automobile industry analysis jitendra shekhar
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A N A LY S I S O F I N D I A N A U T O M O B I L E I N D U S T R Y
MRP Topic
Presenter
J I T E N D R A K U M A R
Presented to
P R O F. D E E PA K V I N AYA K U K I D A V E
Agenda
1. Overview
2. Objective of the Project
3. Analysis of Indian Automobile Industry
4. Fundamental Analysis
Economy
Industry
Company
- Financial & Non-Financial
5. Conclusion
6. References
Agenda:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Overview
Indian automobile industry has grown leaps and bounds since 1898,
a time when a car had touched the Indian streets for the first time.
At present it holds a promising ninth position in the entire world with
being # 1 in Two Wheelers and # 4 in commercial vehicles.
Withstanding a growth rate of 13% per annum and an annual
production of more than 2 million units, it may not be an exaggeration
to say that this industry in the coming years will soon touch a figure of
10 million units per year.
It is expected that the Automobile Industry in India would be the 7th
largest automobile market within the year 2016.
Overview:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
The objective of this project is deeply analyzing our Indian Automobile
Industry for investment purpose by monitoring the growth rate and
performance on the basis of historical data.
The main objectives of the Project study are:
Detailed analysis of Automobile industry which is gearing towards
international standards
Analyze the impact of qualitative factors on industry’s and
company’s prospects
Comparative analysis of two tough competitors TATA Motors and
Maruti Suzuki
Application of various Technical Tools and Fundamental tools (like
Financial and Non-financial statements).
Objective
OBJECTIVE OF THE PROJECT:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
India has become a hub of domestic and exports business. The
automobile sector has been contributing its share to the shining
economic performance of India in the recent years.
To understand this industry for the purpose of investment we need to
analyze it by following two approaches:
1). Fundamental Analysis (E.I.C Approach)
a. Economy
b. Industry
c. Company
2).Technical Analysis
Analysis
ANALYSIS OF AUTOMOBILE INDUSTRY:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
GDP and Automobile Industry:In absolute terms, India is 16th in the world in terms of nominal factory output(its $1.22 trillion)Data source: World Bank, World Development Indicators November 20, 2009
Fundamental Analysis
ECONOMY:
Data source: India central statistical organization
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
GDP and Automobile Industry:The per capita Income is near about Rs38,000 reflecting improvement in the living standards of an average Indian. Today, automobile sector in India is one of the key sectors of the economy in terms of the employment.
The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is near about 5% and will be double by 2016.
Fundamental Analysis
ECONOMY:
Data source: Google Finance
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Recession:
Global recession has hit the Indian auto industry, impact of recession is
evident now on industry as sales & growth of automobile companies have
declined. Passenger Vehicles segment registered negative growth.
In December 2008, overall production fell by 22 % over the same month
last year.
The sales in December 2008 for passenger vehicles fell by 13.86% over
December 2007.
Two Wheelers registered minor growth of 1.85 % during April –
December 2008.
Although the sector was hit by economic slowdown, overall production
increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles
in 2008-09.
Fundamental Analysis
ECONOMY:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
FDI’s:
In India FDI up to 100 percent, has been permitted under automatic
route to this sector, which has led to a turnover of USD 12 billion in
the Indian auto industry and USD 3 billion in the auto parts
industry.
the Investment Commission has set a target of attracting foreign
investment worth US$ 5 billion for the next seven years to increase
India's share in the global auto components market from the
existing 0.9 per cent to 2.5 per cent by 2015.
FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an
increase of 47.25% compare to 2007-08, while in April-May 2009 it
was around Rs.497 Cr.
Fundamental Analysis
ECONOMY:
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Foreign Exchange:
India holds the third largest stock of reserves among the emerging
market economies after China and Russia.
Increase in Exports especially from auto industry shows an
expectation of huge income from western countries and new $200
bl. target for exports by 2011 helps in increasing.
