Why Force Motors Share Price is Rising

Auto and auto ancillary stocks have seen an explosion of interest over the past couple of months.

The BSE auto index is up over 21% in a little over two months. Individual stocks are up even more.

Auto Stocks on a Roll

Company	Current price (Rs)	Price as on 27 March 2023	Change (%)
Force Motors	1,921	1,122	71%
Tata Motors Ltd.	536	412	30%
Eicher Motors Ltd.	3,700	2,886	28%
UNO Minda Ltd.	573	455	26%
Samvardhana Motherson International Ltd.	80	64	25%
Hero MotoCorp Ltd.	2,892	2,308	25%
TVS Motor Company Ltd.	1,305	1,047	25%
Motherson Sumi Wiring India Ltd.	58	47	23%
Bajaj Auto Ltd.	4,667	3,807	23%
Balkrishna Industries Ltd.	2,285	1,937	18%
Mahindra & Mahindra Ltd.	1,341	1,138	18%
Tube Investments of India Ltd.	2,884	2,495	16%
MRF Ltd.	96,389	83,603	15%
Maruti Suzuki India Ltd.	9,489	8,275	15%
Cummins India Ltd.	1,751	1,584	11%

Source: Equitymaster

And this growth doesn't look to be slowing down either, with benchmark indices Sensex and Nifty riding on bullish sentiment.

Force Motors is one such auto company from the lot which has delivered substantial gains. Let's find out the reasons driving the growth.

Why Force Motors share price is rising

#1 Strong Q4 show

Last week on Tuesday, shares of Force Motors were locked in the 20% upper circuit limit after the company reported its Q4 earnings.

The commercial vehicle maker posted a consolidated net profit of Rs 1.5 billion (bn) for the quarter ended March 2023 as against a loss of Rs 427 million (m) in the year ago quarter. The company had reported a loss of Rs 155.7 m in the December quarter.

The company was back in the black as revenue surged 70% to Rs 14.9 bn. It also reported an exceptional income as part of the government's scheme.

Exceptional income of Rs 3.1 bn was part of the Madhya Pradesh state government's Industrial Investment Promotion Assistance Scheme, 2010, recognised on the basis of sanction orders received.

The company's operating margins improved on the back of price hikes taken besides some cooling down of key raw material prices like steel.

For the full year, the company achieved the highest ever revenue and EBITDA. It also crossed a turnover of Rs 50 bn for the first time.

#2 Sectoral effect

For the past couple of months, robust auto sales have sent auto stocks piggybacking on the already bullish market.

The buoyancy could be attributed to both a positive market environment as well as an individual company's improved performance during the March quarter.

In FY23, passenger vehicle sales rose 27% YoY. Sales grew to a record 3.9 m units. Leading auto companies are seeing strong demand in terms of enquiries and bookings.

Also, the auto sector's fortunes are closely linked to the economy. We've already written a lot about the government's continued focus on infrastructure spending.

#3 Improvement in market share

Force Motors is currently placed third in the two-wheeler maker space. As the company focusses on niche segments, it has maintained its market share. In fact, the company has increased its market share to over 16% in the electric 2-wheeler space.

It has raced past Hero MotoCorp in market cap gains. Hero MotoCorp is the largest 2-wheeler maker.

What next?

Market participants are now awaiting monthly sales numbers for May 2023.

The company lined up new models in the past one year and it turned out pretty well. The company is looking to do the same for the next few quarters.

Going forward, the company's management has guided for strong demand at least till the festive period in October 2023.

From a valuation perspective, the swift rise in the price seems to have made the stock richly valued from a medium-term perspective. Both from the perspective of book value and earnings power.

How Force Motors share price has moved recently

On a YTD basis, Force Motors share price is up 39%.

In the past one year, it has gained 83%. In the past five days, the share price has gone up by 14%.

Force Motors has a 52-week high of Rs 1,965 touched today and a 52-week low of Rs 919 touched on 20 June 2022.

Have a look at the table below to compare Force Motors with its peers.

Comparative Analysis

Company	Ashok Leyland	Force Motors	Tata Motors
ROE (%)	15.8	-5.1	5.2
ROCE (%)	15.5	-3.4	9.9
Latest EPS (Rs)	4.2	101.4	7.3
TTM PE (x)	34.6	19.0	73.7
TTM Price to book (x)	5.0	1.4	3.9
Dividend yield (%)	1.8	0.5	0.4
Industry PE	58.0
Industry PB	4.0

Data Source: Ace Equity

About Force Motors

Established in 1958, Force Motors is the flagship company of the Abhay Firodia group.

The company is a fully vertically integrated manufacturer of small and light commercial vehicles (CVs), multi-utility vehicles, and agricultural tractors.

Under the auto components division, the company assembles engines for Mercedes-Benz India and BMW India.

The primary brands in LCVs and multi-utility vehicles include Traveller, Trax, Gurkha, and Shaktiman, The brands in tractors are Balwan, Orchard, Abhiman, and Sanman.

The holding company of the group owns a 57.4% stake in Force Motors and has stakes in several Bajaj group of companies.

To know more, check out the company's financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...