Force Motors
Market Cap: 1100cr
P/B 0.6
Market leader in the mini van segment with 68% market share. They also produce jeeps and LCV's.
Company is also a contract manufacturer for Mercedes and BMW. They supply engines and Axles. Almost 40% revenue comes from this segment.
Market Cap: 1100cr
P/B 0.6
Market leader in the mini van segment with 68% market share. They also produce jeeps and LCV's.
Company is also a contract manufacturer for Mercedes and BMW. They supply engines and Axles. Almost 40% revenue comes from this segment.
They have formed a JV with Rolls Royce Global (51:49) to contract manufacture for them. Factory should start sometime in H2 2020. RR is shifting its entire manufacturing line from germany to India to supply particular engines globally from India
Approx cost 300cr.
Approx cost 300cr.
Force has almost spent approx 1000cr on a new mobility platform for its minivans and recently launched the same.They plan to spend another 600cr towards the same. Also built a state of the art factory.The product is geared towards the international markets w diesel, cng & electic
All this has been done thru internal accurals as the company is virtually debt free. (D/E: 0.1)
Spent 1300cr over the last 4 years all majorly from internal accurals.
After this capex cycle they will have a strong contract manufacturing setup for Merc, BMW & Rolls Royce
Spent 1300cr over the last 4 years all majorly from internal accurals.
After this capex cycle they will have a strong contract manufacturing setup for Merc, BMW & Rolls Royce
Contract Manufacturing is a theme our govt currently loves dearly and these guys started planning many years ahead. They have dedicated factories for the same as well. So partners wont leave them. Merc relation is since 1997.
Negatives: The sector is at the bottom of a cycle and covid has slowed it down even further. So first half of the year could be slow for them
But looking ahead they sell tractors and mini vans which should pick up quicker than regular auto. Their Jeeps also have a rural focus.
But looking ahead they sell tractors and mini vans which should pick up quicker than regular auto. Their Jeeps also have a rural focus.
Technically the stock +ive triple divergence on the weeklies. The Monthly too has a div. So we could expect the stock to have bottomed out. A true indication of a reversal could be above 1100. But accumilation could potentially be done around 780 levels. 
Around 780 the market cap would be around 900 crores for a company that should have a gross block at year end of over 3000cr (Net 1400-1600cr).
Sales for the year should be 3300cr with an EBITDA of approx 250cr (These are assumptions since result is not decared)
Sales for the year should be 3300cr with an EBITDA of approx 250cr (These are assumptions since result is not decared)
We could potentially get the company which has completed a major capex cycle at approx EV/EBITDA of 4. Note that the company has minimal debt on the books even after such a huge capex.
I think at those levels the stock could loook interesting over a couple years horizon.
I think at those levels the stock could loook interesting over a couple years horizon.
Disc: My view might be biased coz i am planning to buy the stock if it hits those levels. Or if it breaks out. Also this is purely for educational purposes where the q4 numbers are projections of mine. (Not actual coz the results have not been declared.
Will review on results
Will review on results
Personally believe if we get it at the lower end of the spectrum it would be at approx 10 P/E of a depressed cycle in the sector. Going ahead all the numbers should improve coz the new platform will be the best in India + opens up export markets. Plus the RR tieup could be big
Attached here is a small write up from the RR annual report of why they will be doing as part of the JV.
Everyones comments, views, thoughts are welcome.
My logic is cycle low, great valuations, if markets fall more it becomes too cheap compared to its investments, assets and products + contract manufacturing for 3 top global companies.
Sharing a longer term chart as well.. :-)
My logic is cycle low, great valuations, if markets fall more it becomes too cheap compared to its investments, assets and products + contract manufacturing for 3 top global companies.
Sharing a longer term chart as well.. :-)
