fundamental analysis (2)

8/14/2019 Fundamental Analysis (2)

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FUTURE OF INDIAN ECONOMY

India is among the world's youngest nations with a median age of 25 years

India has the second largest area of arable land in the world, making it one of the world'slargest food producers - over 200 million tonnes of foodgrains are produced annually.

With the largest number of listed companies -10,000 across 23 stock exchanges,

India's healthy banking system with a network of 70,000 branches is among the largest inthe world

According to a study by the McKinsey Global Institute (MGI), India's consumer marketwill be the world's fifth largest (from twelfth) in the world by 2025

Topic: Fundamental AnalysisSubmitted By: Shankar KumarSubmitted To: Prof. N. N. PandeyEnrollment No: 208250 (B1) SIMS GHAZIABAD Date:19/09/09

FUNDAMENTAL ANALYSIS


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Economy Analysis

2006-07 2007-08

Foreign exchange reserve($) 247.76 309.72

FII ($) 10.3 16.1

FDI ($) 15.7 24.57

The indian economy grew at 9.6 percent in 2006-07 and 9 percent in emerging as the secondfastest growing major economy in the world.

POSITION OF INDIA



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GDP GROWTH RATE

After economy slowdown the GDP growth rate is now increasing and is 6.5 from 6.1.So, in near future the growth rate will again be improve further which is good forinvestors.

INFLATION RATE



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Inflation rate in 2009 went up to negative but now its improving and came back in

positive. We can expect that till 2010 it will be around 4-5% which is good for our

economy.

Central stastical org.

Per capita income has been increased by Rs. 4207 over last year. So we can say that the

purchasing power of people will also increase. If purchasing power will increase than

there will be demand for goods and service and it will force the producer to produce the

goods and service. So the GDP rate will increase and there will be good condition for

investment in future.



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INVESTMENT IN FIXED ASSETS % OF GDP

This graph is showing that it is increasing year after year.

CONCLUSION



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ECONOMY WILL BE GOOD FOR INVESTMENT IN 1-2 YEAR


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Industrial production rate

(Annual percentage increase in industrial production (includes manufacturing, mining, andconstruction).


INDUSTRY ANALYSIS


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Industry wise Growth Rates of Select Performance Indicatorsover the Quarters of 2008-09

(Percent)Sales Expenditure

Industry / industry group Number ofcompanies

Q1 Q2 Q3 Q4 Q1

Q2 Q3 Q4

1 2 3 4 5 6 7 8 9 10

1. 1 Tea

plantation

25 25.8 35.2 24.9 14.2 22.4 29.9 29.3 21.9

2. Mining &

quarrying

35 67.7 41.5 17.7 -11.5 31.5 31.9 31.2 20.1

3. Textiles 270 20 15.1 5.3 .7 20.4 16 5.4 1.7

4. Paper &

paper

products

38 6.9 24.7 16.1 5.3 8.6 27.1 25.3 3.2


Q1


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5. Pharmaceuti

cals &

Medicines

116 24.6 16.8 11.4 11 24.6 20.8 20.7 6.8

6. Cement &

cement

products

38 13.3 17.3 13.2 17.9 24.4 28.3 23.5 13.5

7. Iron & Steel 117 44 48.1 -1.2 -1.4 45.6 55 11.7 -4.7

8. Construction 73 48.3 41.1 33.3 23.7 47.2 40 37 22.5

9. Computer &

related

activities

179 22.9 24.4 18.8 7.5 26.1 22.2 17.4 7.7

10

.

Petroleum

refinery

15 68.4 79.8 15 -5 97.8 93.8 7.3 -10.3

Sales performance of cement industry has increased in last quarter and it is maintaining aconsistent performance quarter after quarter.

Industry wise Growth Rates of Select Performance Indicatorsover the Quarters of 2008-09 (Concld.)

