Cement

Equity Research on Cement Sector
PROJECT REPORT ON EQUITY RESEARCH ON CEMENT SECTOR IN BIRLA SUN LIFE INSURANCE COMPANY LTD.
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY
GURPREET SINGH SALUJA ROLL NO. : 2010129

MMS-II (SEM III) YEAR 2010-2012
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LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI - 400034 PROJECT REPORT ON EQUITY RESEARCH ON CEMENT SECTOR In BIRLA SUN LIFE INSURANCE COMPANY LTD. SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY GURPREET SINGH SALUJA ROLL NO. : 2010129 MMS-II (SEM III) YEAR 2010-2012
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LALA LAJPATRAI INSTITUTE OF MANAGEMENT MAHALAXMI, MUMBAI - 400034 SUMMER INTERNSHIP PROJECT
SUBMITTED BY GURPREET SINGH SALUJA ROLL NO. : 2010129 MMS II (SEM III) Year 2010-2012
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CertifiCate This is to certify that the project work titled Equity Research on Cement Sector is a summer internship work carried out by Mr. Gurpreet Singh Saluja. The project was completed for Birla Sunlife Insurance Company Ltd., under the guidance of Mr. Nikesh Ruparel. I further certify that the said work has not been submitted in the part or in full, to any other University. Date:
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Prof. Arati Kale Project Guide
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Dr V.B. Angadi Director, Lala Lajpatrai Institute Management of
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DECLARATION
I, Mr. Gurpreet Singh Saluja, student of Lala Lajpatrai Institute of Management of MMS II (Semester III) hereby declare that I have completed the summer internship project on Equity Research on Cement Sector with Birla Sunlife Insurance Company Ltd. in the Academic year 2010-2012. The information submitted is true & original to the best of my knowledge.
Signature of the student
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ACKNOWLEDGEMENT At the outset of this project, I would like to express my profound thanks to a few people without whose help, completion of this project would not have been possible. First and foremost, I would like to express sincere thanks to Birla Sunlife Insurance Company Ltd. for giving me this opportunity to work with them. The list is endless but to name a few special people, I would like to thank Mr.Nikesh Ruparel for being extremely supportive and guiding me throughout my internship and giving me constant motivation and expert advice. I would also like to thank the entire Birla Sunlife Insurance Department for providing me their precious time and making this internship a successful learning experience. I am very grateful to Dr. Angadi, Directorof Lala Lajpat Rai Institute of Management, for giving me the opportunity to do this project in Birla Sunlife Insurance Company Ltd. My sincere thanks to Prof. Arati Kale for her valuable guidance and advice in completing this project. I would also like to thank Prof. Narendran and Prof. Avni Pramod for being an excellent mentor and helping me whenever I approached him/her. Last but not the least; I take pride in thanking my family, siblings and friends for their much valued support. .
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INDEX
Sr. No. 1 INDEX TOPIC Executive Summary Introduction and Research Methodology 1.1 Introduction of the Project 1.2 Objective of the Study 1.3 Scope 1.4 Research Methodology Company Profile (Birla Sunlife Insurance co. Ltd.) Introduction to Equity 3.1 Fundamental Analysis 3.2 Technical Analysis Indian Cement Sector Company Analysis 5.1 ACC Ltd. 5.2 Ambuja Cements Ltd. 5.3 Ultratech Cement Ltd. Findings and Suggestions 6.1 Findings 6.2 Suggestions Conclusion Recommendations Bibliography Page No. 1 1 1 1 2 3-7 8-10 11-18 19-23 24-34 35 35-44 45-55 56-65 66 66 67-68 69 70
2 3 4 5
6 7 8 9
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EXECUTIVE SUMMARY
Indian economy being one of the fastest developing economies in the world, companies in India are growing at faster rate as compared to their growth rate a decade back. Many Indian Companies are expanding their business globally with mergers and acquisitions. Thus Indian equity markets today are attracting investors from around the world to take advantage of Indias growth story.
As companies grow their shareholders are benefitted with good dividend and capital appreciation on investment in equity shares of such companies. Number of companies listed in stock exchange (BSE & NSE) has been increasing every year with new IPOs coming in the market. In India people are realizing that equity has potential to give highest return as compared to other investment avenues however people do not have proper knowledge in which stock to invest their hard earned money to get good returns. They just invest on the basis of tips given by brokers or friends which is not correct. The penetration of retail investors in the Indian Markets is just around 5%, which means that the Indian investor is not able to take the maximum advantage of Indias growth. This report is meant to narrow down this gap between retail investors and equity markets by simplifying the basic investment strategies and give a basic understanding of how stocks are analysed for investment using the the theories of fundamental and technical analysis Equity Research helps the investor to know about the value, risk & volatility of the covered security, and thus assist investors to decide whether to buy, hold, sell, sell short, or simply avoid the security in question.
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Fundamental analysis is very helpful to the investor, which is reflected in the investment purpose. Fundamental analysis consist of three parts, they are economic, industry and company. Any investors who go to systematic investment, he/she would like to know, the complete scenario of the industry. If the industry looks positive then analyze various companies in the sector. A Company is analyzed fundamentally to check its performance and financial strength. With the help of this analysis investors comes to know whether to make an investment in a particular stock. In this report I have explained How to do fundamental analysis with analysis of cement sector and few companies in the sector.
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1. INTRODUCTION AND RESEARCH METHODOLOGY

