Force Motors - Long term value buy

Jun 14, 2020

Buy 50% now and 50% either at 780 or above breakout at marked price of 975. (ideally 50% at 780 because we are buying this as a value pick and not to trade)

Some fundamentals worth knowing about the company

Force Motors

Market Cap: 1100cr
P/B 0.6
D/E 0.1

Company is a contract manufacturer for Mercedes and BMW. They supply engines and Axles. 50% revenue comes from this segment

They are also the leading mini van makers in India and command 68% market share.

They have recently tied up with Rolls Roye Global to contract manufacture for them. Factory should start sometime in 2020 or Early 2021. RR is shifting its entire manufacturing from germany to India to supply the world

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 this along with a new state of the art factory. Their focus for this new mobility platform is international markets for export. They also have an electric option.

business-standard.com/article/automobile/rolls-royce-force-motors-jv-factory-to-start-operations-in-a-few-months-120030900697_1.html

timesofindia.indiatimes.com/business/india-business/force-motors-invests-rs-1000cr-on-next-gen-platform/articleshow/73531755.cms

livemint.com/auto-news/force-motors-plans-600-crore-capex-to-develop-2-new-models-11580045577864.html

All this has been done thru internal accurals as the company is virtually debt free.
Also this leads to the company having a lot of focus on contract manufacturing..which is a theme our govt is highly focused on.

The only negative here is sales have slowed down short term because of Covid and H1Fy21 could be slow..

Technically the stock +ive triple divergence on the weeklies. The Monthly too has a divergence. So we could expect the stock to have bottomed out. A true indication of a reversal could be above 1100. But bottom fishing coz the same could start at approx 780 given the chance in the next correction...