Expect Force Motors to go up 15-20% with improvement in volume growth: Avinnash Gorakssakar

In a chat with ET Now, Avinnash Gorakssakar, Head of Research at Mintdirect.com, shares his views on Force Motors. Excerpts:

ET Now: What is happening in Force Motors? Now that the Bajaj family is out of the way completely, large selling would probably not happen on the stock. But fundamentally, the kind of move that we have seen in Force Motors, is this justified? Are the earnings good enough?

Avinnash Gorakssakar: For the previous quarter - the first quarter of FY15 - they have done a remarkably good number, but the reason the stock is moving up is because we have been hearing reports that after a long time the management wants to ramp up its product portfolio quite aggressively and launch more products in the market.

For a very long time, this was fairly illiquid counter and the performance for Bajaj Tempo was erratic. Hence, I would say that hopefully if the numbers keep on improving and the way the CV market has emerged, they are strong in the two or three turner kind of vehicles. Even in the larger tonnage vehicle, they had a tie up with MAN which is now sold to the foreign collaborator.

Coming back to the number, I would say that a stock price of close to above four figure mark is possible. They have a very small equity base and have a good operating leverage. Thus in a scenario where volume growth improves by say 5 to 10 per cent, clearly with cost under control, this stock could possibly give another say 15-20 per cent.