Fundamental Analysis
ECONOMY:
Data Source:http://www.rbi.org.in
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Segmentation of Automobile Industry:
The automobile industry comprises of Heavy vehicles (trucks, buses,
tempos, tractors); passenger cars; Two-wheelers; Commercial Vehicles;
and Three-wheelers.
Industry Analysis
Industry Analysis:
Data Source:http://www.autoindia.com/
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Export Analysis
Automobile Export:
2003-03
2003-04
2005-06
2006-07
2007-08
2008-09
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
Passenger VehiclesCommercial VehiclesThree WheelersTwo WheelersGrand Total
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Industry BCG Matrix
Banking & InsuranceBanking & Insurance
AUTOMOBILESAUTOMOBILES
SoftwareSoftware
FMCGFMCG
TelecomTelecom
RetailRetail
Textile Textile
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Five Forces Analysis
Automobile Industry
Rivalry among Competitors :>Rivalry in the Indian auto sector is intense due to the entry of foreign companies in the market.>Product being matched in a few months by the competitors
Threat of substitutes:>The threat of substitutes to the automotive industry is fairly mild. >The switching cost may be high in terms of personal time, convenience and utility.
Bargaining Power of Suppliers:>The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers.
Barriers to entry :>Regulatory framework>The startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive.
Buyer/Customer Power :>Buyer is having bargaining power due to low switching costs associated with selecting from among competing brands.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
SWOT Analysis
Strengths:Large domestic marketSustainable labor cost advantageCompetitive auto component vendor baseGovernment incentives for manufacturing plantsStrong engineering skills in design etc
Weaknesses:Low labor productivityHigh interest costs and high overheads make the production uncompetitiveVarious forms of taxes push up the cost of productionLow investment in Research and DevelopmentInfrastructure bottleneck
Opportunities:Commercial vehicles: SC ban on overloadingHeavy thrust on mining and construction activityIncrease in the income levelCut in excise dutiesRising rural demand
Threats:Rising input costsRising interest ratesCut throat competition
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
5 Years BSE Auto INDEX
Source: BSE Historical Data
In 2003 when major giants got listed on stock exchange TATA Motors,
Maruti Suzuki, etc. Indian auto industry start picking up growth slowly.
During year 2007on year we saw a up and down movement in the index
as lots of new players came in Indian market with foreign collaboration.
2008 came with global slowdown it brings the demand of automobile so
low that index reaches to its lowest in past 5year.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Company ANALYSIS
Profile of Maruti Suzuki:
Maruti Suzuki is one of India's leading automobile manufacturers
and the market leader in the car segment, both in terms of volume of
vehicles sold and revenue earned.
Until recently, 18.28% of the company was owned by the Indian
government, and 54.2% by Suzuki of Japan. As of May 10, 2007, Govt.
of India sold its complete share to Indian financial institutions.
The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million &
Profit After Tax at Rs. 12,187ml.
Source: Annual report 2009 Maruti Suzuki India
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Company ANALYSIS
Profile of Tata Motors:
Tata Motors Limited is India’s largest automobile company, reported
gross revenue (stand-alone) of Rs.28599.27 crores (2007-08:
Rs.33093.93 crores) in 2008-09, a year marked by severe demand
contraction in the automobile industry.
The Profit before Tax was Rs.1013.76 crores compared to Rs.2576.47
crores in 2007-08, a decline of 60.7%.
The Profit after Tax for the year was Rs.1001.26 crores compared to
Rs.2028.92 crores, a decline of 50.7%.
It is the leader in commercial vehicles in each segment, and among
the top three in passenger vehicles with winning products in the
compact, midsize car and utility vehicle segments.
The company is the world’s fourth largest truck manufacturer, and
the world’s second largest bus manufacturer.
Source: Annual report 2009 TATA Motors
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
mar'09 mar'08 mar'07 mar'06 mar'050
10
20
30
40
50
60
EARNING PER SHARE
TATAMARUTI
year
RS.
