Adding …
Revenue potential : (FY-24 estimates)
OEM + Engine business : Current sales run-rate is > 1300 Cr with average ebitda margins of 8-9%, extrapolating it without considering any growth, yearly standalone numbers will look like :
Sales of 5200 Cr with EBITDA of 416-468 Cr
Dep + Interest at 300 Cr
PBT at 116-168 Cr
Current market cap is 1694 Cr & interest cost will come down with cash flows coming in and capex also commercialising.
Considering debt coming down to 500 Cr at the end of FY-24 (conservatively) – the company is available at 4-5x EV/EBITDA with Sales & EBITDA being at all time highs.
Joint Venture with MTU : Since Force is having 51% stake in the JV – Sales are not included in the financial statements and they get the JV share directly in PBT. In FY-22, they did sales of ~78 Cr, EBITDA loss of ~20 Cr and net loss of ~33 Cr – This JV is expected to achieve revenues of over 300-400 Cr in medium term (source – credit rating). Assuming that they do revenue of 400 Cr in FY24 (while peak sales potential can be 2x of it) and with increased localisation of RM content – ebitda margins of 8% (similar to their existing business) then we can expect bottomline to break-even and in FY-25 the JV can become profitable. (Please note that these are just assumption & might go wrong)
So even without considering the JV business which can turn profitable and achieve ebitda margins of over 14% once RM localisation takes place – the company is available at below 1x book value.
Links :
Force MTU credit rating report : India Ratings and Research: Most Respected Credit Rating and Research Agency India
Force MTU audited statements : https://www.forcemotors.com/themes/frontend/docs/share-holder-info/annual-report/Force_MTU_Power_Systems_Pvt_Ltd.pdf
Force Motors credit rating report : Rating Rationale
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