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Old 4th August 2015, 14:56   #1
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Default What's up with Force Motors? Share price up 5 times in a year!

Yes, that manufacturer of badly put-together buckets on rolling chassis, the Mercedes Transporter clone from the 80s, the chinese Endeavour with a Merc engine and the goofy-faced Gurkha. And contract manufacturer for the big boys.

The stock is suddenly on the rise on Sensex - and it cannot be because of their products past, present or future. Wonder whats up?

Source: ET

Force Motors doubles in 2 weeks, vrooms 400 in 1 year
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What's up with Force Motors? Share price up 5 times in a year!-force-motors-sensex.png  


Last edited by Steeroid : 4th August 2015 at 14:58.
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Old 4th August 2015, 15:18   #2
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Default re: What's up with Force Motors? Share price up 5 times in a year!

The spike is around the time the news came about manufacturing engines for BMW. They are a shitty car company, but seem to be doing a decent job of contract manufacturing engines and gearboxes for Mercedes and BMW.
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Old 4th August 2015, 15:56   #3
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Default re: What's up with Force Motors? Share price up 5 times in a year!

Force Motors may not be good car manufacturers but as Addict has commented, they are doing well in the contract manufacturing business.

The reasons are as below:
  • For the quarter ended 30-Jun-2015, the company has reported a Standalone sales of Rs. 634.09 Cr., down -8.71% from last quarter Sales of Rs. 694.55 Cr. and up 17.77% from last year same quarter Sales of Rs. 538.42 Cr. Company has reported net profit after tax of Rs. 35.76 Cr. in latest quarter.
  • Promoters stake increased to 60.1% from the earlier held 59%.
  • Its stock is "Considering the attractive valuations of Force Motors, I find this stock a perfect buy with a possibility of its rising further from current levels."
  • Its Nett Profit saw a 3.2% rise and stands at 46.26 cr.

(All Sourced from ET Website)
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Old 4th August 2015, 16:30   #4
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Default re: What's up with Force Motors? Share price up 5 times in a year!

Quote:
Originally Posted by arnabchak View Post
Force Motors may not be good car manufacturers but as Addict has commented, they are doing well in the contract manufacturing business.

The reasons are as below:[list][*]For the quarter ended 30-Jun-2015, the company has reported a Standalone sales of Rs. 634.09 Cr., down -8.71% from last quarter Sales of Rs. 694.55 Cr. and up 17.77% from last year same quarter Sales of Rs. 538.42 Cr. Company has reported net profit after tax of Rs. 35.76 Cr. in latest quarter.
If you look at things year-on-year rather than quarterly, Force has just rebounded to its 2012 revenue levels (2,085 cr) in 2015 (2,363 cr), after taking a dip in 2013 (1,972 cr) & 14 (2,012 cr).

In 2015 their revenues went up by 250 cr, but an analysis of the P&L shows that Raw Material costs also went up by 250 cr for the same period. All other costs shown also increased proportionately. Yet Gross Profit shot up by 50 cr and Net was up by 25 cr.

None of this warrants a 400% increase in stock price over a year. Something is up.

Last edited by Steeroid : 4th August 2015 at 16:31.
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Old 4th August 2015, 17:08   #5
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Default re: What's up with Force Motors? Share price up 5 times in a year!

This has been an interesting stock and very hot on the market. As enthusiasts we ought to have predicted this one Any plans of Audi beginning to assemble with Force? That could be a big boost for the stock again.
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Old 5th August 2015, 10:47   #6
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Investors always look for the "next" company in a bull market.

The "next" Infosys.
The "next" Sun Pharma

and so on.

In Force Motors, I think the investors are looking at the "next Eicher Motors" (a stock that has taken off vertically in recent times). I would not pay more than 10 times profits for what is essentially a contract manufacturer, that also happens to sell a Chinese SUV & a 1970s Van.

But that doesn't mean it won't go up 2 or 3 times from here, over the next few years, till the peak of the current bull run.
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Old 5th August 2015, 10:55   #7
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

As everyone has highlighted above, This share has been suggested by various advisory firms over the past 6 months. However no news/company results point towards the reason for the increase. The only news was the plant for Engine/Gearbox manufacturing which has already happened and the latest share price increase started since the announcement of the new facility.

Unless until if the market is linking future growth to BMW growth which itself is in question at this point, I see no reason. Maybe everyone is building stock for the dividend announcement and possible share split in Sept.