Till 2008 both the companies had a rising EPS but in 2009 both of them
fall and the effect more on Tata motors as they bought two brands Ford
Motors and fall in sales results in low EPS. But as trend shows TATA
motors have potential so an shareholder expect better in future.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
The trend shows that Tata’s net profit margin is quite stable until it falls
to 3.77 in 2009. While the net profit of India’s no.1 car manufacturer
Maruti Suzuki shows a negative trend from 2007 onwards. But the
future prospect for both the company’s profit is higher. Profit margins
come down as recession hits economy badly hence sales get reduced
and cost get increased very much.
mar'09 mar'08 mar'07 mar'06 mar'050
2
4
6
8
10
12
NET PROFIT
TATAMARUTI
year
%
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
Both giants of Automobile industry shows positive trend in Sales
Revenue over the past 5year. However recession brought hurdles but
both companies have potential to grow in future as lots of products are
still to add in their portfolio. Moreover increased demand in foreign
market also seems to be a positive signal for better future.
mar'09 mar'08 mar'07 mar'06 mar'050.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
SALES
TATAMARUTI
year
Rs in
cror
es
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
Maruti is always showing a positive trend as its ratio is always greater
than 1 except in 2008, while TATA motors was doing good till 2007, but
the performance decreased from 2008 onwards as shortage of cash was
there and current liabilities and provision increased by Rs800Cr.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
We see that the debt–equity ratio of TATA motors is very high
compared to that of Maruti. It means that a lot of debt is used by TATA’s
to finance its increased operations.
mar'09 mar'08 mar'07 mar'06 mar'050
0.1
0.2
0.3
0.4
0.5
0.6
DEBT-EQUITY RATIO
TATAMARUTI
year
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
Both the companies possess a good ratio but the ratio which is close to
2 is desirable, so we see in graph that Maruti has more strong liquidity
than TATA Motors as its current ratio is always greater than 1. Maruti is
more successful in paying off its liabilities. Expansion plans of TATA
brought down its cash & Bank Balance and increase of outside
liabilities.
mar'09 mar'08 mar'07 mar'06 mar'050
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
CURRENT RATIO
TATAMARUTI
year
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Financial ANALYSIS
According to graph TATA’s dividend was much higher than that of
Maruti, it always provided dividend of above 10 per share to its
shareholders while maruti stick to below 5 per share, even though the
fall in dividend in 2009, still both the companies are earning good
profit.
mar'09 mar'08 mar'07 mar'06 mar'050
2
4
6
8
10
12
14
16
DIVIDEND PER SHARE
TATAMARUTI
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
OverviewShare Holding Pattern for Quarter Ended 30-Oct-09
indian pro-moters, 41 %
institutional buyers, 27 %
oter investors, 21% general public, 11%
Share Holding pattern of TATA MOTORS
foreign promoters institutional buyers oter investors general public
Indian promoter share in the company is 41%, Company has already raised huge money by selling their large stake to institutional investors about 27%.General Public also have quite large stake in the company compare to its competitors.
Non-Financial ANALYSIS
Non-Financial ANALYSIS
Being a venture of Japanese company Suzuki big stake of the company
is held by foreign promoters which shows that they can divest their
part(small part) to raise money in future. However institutional
investors also held 39% major stake in the company but general public
have very small part which shows that less presence of share in the
secondary market hence low volume trading in stock market.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
OverviewShare Holding Pattern for Quarter Ended 30-Oct-09
53%39%
6%
2%
Share Holding pattern of Maruti Suzukiforeign promoters institutional buyers oter investors general public
Upcoming Ventures & Products
Tata Motors have announced that they are interested in the idea of designing electric cars. To take it a step further Tata has also initialized plans for the manufacture of a hybrid car which it will market with Chrysler in the U.S.
After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The company hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012.
Tata Motors, is now aiming to launch its cars in Indonesia and is also planning to sell Nano in South America with the help of Fiat.