Gross profits Expenditure

Industry / industry group Number of

companies

Q1 Q2 Q3 Q4 Q

Q

Q2 Q3 Q4

1 2 11 12 13 14 15 16 17 18

1. Tea 25 7.6 34.9 2.5 $ -18.5 30.9 -0.1 $


Q1


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plantation

2. Mining &

quarrying

35 183.2 91.5 -13.9 -44.8 225.4 98.5 -19.6 -51.3

3. Textiles 270 -19 -20.6 -62.8 -20 -63 -70.3 $ $

4. Paper &

paper

products

38 -11.4 2.1 -8.1 -8.4 -22.3 -15.7 -25.7 -11.4

5. Pharmaceu

ticals &

Medicines

116 3.6 -2.4 -27.3 30.6 -10.6 -33.8 -76.2 -26.3

6. Cement &

cement

products

38 -9.2 -16.6 -12.5 12.1 -18.7 -22.2 -16.5 9.4

7. Iron &

Steel

117 34.4 36.6 -77.5 -43.5 27.9 25.8 $ -54

8. Constructio

n

73 32.4 35.5 15.4 20.5 38 26.7 62 1.6

9. Computer

& related

activities

179 8.7 10.6 3.8 4.7 -2.1 7.9 -5.7 9.2

10. Petroleum

refinery

15 14.2 17.8 -9.3 21 14.3 8.5 -71.5 6.4

Due to economy slowdown the performance of every industries were not good but cementindustry came back with a great rate in the last quarter along with construction.

Percentage change in sales over the quarters of 2008-09(major industry-wise)



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With the help of this chart we can analyze that only cement industry is that sector

whose sales performance is improving. So we can say that market demand is there

for still and in near future demand for cement will increase.

So according to me cement industry is good industry for investment in next 1-2

years.

Percentage change in net profits over the quarters of 2008-09

(Major industry-wise)

Here we can say from this chart that only cement is that industry whose net profit is

increasing and standing on the first rank with the percentage change 9.4%.



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Sectoral contribution to India INC sales (June 09)

In general terms, India will continue to be one of the more attractive emerging markets. This isowing to the resilience of the Indian economy during this downturn. The fact that valuations are

in line with other key emerging markets, and because the Indian market provides a large

spectrum of stocks & sectors where the global investors can invest.

Thus from a macro perspective, I am positive about the Indian markets. I will not want to focus

on the short - term trends in the Indian economy too much, because in short - term a lot will

depend on how the monsoon plays out and how the recovery across the world shapes up.

I will continue to focus on the more structural aspects of the Indian economy which are likely to

play out over the next few years. Because of:

Positive demographics

Increasing infrastructural spending by government Increasing consumption level

Increasing rural prosperity



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And likelihood of Indian economy being a relatively

impressive performer on the world stage.

CONCLUSION


FRASTRUCTURE INDUSTRY WILL BE THE MOST GROWING SECTOR IN


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Performance of Basic Infrastructure IndustriesYear on Year growth (%)

PRODUCTION IN INFRASTRUCTURE INDUSTRIES


SCOPE FOR INFRASTRUCTURE INDUSTRIES


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December April- December % Change

Industry/Infrastructur

e

Unit 2007 2008 2007-08 2008-09 2007-

08

2008

Coal Mn

tonnes

42.81 46.82 305.75 336.52 3.5 10.1

Electricity Generation in Gwh 59236.

1

59630.6 525935.

2

539443.

1

6.6 2.6

Crude petroleum 000

tonnes

2882 2874 25570 25430 0.3 -0.5

Petroleum Products 000

tonnes

12140 12509 107979 112019 7.5 3.7

Finished steel 000

tonnes

4479 4443 38844 39897 6.4 2.7

Cement 000

tonnes

14630 16320 126830 135700 7.7 7.0

Overall growth rate 3.2 2.3 - - 5.9 3.5

During April- December 2008-09, six core infrastructure industries registered a growth of 3.5percent (provisional) as against 5.9 per cent during the corresponding period of the Previousyear.



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The above graph is showing that the production of COAL has increased at a greatest

pace and rest are decreasing with a major changes but only cement is having a

small change in production. So we can say that cement is still in demand.


