Force motors

Daljeet kolhi calls it the next Eicher or MRF.... 300% return by 2020 and urges everybody to take the plunge

Whats the view on this one?

 

We can't say it's next Eicher motors because Eicher s moat s different one ...

Key rationale for investment in force motors :
1. They are the only contract manufacturers of the BMW, benz engine in the world .. It signifies their quality aspects
2. They are the number one in travel utility vehicle, ambulance vehicle and now they are trying to capture the fire safety and disaster rescue vehicle niche...
3. Very low debt with huge cash reserve
4. They are increasing their auto components manufacturing business and gradually shifting towards it
5. As per India nivesh report, luxury car market s growing rapidly since 2009 in our country. Hence, we assume that force motors will reap some revenue from that...
6.Huge capacity expansion plans
7.As we know that India s now becoming low cost production hub and German car makers may increase their outsourcing from our country So that force may produce and export engine to other nations too

Key risks :
If German car makers start to procure from some other vendors or else they start to manufacture by setting up their own plant may be the threat

 

The future seems exciting. Past track record of management is a concern. Not a management known for its performance or track record. That said, there have been signs that they have changed their attitude.

Purely from a business valuation aspect, it is an undervalued share in the space.

 

The firm has reduced debt dramatically, which is always really nice. The cash flows are looking really good. The ROCE and Net Margins are really low. But again, what matters is not the absolute value but the trend . ROCE is showing consistent growth over the last three years. What is not clear is what happened four years back in this share for it offer such stellar numbers at the operating level.

 

Why shouldnt one invest in tata motors - even it should give the 300% return over that time horizon

 

Definitely now tata motors s not domestic car maker , they become global car maker ... JLR s transforming it well and surely one can invest in this company which is available at rock bottom valuations...I have to board this plane soon before it take off . . .

 

Anyhow luxury car market s growing rapidly in our country ... Surely force motors can benefit from it

 

I don't know much about Tata Motors. I have not been a fan of their products. Now, though, around 70 per cent or more of their P&L is derived from JLR sales. China seems to be a focus market. But analysts are saying those concerns are overstated. If the U.S. Recovery sustains and the VW crisis implies a reduced sale of Audi there, there will be a sure opportunity for Jaguar there. But the new Tata Management does not exactly inspire confidence, does it? They are still in the realm of long term plans when day to day reality is zooming past them. Long story short : TTML could be an interesting story but I need to understand it a lot better for myself.

 

I just feel that supply story works better instead of buying brands themselves. Instead of investing in Force or TM or M&M maybe look at great ancillaries companies which supply to all and many. Motherson is a great stock with their vision of $20 Bn by 2020. That would mean at least 4 times from their current valuations. Or maybe look at other suppliers like Sona Koyo, Bosch or Amara Raja/Exide. That way you will not have a single brand exposure but the auto sector exposure as a whole.

 

Motherson sumi is an excellent stock and the management never distracted from their guidance till now ... Due to their superior quality, ms s getting more orders from top global car makers .. Recent Daimler order states the ms uniqueness among auto ancillary companies...one fellow s loss s another felllow s gain ...likewise Volkswagen losses market share then some other can take that pie , most of their rivals are motherson customer only .. stock market s over exaggeration slumped the motherson stock price so we can make use of this situation to add up more ... Vivek chand sehgal created this giant from rags ...even no one so called experts never dreamed of their growth ... First and foremost thing in business or anything s say "NO" till you find value .. Vivek s attitude of say "No" s well noted in their past big acquisitions...

Toyota recalled vehicles some years ago due to brake pedal default I think ... Around 35 people died ... But Toyota regained their market share within a year ...I m not saying that Volkswagen can regain like this ... It may or may not but motherson s not married to Volkswagen ... So as like the CFO of motherson stated that they can get more orders from others ... No can deny the wealth they created for share holders

 

JLR sales have been increased 15 folds since its launch in India (on 2009) ... Though Audi s sales have been increased 23 folds in the same period , JLR s making strong footprints in Indian luxury car market... If we need to ride on this growing segment, then tata motors s best and attractive in terms of recent price fall...