After launching the world’s cheapest car, Nano, Tata Motors is looking east, towards neighboring Myanmar to boost its sales by setting up a truck manufacturing plant.
As part of its expansion plans in Southeast Asia, Tata Motors had inked a joint venture with Thailand’s Thonburi Auto Assembly’s to manufacture up to 35,000 one tone pickup trucks a year over the next 3-5 years.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
OverviewTATA Motors
Upcoming Ventures & Products
Maruti Suzuki has expanded the capacity at its Manesar plant to 1.7 lakhs unit per annum from January 2009. By the year 2010, Suzuki Motors plan to increase their dealership in India.
As Maruti Suzuki eyes one million sales by 2010, they have firmed up a massive expansion plan of its service network and plans to expand it to 1700 towns and cities from the current of about 1200.
They have also been coming with specific sales promotion programmes targeted at anterior regions, among them is the “Mera Sapna Meri Maruti: New Panchayati Scheme”.
The Haryana government has allotted 700 acres of land to Maruti Suzuki for hi – tech Research & Development complex at Rohtak. The upcoming facility, will see an investment in the range of Rs. 1,000 cr. to 1,500 cr. And will introduce world class R&D facilities into India.
In a move ahead, Maruti Suzuki India limited launched the Estilo with all new overall looks and advanced technological features.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
OverviewMaruti Suzuki
Govt. Policies
Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority foreign equity ownership.
Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted.
FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per cent of the paid-up equity capital of the investee company.
Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15,000 rupees per vehicle from 20,000 rupees earlier.
The Proposal by the Govt. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products, as this will surely had an impact on the Automobile Industry.
The announced reduction on the basic customs on bio-diesel is great news for all companies working on environmental saving technologies.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Technical Analysis
GOAL: The goal is to predict probable often short-term price changes in the investments, which allows investors to choose an appropriate trading strategy.
Implication of DOW THEORY
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
1. 1st Tenet Uptrends Downtrends Corrections2. 2nd Tenet Accumulation Public Participation Excess3. 3rd Tenet Market counts all the information and quickly reflected into the price of an asset4. 4th Tenet
The averages must confirm each other that mean that the performance of related industries should move in one direction for the health of a particular industry. When the performances diverge, it is warning that change is in the air.
Source:Googlefinance.com
Technical Analysis
Implication of DOW THEORY
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Tenet five:Trends are confirmed by volume. In case of Tata motors, when the people stopped investing during recession, prices went down and after recession, when people came back to the market, prices also increased.
Source:Googlefinance.com
Technical Analysis
Resistance & Support Level
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
This Technical tool helps in finding the future price band of the share on the basis of past high and low levels made by a particular script. Resistance Level shows the price above which share price will not move in normal case.
Maruti Suzuki
Resistance Level
Rs.1425 approx.
Support level
RS.1275 approx.
Resistance Level
Rs.490 approx.
Support Level
Rs.430 approx.
TATA Motors
Technical Analysis
Simple Moving Average (50 periods)-Medium Term
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
TATA Motors
Maruti Suzuki
Technical Analysis
TATA MOTORS MACD
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
OverboughtOverboughtOversoldOversold
Sell PositionSell Position
Buy PositionBuy Position
Above graph shows the MACD of TATA motors for the period of 6 months. The MACD is the difference between a 26-day and 12-day exponential moving average. A 9-day exponential moving average(EMA), called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. here are three popular ways to use the MACD: crossovers, overbought/oversold, and divergences.
Technical Analysis
MARTUTI SUZUKI MACD
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
OversoldOversold
OverboughtOverbought
Raw Data Source: BSE
Technical Analysis
MARTUTI SUZUKIEconomy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Moving Average Crossover
No Sell Position or Always Position of BuyNo Sell Position or Always Position of Buy
Buy Buy
Raw Data Source: BSE
Technical Analysis
TATA Motors
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
OverviewBOLLINGER BANDBollinger bands are used to measure a market’s volatility. Basically, this little tool tells us whether the market is quiet or LOUD! When the market is quiet, the bands contract; and when the market is LOUD, the bands expand
Raw Data Source: BSE
Technical Analysis
Maruti SuzukiEconomy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview BOLLINGER BAND
Raw Data Source: BSE
Conclusion
Indian Automobile has a lot of scope for both two wheelers and four wheelers due to development in infrastructure of the country and especially the rural sector in which demand of two wheeler has increased even in recession.