1.1 INTRODUCTION OF THE PROJECT:
Equity Research is a subject which involves detailed knowledge of the share market. This knowledge can be obtained through fundamental and technical analysis. Fundamental Analysis looks into the companys financial statements and key ratios to determine whether a stock is worth buying or not. Fundamental Analysis is generally for long term perspective. Technical Analysis make use of charts to determine the future price of a particular stock. These analysis helps in making informed decisions which stock to buy, hold or sell. This research report is prepared on cement sector in India and its three companies namely ACC LTd, Ambuja Cements Ltd. and Ultratech Cement Ltd. and an analysis is done in order to determine which company provides good returns to the investors.
1.2 OBJECTIVE OF THE STUDY:

To acquire a deep knowledge of the Cement Sector through fundamental analysis. To assess the financial health & management effectiveness of the Company. To evaluate the share of the company ACC Ltd., Ambuja Cements Ltd. and Ultratech Cement Ltd. on the basis of fundamental analysis. To find out how effectively resources are used within the enterprise To predict the future performance of the stocks and give suggestion on the same.
1.3 SCOPE:
The scope of project is limited to Understanding the basics of Fundamental analysis and apply it to take a decision of investing in Cement Stocks.
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1.4 RESEARCH METHODOLOGY:

Formation of the Problem Which significant ratios determine investment decision in share market ?
Collection of Data Secondary Data: The sources of secondary data are: Company Annual Report Internet-Websites
Research Limitation
Information available on the websites was not updated. There was a limited time period to complete the project. This research is restricted to analysis of cement sector.
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2. COMPANY PROFILE
Company Profile
Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers future. With an experience of over 9 years, BSLI has contributed significantly to the growth and development of the life insurance industry in India and currently ranks amongst the top 5 private life insurance companies in the country.
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Known for its innovation and creating industry benchmarks, BSLI has several firsts to its credit. It was the first Indian Insurance Company to introduce Free Look Period and the same was made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life Insurance plans amongst the private players in India. To establish credibility and further transparency, BSLI also enjoys the prestige to be the originator of practice to disclose portfolio on monthly basis. These category development initiatives have helped BSLI be closer to its policy holders expectations, which gets further accentuated by the complete bouquet of insurance products (viz. pure term plan, life stage products, health plan and retirement plan) that the company offers. Add to this, the extensive reach through its network of 600 branches and 175,000 empanelled advisors. This impressive combination of domain expertise, product range, reach and ears on ground, helped BSLI cover more than 2 million lives since it commenced operations and establish a customer base spread across more than 1500 towns and cities in India. To ensure that our customers have an impeccable experience, BSLI has ensured that it has lowest outstanding claims ratio of 0.00% for FY 2008-09. Additionally, BSLI has the best Turn Around Time according to LOMA on all claims Parameters. Such services are well supported by sound financials that the Company has. The AUM of BSLI stood at Rs. 8165 crs as on February 28, 2009, while as on March 31, 2009, the company has a robust capital base of Rs. 2000 crore.
Vision
To be a leader and role model in a broad based and integrated financial services business.
Mission
To help people mitigate risks of life, accident, health, and money at all stages and under all circumstances. Enhance the financial future of our customers including enterprises.
Values
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Integrity, Commitment, Passion, Seamlessness, Speed
Management
The management team comprises of Mr. Kumar Mangalam Birla (Chairman) Mr.Niall OHare (Chief Actuarial Officer) Mr. Jayant Dua ( Managing Director and CEO)
A US $28 billion corporation, the Aditya Birla Group is in the league of Fortune 500 worldwide. It is anchored by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. The group operates in 25 countries across six continents truly India's first multinational corporation. Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong presence across various financial services verticals that include life insurance, fund management, distribution & wealth management, security based lending, insurance broking, private equity and retail broking. The seven companies representing ABFSG are Birla Sun Life Insurance Company, Birla Sun Life Asset Management Company, Aditya Birla Money, Aditya Birla Finance, Birla Insurance Advisory & Broking Services, Aditya Birla Capital Advisors and Apollo Sindhoori Capital Investment. In FY 2008-09, the consolidated revenues of ABFSG from these businesses crossed Rs. 4763 crore, registering a growth rate of 36%. Sun Life Financial is a leading international financial services organisation providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China
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and Bermuda. As of December 31, 2008, the Sun Life Financial group of companies had total assets under management of $381 billion.
Awards
At Birla Sun Life Insurance, winning is a way of life. Our innovative solutions and customer-friendly services have been admired, appreciated and rewarded by customers and the industry at large. Recruiting and Staffing Best in Class Awards.
Outlook Money Awards 2004 BSLI - Best Life Insurer (Runner Up) 2004 TROPHY
The 8th Asia Insurance Industry Awards 2004 - Birla Sun Life Insurance was among the top five nominees in the category.
The Indo-Canadian Business Chamber- BSLI awarded for its 'Successful Performance' for 4 years April 2005.
Birla Sun Life Insurance was presented 'The Hewitt Best Employers In India Awards 2004' Trophy.
Birla Sun Life Insurance was awarded 'The Great Place to Work Seminar Series 2007 Presented by Anil Sachdev (Chairman & MD of Grow Talent Company
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Ltd) Robert Levering (Co-founder Great Place to Work Institute) and Jehangir Pocha (Business World Magazine).
The Bhartiya Shiromani Puraskar awarded to BSLI at the seminar on "Economic Development New Delhi, on February 13, 2006. This is a Certificate of Excellence for Enhancing the image of India presented by Dr. Bhishma Narain Singh (Former Governor of Tamil Nadu & Assam) in association with the "Institute of Economic Studies (IES)".
Hewitt Best Employers in India 2004.
Sponsorship Acknowledgement for - The Asia Insurance Review.
Future Business Continuity Plan

