fundamental analysis of equity

7/28/2019 Fundamental Analysis of Equity

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OBJECTIVES OF STUDY Detailed analysis of Automobile industry which is

gearing towards international standards .

Comparative analysis of three tough competitors TATAMotors, Maruti Suzuki and Mahindra and Mahindrathrough fundamental analysis.

Suggesting as to which companys shares would be best

for an investor to invest. To understand stock market. To understand stock market.


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PROFILE OF SHRIRAM INSIGHT BROKERS LTD Shriram insight brokers ltd is famous broking

company in india.

Incorporated in 1995, Shri ram Insight Share Brokers

Ltd, was promoted by professional entrepreneurs andincubate by Shriram group

Shriram insight commenced operations with corporatemembership on NSE in cash segment in 1996.

Shriram insight broking equity related services includetrade execution on BSE, NSE, Derivatives,commodities, depository services, online trading andinvestment advice.


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Products of shriram Trading in cash & derivatives

Trading & D-mat account at nominal cost

Share trading

Call & Trade


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AUTOMOBILE SECTOR IN INDIA:

The Automobile industry in India is one of the largest in the

world and one of the fastest growing globally.

It is the world's second largest manufacturer of motorcycles,

with annual sales exceeding 8.5 million in 2009.

According to recent reports, India is set to overtake Brazil to

become the sixth largest passenger vehicle producer in the world.

By 2050, the country is expected to top the world in car volumes

with approximately 611 million vehicles on the nation's roads.


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Fundamental analysis

Fundamental analysis attempts to find out the fair

value of a securities.

Fundamental analysis is the study of economic,

industry and company conditions in an effort to

determine the value of a companys stock.

It is also known as Economic-Industry-Company

approach (E I C APPROACH).


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EIC APPROACH Economic analysis is the analysis of forces operating in the

overall economy of a country. It includes Gdp, Recession,

Inflation etc.

INDUSTRY ANALYSIS- Industry analysis involves

reviewing the economic, and market factors influence the

way the industry develops.

COMPANY ANALYSIS- Company analysis is to identify

better performing companies in an industry


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RATIO ANALYSIS

EPS

Till 2008 TATA and Maruti had a rising EPS but in 2009 both of them fall and the effect

is more on Tata motors because of the slump in domestic and international markets and

sharp fall in sales and net profits which resulted in low EPS.Till2008, Mahindra also had a

rising EPS but it declined in 2009.But Mahindra showed an increasing trend in 2010 &

2011.As trend shows Mahindra motors has potential so a shareholder can expect better in

future.

0

20

40

60

80

100

MAR'08 MAR'09 MAR'10 MAR'11 MAR'12

TATA

SUZUKI

MAHIN

EARNINGS PERSHARE


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DIVIDEND PER SHARE

Tata motors and Maruti Suzuki both the companies showed a positivetrend in paying dividends till 2008, but the scenario changed in 2009 as

both the companys dividend per share fell. According to graph Tatasdividend has fallen drastically while Maruti stick to below 5 per share.Mahindra has made a slight reduction from rs.11.5 per share in 2008 tors.10 per share in 2009.After 2009 both tata and Mahindra againshowed a positive trend and the effect was more on tata motors.

Mahindra was also positive in 2010 & 2011, Tata or Mahindra could bethe best option for an investor.

0

5

10

15

20

25

MAR08 MAR09 MAR10 MAR11 MAR12

TATA

SUZUKI

MAHINDRA

DIVIDEND PER SHARE


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DIVIDEND PAYOUT RATIO :

DIVIDEND PAYOUT RATIO Dividend payout ratio is the percentage ofearnings paid to shareholders in dividends. It provides an idea to aninvestor of how well earnings support the dividend payments. Till2009, Maruti has maintained a stable payout ratio. DP ratio of TATA &MAHINDRA have declined till 2008 but both of them showed apositive trend in 2009. Both TATA and Mahindra have increased theirpayout ratio in which Mahindra shows a higher payout ratio.

0

20

40

60

80

100

120

140

MAR8 MAR9 MAR10 MAR,11 MAR,12

TATA

SUZUKI

MAHINDRA

DIVIDEND PAYOUT

RATIO


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FINDINGS: FINDINGS The three companies were performing well till 2008

with a positive trend in the earnings per share. But there was adownward trend in 2009. Especially, TATA has witnessed a steepfall in the year 2009.In 2011,only Mahindra showed a positive

trend. The return on investment has been fluctuating since 2007 and

the year 2011 witnessed low returns in case of all the companiesamongst which TATA has the least rate of return. Compared tothe three companies, Mahindra has the highest ROI in 2011.

The three companies have witnessed a low price earnings ratioin 2008 compared to the previous year. But the ratio increased in2009 in three companies. TATA has the highest P/E ratio in 2009

which indicates that it is overvalued and Mahindras P/E ratio isthe lowest in 2009 which indicates that it is undervalued andthere is a scope for growth in the future.


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SUGGESTION: Earnings per share has declined drastically. It has reduced

its dividend per share from rs.15 in the previous year to rs.6in 2009. The return on investment is also very low. In viewof all these, TATA is not a better option for an investor.

Marutis return on investment is not higher as compared tomahindra.Its Dividend per share is also low .

Mahindras Return on Investment is much highercompared to TATA and Maruti. The dividend per share isrs.11.50 in 2011, which is higher amongst the threecompanies. The company has potential to grow. It would bethe best option for the investor.

As Mahindras shares are undervalued, the investor can buythese shares. This is because a relatively lower P/E wouldsave investors from paying a very high price that does not

justify the value of an investment .


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CONCLUSION: Global recession had a dampener effect on the growth of

automobile industry but it was a short term phenomenon.The industry is bouncing back. One factor favoring thispoint is that India has become a hot destination forcompanies of diverse nature to invest in. Cut throat

competition among top companies, lots of new car andvehicle model launches at regular intervals keeps theIndian auto sector moving.

This has happened due to a lot of positive factors likeFriendly and favorable government economical policies.

Rise in per capita income (individual). Rising Middle Class and Working Class ( higher buying

power). Availability of Easy Finance Schemes for purchasing

Automotives.


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fundamental analysis of equity

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