 

Tata Motor currently rides on JLR with its domestic piece bleeding. But this domestic piece is expected to show improved performance ( not really due to PV but due to HMCV) and JLR globally maynot face the China headwinds which recently became the additional big concern ( with the resultant stock crash below 300)

There is no doubting TM competencies in the HMCV whilst this cant be said about PV

Atul Auto is another name worth considering. The latest Capital Market lists it in their compilation of 'one of their kind' companies along with the likes of essel packaging, eicher, Glenmark, bata etc

MS excellent scrip at current levels inspite of its concentration risk. Given their reputation they should easily diversify the risk via new customers. A company which exceeds their guidance regularly is worth a look always

 

Eicher Motors

Part of the two-wheeler industry, it also manufactures light and medium duty (LMD) trucks and buses. The iconic Royal Enfield brand is unique. Globally, it is the oldest motorcycle brand in continuous production.

Eicher continues to outperform the two-wheeler industry by a huge margin. The motorcycle industry grew 8% in the calendar year (CY) 2014 over CY 2013. As against this, the lifestyle segment (250cc and above) in which Eicher is present expanded 74.4% in CY 2014 and 65.6% in CY 2013. The robust growth indicates the tremendous potential of this segment holds. Royal Enfield sales spurted 70% in CY 2014. This is far superior compared with the two-wheeler industry. As a matter of fact, Royal Enfield is true pioneer in the lifestyle segment and commands market share of around 95%.

The sales volume of Royal Enfield jumped seven times between CY 2014 and CY 2008, that is, merely in six years 3.02 lakh units were sold. In CY 2015, there are plans to manufacture 4.5 lakh motorcycles. For sustainable growth, new products will be launched, with focus on international markets. Royal Enfield will be investing Rs 500 crore in CY 2015 towards capacity creation and new product development.

Capacity at the new Oragadam facility in Tamil Nadu, which went commercial in April 2013, will be ramped up. Recently, 50 acres of land in Vallam Vadagal, near Chennai in Tamil Nadu, was acquired to set up the third manufacturing facility.

Eicher is among the most profitable companies in the automotive business and has no debt. It reported earnings before interest and tax (EBIT) margin of 22.5% in CY 2014. As per the company, this is the highest EBIT margin in the motorcycle industry in the world.

In the light and medium duty (LMD) trucks and buses segments, capital investment of Rs 500 crore is earmarked for the current CY. The market share was 32.6% in the LMD trucks segment and 14.9% in the bus segment in CY 2014. The Pro series of trucks and buses were launched in December 2013. These next-generation trucks and buses are expected to shape the future of the Indian trucking industry.

Royal Enfield aims to be a leader in the global mid-size motorcycle market. Towards this objective, Eicher will be investing in increasing manufacturing capacities, strengthening supply chain, new products and distribution network. A brand-building exercise was initiated in the strategic markets of United Kingdom (UK), Europe, US and Colombia in 2014. The first exclusive store was opened in London in May 2014. Already, there are 100 stores in India.

In July 2014, the Corbeta group was appointed as the distributor and completely knocked-down (CKD) partner in Colombia. An equal joint venture (JV) was inked with Polaris Industries, US, in CY 2012 to manufacture and market four-wheeled personal vehicles. The JV will be commencing commercial production shortly. This will be one event to watch out for.

Eicher has created a new segment that is growing at a scorching pace. This expansion might move south as the base widens but it is likely to outperform the industry considering the increasing affluence of the population that is demanding premium lifestyle products. Furthermore, the company is nurturing global ambition for flagship product Royal Enfield. It has emerged as the second most valuable two-wheeler manufacturer just behind Bajaj Auto and ahead of industry leader Hero MotoCorp in a short span of time. Thus, such unique companies deserve the attention of investors.

WILL FORCE INDIA BE THE NEXT EICHER AS PROCLAIMED BY DALJEET KOLHI?

 

Sachin - What size of Eichers P&L comes from Royal Enfield, would you know ?

 

Till march 2015, RE contributed 80% to the consolidated EBIDTA ... This year, its expecting to be around 84-86% ...

 

Thank you Stockjeet18. And at the topline and net margin level ?

 

https://forbesindia.com/article/super-50-companies-2015/eicher-motors-its-all-in-the-drive/40705/1

 

Operating profit level ... Surely not to topline bcoz its high margin segment for Eicher... Best margin when compared to all global auto maker

 

I never get the confidence while even investing in 100 bagger stocks too like granules India and all ... But I feel comfort in Eicher though it trades in higher pe ... RE kind of products create lust among the users as like gold ... I hope it's Peter Lynch style of stock

 

One should watch the export numbers in Eicher RE segment as I think their next leg of growth must be in export market ... But still domestic market s not saturated ... RE replaces the Yamaha r15, Honda cbr kind of high end sports bike among the minds of youth and even the middle age men are attracted towards it as they feel it as symbol of pride..!