Force Motors

It was a set of pretty disappointing numbers from Force Motors for Q3FY15. On a 8% (YoY) rise in net sales at Rs.512 crore, the company ended the quarter with a net profit of Rs.10 crore v/s loss of Rs.8 crore in Q3FY14. But this ‘turnaround’ had nothing to do with operational efficiency; it was on account of two things – firstly the hefty other income of Rs.13 crore and then tax write back to the tune of Rs.4 crore ( MAT + deferred tax).  Its operating cost at Rs.521 crore exceeded the total income earned at Rs.516 crore thus loss at gross level was a certainty – loss was at Rs.4 crore. Seasonally, it has been seen that Q3 is usually is a laggard.

During the quarter the company had a mixed sales performance with November being the laggard, showing a drop in both domestic as well as export sales. Compared to domestic sales of 2131 units in Dec, in November, it sold only 1849 and exports dropped were at 71 units v/s 223 units. Thus this one month’s poor show had an effect on the overall performance of the company in Q3. We had recommended this stock in August at Rs.684, projecting it to hit four digits mark over 12 months – the target was more than achieved within 6 months itself. It continues to remain a good long term buy.