Dharmesh Kant, Daljeet Kohli’s colleague at IndiaNivesh, was the first to put a buy on Force Motors in August 2014 when the stock was still available at a throwaway price of Rs. 563. Dharmesh was enamoured by Force Motors’ debt-free status, strong growth track record, huge cash on books and cheap valuations.
However, before anyone could gather his wits and buy the stock, the stock surged 52% in just 15 days.
Thereafter, the stock has been on a continuous upward trajectory. When I last checked the situation on 3rd August 2015, one year after Dharmesh’s recommendation, Force Motors was standing tall at Rs. 2856, giving its shareholders mind-boggling gains of 400%.
The reason Force Motors caught everyone’s fancy is because it is the only company in the entire World to be given the privilege to make engines for both the top luxury cars, Mercedes and BMW.
In an earlier interview, Daljeet was very gung-ho about Force Motors’ prospects. He called it the “next Eicher Motors and MRF” and urged everyone to “plunge” into the stock.
Daljeet has now put his thoughts to paper. He has issued an initiating coverage report in which he has succinctly described why he is so bullish about Force Motors. He says:
“For Force motors we believe the picture will reverse In FY20 compared to current year with Auto components segment contributing 54% to the revenues (from current 30%) and Automotive sales contribution falling to 44% levels (from current 68%) of the total revenue. With higher volumes, operating leverage would kick in further which could mean an EBITDA margin of close to 10% and NPM of around 7% in 2020. This would result in Net Profit of Rs 4398 million and EPS of ~Rs 334. With such consistent performance of Sales CAGR of 22% and Profit CAGR of 37% over FY15‐FY20E, the multiple can easily expand to 30X giving a target price of ~Rs 10,011 in 2020.”
If Daljeet’s target price is achieved, it means that investors will take home magnificent gains of 300% in five years. This works out to a CAGR of 31.95%. This is not an unreasonable target to project for a powerhouse stock like Force Motors!
I don’t bother about targets,but all i know is that FORCE MOTORS is definitely a Excellent Company in terms of future growth.
It is a good stock with already growth priced in. Sometime back, I did a rough back on the envelope calculation for their new plant in Chennai to supply engine for 200 crores it had an ROI of 10%, which means of it was fully leveraged expansion they would lose money, return below interest rate. The hope is they may get something more out of this tie up. If they get in to niche SUV they may command premium but it is all just hope for now
Is he planning to exit?
Maybe he would be planning to exit,but force motors is definitely a good company?
Probably Yes… then only they will come on this website
I have trapped like this in HSIL, after they give this comment. the stock nose dived …. this is a good strategy for offloading their stake
Buy Tata Motors as of now, also by 2020 you can expect a 300% gain.
Ha ha ha. True that.
U are true sir..Tata motor is available at thorow away price
Hi, I have been reading your newsletter for some time now. I definitely find it useful as it helps me keep tab of hot stocks and their promoters, if if I may call them so:).
However, I find that the numbers are skewed toward success stories. It will help users, if you could take up failed calls in equal measure and highlight reasons thereof.
I picked this up sometimes in sept 2014 and didnt even know of a daljeet kohli’s existence then.
The stock whilst fundamentally sound moved up rapidly only on the news of the tie up and nothing else.
And Force isnt anywhere close to an Eicher. Have no doubts about this.
Tata Motors during 2015-2020 will give a better return