PRODUCTION IN INFRASTRUCTURE INDUSTRIES

June April--June June %

Change

Industry/Infrastructure Unit 2008 2009 2008-09 2009-10 2008 2009



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Coal Mn

tonnes

34.19 39.22 105.50 118.90 6.1 14.7

Electricity Generation in Gwh 58533.

7

62645.5 179377.

4

189700.

8

2.6 7.0

Crude petroleum 000tonnes

2645 2752 8371 8265 -4.7 4.0

Petroleum Products 000

tonnes

12695 12230 37245 35701 5.6 -3.7

Finished steel 000

tonnes

4503 4742 13124 13542 10.4 5.3

Cement 000

tonnes

15160 17100 46070 51651 6.6 12.8

Overall growth rate - - - - 5.1 6.5

Performance of Basic Infrastructure Industries

Year on Year growth (%)



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Despite concerns on slowdown leading to excess supply pressure, the 224-million tonne cementindustry has surprisingly shown strong growth in the last six months, after having reporteddismal growth till October 2008. Cement dispatches grew by 8-10% in the last five consecutivemonths till May 2009. After a strong revival in cement dispatches, the momentum continued in

the beginning of FY2010 as well. The growth in cement consumption was mainly on account ofhigher government spending on infrastructure projects and strong demand from personal homebuilding activity in rural and semi-urban areas, say industry players.

In line with volume growth, cement prices have also improved. On an all-India basis, cementprices have increased by Rs15-20 per 50 kg bag from February 2009 to April 2009.

The price hike is again on the back of strong demand arising from infrastructure projects,personal housing construction in rural and semi-urban areas and supply shortage in some areas.However, for May 2009, the prices have remained stable across the country.

Conclusion


NT INDUSTRY WILL BE THE MOST GROWING INDUSTRY AND WILL GO


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CEMENT INDUSTRY ANALYSIS

India is the worlds second largest producer of cement after China with industry capacity of over200 million tonnes (MT)

Total installed capacity was 204.29 MT as on August 31, 2008

Total dispatches have been 100.17 MT during AprilOctober 200809.

100.96 MT during AprilOctober 200809.

All India cement figures

yoy growth mom growth

Mn tons Sep-08 Sep-08 Aug-08 % % YTD08 YTD07 YOY

growth

(%)

Production 13.86 12.76 13.16 8.62 5.32 132.08 122.76 7.59Dispatches 13.87 12.65 13.19 9.64 5.16 131.86 122.37 7.76

Consumption 13.54 12.36 12.91 9.60 4.89 129.98 119.24 9.01



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Cap utization

(%)

81.43 88.49 77.30 _ _ 90.05 88.49 _

REBOUND IN CONSUMPTION GROWTH; CENTRAL AND SOUTHREGION OUTERFORM.

Indias cement consumption grew 9.6% yoy. South market witnessed strong demand supporting firm pricing (up 4.7% yoy) in the

region.

The key concern dips in construction and infrastructure activities in the country.



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SWOT ANALYSIS

STRENGTHS

Second largest in the world in terms of capacity

Low cost of production

WEAKNESS

Effect of global recession on Real Estate and Infrastructure.

Demand-Supply gap, Overcapacity

Increasing Cost of Production

High Interest rates

OPPORTUNITIES

Strong growth of economy in the long run.

Increase in infrastructure projects

Growing middle class

Technological Changes

Increase in government spending.

THREATS

Imports from Pakistan affecting markets in Northern India.

Excess over capacity can hurt margins as well as prices.



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COMPANY CHOOSEN ON THE BASIS OF MARKETCAPITALIZATION

ACCAMBUJA

ULTRATECHSHREE CEMENT


COMPANY ANALYSIS


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Market capitalization and P/E ratio (Jun. 09)

High Market capitalization means, any company whose Market capitalization is high thanthat company can survive in bad condition also. So this graph shows that Acc is havingmore market capitalization as well as higher price earnings ratio.

Sales performance (Rs/cr.)

