Stock Review: Fiem Industries

Fiem Industries interests me because of its alliance with Ichiko Japan. Their two memorandum of understanding with Ichiko, which has an alliance with Value, the France based company, I think this stock can actually get re-rated once Ichiko takes economic interest into the company. It makes a lot of sense for Ichiko to take economic interest in the company which will reduce the debt burden substantially.

The performance of the company, the company has been languishing in terms of stock prices. Right from Rs 142 to Rs 170 mark, even in bad times the stock has got support in this level and good resistance zone on around Rs 170 odd mark. But going forward, I feel with this particular development coming in from the company in the next 12 to 24 months, it is anyone's guess, the stock can get significant re-rating. The company would be posting an EPS of close to Rs 12.50 for the next fiscal.

Looking into this particular segment, Lumax Industries and others trade almost 18-20 times PE multiple which they get because of their strong parentage of Stanley. Similar story can be shaped out in this particular story. Though the Indian promoters are there, but with Ichiko taking stake, I think the stock can get re-rated in no time.

We have a very modest target of Rs 190 in the next 12 months, if the deal does not go through. If the deal goes through then the stock can get significant upside. If I take a technical call on the stock because of the market turmoil, one should keep a stop loss of around Rs 138 mark on closing basis. This is one story that can definitely give good returns.

Now looking into their expansion plans, they have got a new plant in large industrial area which would be looking into developing products for original equipment manufacturers. Their Tarapur project based in Haryana has got very close proximity with their existing clientele base of Honda Siel and also Scooter India. So, there are a lot of interesting developments on the clientele side also that could actually benefit this particular company in terms of proximity. I think this stock can be looked on dips also and is a good bet.