At CMP of Rs.531.95, the stock trades at 7.8x FY15E EPS and 6.9x its FY16E EPS, which looks attractive. We believe higher demand, better margins and improving macro-economic scenario, would lead to FML’s better performance in the foreseeable future.

1. Eastern Financiers Ltd.
1
Eastern Financiers Ltd.
Force Motors Ltd.
July 28th , 2014
Key Data
INDUSTRY Automobiles
No. of Shares (Crs) 1.32
Face value 10.00
Mkt. Cap (Rs. Crore) 700.91
BSE Price (25/07/2014) 531.95
Book Value (Rs) 931.74
P/BV 0.57
BSE Code 500033
NSE Symbol Not Listed
Bloomberg FML IN
Reuters FORC.BO
Volume (Weekly) (BSE) 181738
52 W H/L (Rs.)(BSE) 625 / 225
Shareholding Pattern
(As on 30-Jun-2014)
Categories %
Promoters 56.54
Domestic Institutions 0.26
Foreign Institutions 5.73
Bodies Corporate 18.90
Others 18.57
Total 100
Recommendation
BUY
Company Background
Force Motors Ltd (FML) is a fully integrated Company with expertise in design
development and manufacture of the full spectrum of automotive components,
aggregates and vehicles. The Company has 2 plants – one at Akurdi and other at
Pithampur. FML operates in 5 broad segments – small commercial vehicles (SCV);
light commercial vehicles (LCV); multi utility vehicles (MUV); heavy commercial
vehicles (HCV), and tractors. Formerly known as Bajaj Tempo Limited, FML
manufactures its own engines, chassis, gear boxes, axles, and bodies for its entire
product range. Its product offerings include travelers, trump, trax and tractors.
Highlights
 Force Motor’s major revenue contributor the Traveller range is popular
among its customers, mainly for its monocoque structure. Recently launched
Traveller 26 too has received positive response due to its superior
technology. Traveller is likely to maintain its contribution to the Company's
topline growth in the near future.
 FML has a finance subsidiary Tempo Finance (W) Pvt. Ltd. to finance vehicles.
Going forward this will also help in adding to the bottomline.
 The Company has tie up with German auto giant Daimler AG for developing
high-end multi-purpose vehicle (MPV) based on Mercedes-Benz Viano.
 For June 2014, the Company saw 165% rise in gross export sales over the
previous month. Export sales in June stood at Rs.18.18 cr compared to Rs.6.85
cr in May. Domestic sales during the same period were higher by 1.3% from
previous month while production saw 10.3% increase.
 FML will continue to benefit from the excise duty concessions on automobiles
which Union Budget 2014-15 extended till the end of 2014, as lower taxes
will help keep demand for vehicles firm.
 FML has a strong balance sheet. As of FY14 the Company has a book value of
Rs.931.74. It is a zero debt company and has a cash balance of Rs. 216.09 cr.
 The Company reported strong set of numbers for the quarter ended 30th June
2014. While topline grew by 8.31%, bottomline grew by 35.9% yoy due to
margin expansion and growth in other income. Q1 FY15 net profit stood at
Rs.19.40 cr vs Rs. 14.27 cr in Q1 FY14.
 At CMP of Rs.531.95, the stock trades at 7.8x FY15E EPS and 6.9x its FY16E
EPS, which looks attractive. We believe higher demand, better margins and
improving macro-economic scenario, would lead to FML’s better performance
in the foreseeable future. We recommend a “BUY” on the stock with a price
target of Rs 770, assuming a P/E of 10x FY16E earnings, an upside of 45%,
over a period of 9 to 12 months.
(Fig in Rs. Crores)
Particulars Q1 FY15 Q1 FY14 % VAR. FY12 FY13 FY14 FY15E FY16E
Net Sales 538.42 497.13 8.31 2085.01 1972.72 1997.89 2123.92 2275.15
Other Income 11.99 6.10 96.60 24.60 43.65 59.94 64.14 70.55
Operating Profit 48.54 38.64 25.61 121.50 53.88 96.71 148.67 182.01
Profit After Tax 19.40 14.27 35.90 824.33* 14.28 77.70 89.67 101.68
EPS 14.72 10.83 35.92 625.62* 10.84 58.97 68.04 77.15
Op. Profit Margin% 6.71 6.45 3.93 6.17 4.28 4.78 7.00 8.00
Net Profit Margin (%) 3.56 2.83 25.75 34.79 0.63 3.84 4.22 4.47
* Includes Exceptional Income of Rs. 960.71Cr

2. Eastern Financiers Ltd.
2
Eastern Financiers Ltd.
Force Motors Ltd.
July 28th , 2014
EASTERN FINANCIERS RESEARCH DESK
Rajesh Agarwal – Head of Research 033 – 4000 6823 rajesh.agarwal@easternfin.com
Sanjukta Majumdar – Sr. Research Analyst 033 – 4000 6824 sanjukta@easternfin.com
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