Company Dec. 07 Dec. 08 June 08 June 09

Acc 5,285 5,477 2063.99 2,119.86

Ambuja 4,253 4,627 1,569.77 1,888.47

Ultratech 3,908 4,523 1,495.98 1,968.86

Shree cement 1,447 1,909 615.11 9,22.95



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Sales stability

The sales performance of every company is declining and again increasing. But we can observe

from this graph that the sales stability has been maintained only by ACC and others sales

performance are varying.

Profit (Rs./cr.)

Company Dec. 07 Dec. 08 Variation Jun. 08 Jun. 09 Variation

Acc 1058 847 -20% 271.42 485.62 78.92%

Ambuja 1203 1076 -10.5% 577.02 324.65 -43.74%

Ultratech 725 668 -7.9% 265.01 417.77 57.64%

Shree

cement

258 342 32.6% 110.9 291.13 162.52%

As this table is showing that the profit earned by the Shree cement is very well but itsmarket capitalization is so low that I cannot go for this company. So after Shree cementin the sense of profit only Acc is doing well.

GROSS PROFIT RATIO & NET PROFIT RATIO

Gross profit ratio



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A companys basic strength is its core business activity performance.

Gross profit = (Operating profit/Net Income) *100

Higher the gross profit ratio, better the performance of that company.

Net profit ratio

It identifies the earnings of the business.

Net profit ratio = (Net Profit/Net Income) * 100

Gross Ratio margin & Net Profit margin (%) for ACC



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Gross Ratio margin & Net Profit margin (%) for A mbuja

Gross Ratio margin & Net Profit margin (%) for Ultratech



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Gross Ratio margin & Net Profit margin (%) for Shree cement

CONCLUSION


AMBUJA IS GETTING MAXIMUM FROM ITS CORE BUSINESS SO THIS COMPANY IS PERFORMING


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Dividend by Acc

Dividend by Ambuja



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Dividend by Ultratech

Dividend by Shree cementTopic: Fundamental Analysis

Submitted By: Shankar KumarSubmitted To: Prof. N. N. PandeyEnrollment No: 208250 (B1) SIMS GHAZIABAD Date:19/09/09


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CONCLUSION FOR DIVIDEND

Quick Ratio (Acid Test Ratio)

This is one of the tool which is used to measure the liquidity of a company.

Quick Ratio = (quick assets/current liabilities)

Quick assets are the assets that can be easily converted into cash or cashequivalents. The current asset that is a major problem to business

enterprises is the INVENTORY. Inventory has to be converted into sales to

make it a cash equivalent.

A very low ratio indicates the short-term debt trap of a company and a very

high ratio compared to the industry standards indicates too much of asset

holding that do not yield high returns to the company.

Quick ratio (A cc)


PAID BY ACC IS MORE THAN OTHERS AND ALSO IN THE CONSIS


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Quick ratio (A mbuja)

Quick ratio (ultr a tech)



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Quick ratio (S hree cement)

CONCLUSION FOR QUICK RATIO

Debt Equity Ratio


Y ACC IS ABLE TO KEEP THIS RATIO LOW WHICH INDICATES TH


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This measures how much debt a company has compared to its equity. If this

ratio is 1, then the company still has the equity backup to borrow further. If

this ratio is more than 2, then it is considered as risky.

Acc Ltd.

Ambuja



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Ultratech

Shree cement



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Conclusion for D/E Ratio

Inventory turnover ratio

Company 2008 2007 2006 2005

Acc 24.85 22.40 17.69 12.29

Ambuja 11.13 17.19 9.55 9.07

Ultratech 31.16 34.61 21.20 11.04

Shree cement 28.34 15.74 11.14 20.27

Here Ultratech is doing well but its performance is not so consistence so it is not easy to say that

what will be this ratio in future. But Acc is improving regularly.

CONCLUSION FOR THE COMPANY


MAKING THE BALANCE YEAR AFTER YEAR AND MAINTAINED TO LIVE BELOW T

RETURN ON IVESTMENT WITHOUT CONSIDERING OF MUCH RISK. SO


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BIBLIOGRAPY

Dalal Street

BS 1000

RBI Bulletin

Economic survey

Internet

Books

Topic: Fundamental AnalysisSubmitted By: Shankar Kumar

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