Force Motors - 1QFY2013 Result Update - Angel Broking

Force Motors Ltd. (FML) reported poor set of numbers for 1QFY2013. The company's top line was 17.4% lower qoq and came in at Rs.505cr, which was 8.0% lower than our estimate of Rs.549cr. EBITDA declined by 36.0% sequentially to Rs.17cr, 38.6% lower than our estimate of Rs.28cr. EBITDA margin fell consecutively for second quarter and stood at 3.4%, 100 bps lower than previous quarter. Bottom line stood at Rs.10cr (aided by other income of Rs.12cr) 37.3% lower sequentially, vis-à-vis our estimate of Rs.13cr.

Restructured marketing workforce, new variant of Force One to drive growth FML has currently restructured its marketing and branding team. The company has recently appointed Mr. Naresh Rattan (ex. Marketing Head at Honda Motorcycles and Scooters India) as its Chief Operating Officer for the tractor business and as President of Corporate Sales and Marketing. Moreover, with substantial cash surplus in hand, FML is expected to invest considerable amount on the branding and marketing of its products. The company entered the personal transportation segment with Force One in October'11 and is planning to launch its new variant by September'12, which may assist the top line growth.

Outlook and valuation

We believe FML's recent entry into the SUV segment will enable it to post a top-line CAGR of 21.9% over FY2011-14E to Rs.2,765. FML is trading at an attractive PE of 6.0x and EV/Sales of 0.1x on FY2014E. We maintain our Buy rating on the stock with a target price of Rs.591, based on target PE of 8x and implied EV/Sales of 0.2x for FY2014E.

Source : Equity Bulls

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