The other candidates I am keenly looking at are few companies from auto sector. Lets talk about Force motors and maybe later PPAP Automotive.
Force motors: A company from Firodia group, frankly speaking the company has rich history, of copying things from the west, there are couple of videos on youtube, which tells you very nicely about the history of the company. The good thing I like about them is “If you want to fail, fail fast”. Company came out with SUV Force one, which did not receive quite good response and the shop was shut for it. Then they made Gurkha(old), which was okayish but then they stopped that too due to muted response. Then they launched new Gurkha SUV, which honestly I have received good reviews from people. Needless to say they do not have any competetive advantage, neither scale nor R and D. But they clearly are market leaders in terms of shared mobility vehicle like Tempo traveller, ambulance and are not afraid of throwing things against the wall at a small scale. Recently they came up with force urbania. Which what I have heard is a better version of tempo traveller. Many reviews video are there on youtube too.
On top of that they make engines for BMW and Mercedes in India, and have been doing that from a very long time now. Auto is a cyclical sector. The worst as we now see is behind these companies. The company was posting loss since last year, however recently showed profits in recent quarter, with cost of raw materials coming down as we go in high int rate scenario. I think coming quarters must be good and the stock price can also see a recovery.
The average OPM seems to be around 6-7 percent, in good times they go upto 9 percent and in bad times around 3 percent. Clearly the OPM have recovered from the low of 2 percent post covid and are now at 3 percent.
Last time they were 3 percent was in 2013, post which stock made a low and went up 15-18X within a span of 3-4 years.
Also another interesting data point is that its realisation per vehicle(TOTAL SALES/VEHICLES SOLD) has gone from 3lakh per vehicle to 15lakh per vehicle in last 10 years which is a very clear trend.
Lets see where things go from here on, I think the risk reward ratio is favourable here.