According to Indian Statistical Organization the per capita income (Rs.38000) is increasing and national income at the rate of 14.4% which shows potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fast that by 2016 Indian Industry will be world 7 largest manufacturer in all sections.
The Indian auto market is still untapped the majority of the people in country don’t own a four wheeler and all the major auto companies are trying to increase their sales by several moves. Like TATA has launch NANO the people’s car and now TATA motors is also planning to come out with an electric car as well as hybrid car, moreover in two wheeler segments many companies like Mahindra and Mahindra grow even more than expectations. .
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Conclusion Contd…
By analyzing the current trend of Indian Economy and Automobile Industry I can say that being a developing economy there is lot of scope for growth and this industry still have to cross many levels so there is huge opportunities to invest in and this is proving as more and more foreign Companies setting up there ventures in India.
From the Technical Analysis of both companies it has been found that the share price of Maruti will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range of Rs. 430 to Rs. 490 if certain correction made in the market.
It has also been found that share price movement of TATA Motors is just according to the movement of SENSEX, whenever there is a negative sentiment in the market regarding TATA Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery in its share prices to regain its primary trend e.g In last 3-4 months TATA recovers approx.90% after downfall.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Recommendations
Industry has a lot of potential to grow in future. So, I recommend investing in Automobile Sector. There is no doubt that it is going to be a good and smart investment decision because the industry is booming like never before.
Investing in Maruti Suzuki for a long time could be a good decision whereas in TATA motors there is a chance of getting correction, as it already went on high side in a very short span of time, so holding the shares for a long time could be a wrong step. At this point of time those who invested earlier can book their profit or new investors can buy now and sell within a short period of time after earning profits.
The recent returns from the industry were very impressive; TATA motors recorded 90% of return in previous quarter while Maruti Suzuki showed always a buy and hold position due to good future prospect, and two wheeler segment also performed equally well. Through Technical analysis I found that there is scope of further rise in the Maruti shares prices until and unless any negative reaction or sentiments arises in the Economy. Thus, it is recommended that investors should hold the position or buy more shares.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Impact of Union Budget 2010-11 On Auto Sec.
The auto sector has seen significant rise in sales and the 22% rise in sales
for April-December 2009 period over the previous year.
The partial roll back of stimulus measures is anticipated very much
and so, the rise in excise duty from 8 to 10% across board and from 20%
to 22% for SUVs and MUVs has already been priced in the stock prices.
The hike in excise duty on petrol and diesel may weigh negative on the
auto industry as such. But the rise in disposable income for the consumer is
expected to more than compensate for the above negative factors as the
demand for passenger vehicles and two wheelers rises.
Neutral for stocks like Ashok Leyland, Mahindra & Mahindra.
Positive for stocks like Hero Honda, Bajaj, Maruti.
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
References
Books: Auto Drive MagazineAccounting for Managers: By John J. GlynnReference Materials:The Economic TimesMaruti Suzuki Annual ReportTata Motors Annual ReportRBI annual reportASSOCHAM reportIndia Central Statistical Organization Websites:http://www.googlefinance.comhttp://www.autocarindia.comhttp://www.wheelsunplugged.com http://www.assocham.orghttp://www.wikipedia.comhttp://www.rbi.org.in Search Engines:www.google.com www.yahoo.comwww.bing.com
Economy Analysis
Industry Analysis
Company Analysis
Conclusion
References
Objective
Overview
Regards!J i t e n d r a
Thank You Sir!!!
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