.

Key Concall Highlights

Decline in Conventional Lighting: The replacement market for traditional lighting is shrinking as the industry moves toward LED lighting, impacting sales.
LED Growth: LED lighting now makes up 61% of Fiem’s total automotive lighting sales, and this share is expected to grow with new model launches.
R&D and Expansion: The company is investing in R&D, enhancing design capabilities, and expanding electronic manufacturing in North and South India. It is also strengthening its subsidiaries in Italy and Japan.
New Approvals & Projects: Fiem has received approvals for LED number plates for Mahindra & Mahindra models, with production starting in Q1FY26. It is also working on the XUV700 refresh model and pursuing new project bids for FY26.
Capital Expenditure (CapEx): The company spent ₹369.4 million in Q3FY25, bringing total CapEx for 9MFY25 to ₹1,087.8 million. FY26 CapEx is estimated between ₹750-1,000 million.

Valuation and Outlook

Fiem had a strong quarter with 22% sales growth, mainly driven by Yamaha and Royal Enfield, but fell short of market expectations. Margins were under pressure due to higher raw material costs. Despite this, the company outperformed the industry and is well-positioned for future growth, especially with the strong momentum in the two-wheeler sector. Favorable tax changes are expected to boost discretionary spending, further supporting demand. Fiem’s expansion into both two-wheeler and four-wheeler markets, along with its focus on LED technology, will help it gain market share and attract more customers. The company is also investing in advanced design software and electronic testing labs to strengthen its capabilities. With a diverse customer base and strong demand in the auto industry, Fiem’s medium-term growth outlook remains positive.