EDIT: There is some news of another facility maybe set up in Pune and increase in capacity from 20000 to 50000 vehicles.So as smartcat said above maybe everyone is expecting a Eicher Motors story here

Last edited by malgudi : 5th August 2015 at 11:00.
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Old 5th August 2015, 11:14   #8
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Why is the BMW link a question? I though it was a inked pact?
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Old 5th August 2015, 11:16   #9
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Quote:
Originally Posted by sudev View Post
Why is the BMW link a question? I though it was a inked pact?
Link is not in question, Pace of Growth of BMW is question
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Old 5th August 2015, 14:50   #10
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

It went up in anticipation of winning the RFC

More seriously, the fact that one of their clients for engine assemblies is doing extremely well (Mercedes India) and that may also have a role?
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Old 5th August 2015, 15:11   #11
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

One of the reasons could also be their focus on defence vehicles. There was an article in Business Standard a few months back IIRC about the company focusing on this sector and being bullish about their chances.
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Old 5th August 2015, 17:06   #12
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Hi,

First of all I haven't done in-depth research about Force Motors. My opinion is based on last one hour's reading post a nudge from a member here The capacity expansion over last 2 years (The company has set up ‘Advanced Technology Centre’ at Akurdi for engine and vehicle testing. It undertakes project work on design, development and up gradation of engine configurations in various displacements and capacities) could be leading to a new phase of growth.

This cannot be compared to Eicher at all. There is no brand. It is more likely a contract manufacturing opportunity. But we cannot write off that opportunity either. The company has no debt in its balance sheet, the operating margins have been improving and should continue to improve making profits grow much faster than sales. Force has a market-cap of Rs 4100 Cr which makes it a small company. Some of the auto ancillary companies have demonstrated tremendous growth in the last decade. Motherson Sumi has a market cap of 32000 Cr. The share price has gone up from Rs 10 around 10 years back to nearly 400 now. The Indian auto ancillary story is exciting and these companies cater to the world market. Its more of shift from expensive manufacturing destinations to India. The presence of global auto giants in domestic market opened up the domestic manufacturing to the world as-well.

I had invested in a stock called Igarashi motors around a year and a half back. The company manufactures small DC motors (the number of motors used in cars have increased with advanced features) and do not sell to any OEM in India. Their products are all exported. The point is many companies have come up the R&D curve and are doing much more complex and advanced stuff. This is true of many sectors like Pharma as-well. See the stock price movement of Ajanta Pharma over last 5 years. There are some brilliant guys building up world class competencies in many areas. Ain't I glad to be an investor in India!

Could we have identified Force earlier? The only way would have been to get curious in Fy13 as to why they are spending on capacity expansion when the market was dull. It had to be an export opportunity and the promoter buying close to 8% more stake over a year should have given another hint. This could have been brought to a logical conclusion only by meeting the promoters and understanding their vision and plans. No other way out. Eicher opportunity could have been identified by a seasoned investor/analyst with some refined skill/feel to see the value of the brand.

At current price it is very difficult to take a call on Force without key insights about the plan of the management, competitive edge of the company and the opportunity size. If someone can help in setting up a meeting with the management, we can try and crack this. I am game

Cheers

Vindy
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Old 5th August 2015, 19:30   #13
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Vindy has detailed everything. I think it is a gamble. Only those with pots of money can buy such an expensive stock.
Last dividend was given in September, so are people buying to get dividend again in September?
The sharp rise after the announcement about Chennai plant with 20,000 engine capacity does seem to have triggered something.

Edit: This was one of the top 10 stocks to buy listed somewhere (I think on MoneyControl)

Last edited by S_U_N : 5th August 2015 at 19:32.
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Old 5th August 2015, 19:39   #14
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

Five times in a year and more than 13 times in 2 years!

Force Motors' share price hit its lowest of Rs. 225/share somewhere almost exactly two years ago.

Two years later, it's a whole new story!

What's up with Force Motors? Share price up 5 times in a year!-untitled.jpg
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Old 6th August 2015, 10:19   #15
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Default Re: What's up with Force Motors? Share price up 5 times in a year!

People who spend their hard earned money try to get maximum info about the destination of their money and them do it. As far as force is concerned the people who are investing in their share are sure that what ever the manufacture there is a taker. Market conditions bothers them lesser than their customers. They are into mass manufacture and number of customers they supply is lesser. Then there is a possibility of one of there supplier to go offline , still the other one hold good. That means for the time being they are playing safe as long as the people whom they supply are healthy. I don't see anything that can affect their customers to go into doldrums in the near future. So for the time being they are a safe bet.
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