Birla Sun Life Insurance is one of the few Indian companies to have a fully operational Business Continuity Plan (BCP) to ensure minimal impact to the organisation, its people, and most importantly, its customers. Our Business Continuity Planning (BCP) Program is a response plan which would ensure that in the event of a disaster we would be able to restore and recover operations for critical processes within a predetermined time after the disaster
BSLIS Business Continuity Management Policy

To have a planned response in the event of any contingency ensuring recovery of critical activities at agreed levels within agreed timeframe thereby complying with various
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regulatory requirements and minimizing the potential business impact to BSLI. Additionally to create a system that fosters continuous improvement of business continuity management.
3. INTRODUCTION TO EQUITY
What is Equity?
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance assets. This creates liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business. This definition is helpful to understand the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital, liable capital and equity.
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What is Equity Shares?

Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20, 00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights.
Equity Investment
Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.
How to invest in Equity Shares?

Investors can buy equity shares of a company from Security market that is from Primary market or Secondary market. The primary market provides the channel for sale of new securities. Primary market provides opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their requirements of investment and/or discharge some obligation. Investors can buy shares of a company through IPO (Initial Public Offering) when it is first time issued to the public. Once shares are issued to the public it is traded in the secondary market. Stock exchange only acts as facilitator for trading of equity shares. Anyone who wishes to buy shares of a company can buy it from an existing shareholder of a company.
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Why should one invest in Equity in particular?

When you buy a share of a company you become a shareholder in that Company .Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term. Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similar high returns. Equities are high risk investments. One needs to study them carefully before investing It is important for investors to note that while equity shares give highest return as compared to other investment avenues it also carries highest risk therefore it is important to find real value or intrinsic value of the security before investing in it. The intrinsic value of a security being higher than the securitys market value represents a time to buy. If the value of the security is lower than its market price, investors should sell it. To be able to value equity, we need to first understand how equity is to be analyzed. Equity Share of any company can be analyzed through Fundamental Analysis Technical Analysis
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3.1 FUNDAMENTAL ANALYSIS

Introduction
Fundamental analysis applied to the share market is a method of assessing whether a company is a good investment using information from various sources such as financial statements, company announcements, disclosures and economic and industry reports.Fundamental analysis typically focuses on key statistics in a company's financial statements to determine if the stock price is correctly valued.
Interpretation
Most fundamental information focuses on economic, industry, and company statistics. The typical approach to analyzing a company involves four basic steps: Determine the condition of the general economy. Determine the condition of the industry. Determine the condition of the company. Determine the value of the company's stock.
Fundamental analysis includes:

Economic analysis Industry analysis
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Company analysis
Economic Analysis The economy is studied to determine if overall conditions are good for the stock market. Is inflation a concern? Are interest rates likely to rise or fall? Are consumers spending? Is the trade balance favorable? Is the money supply expanding or contracting? These are just some of the questions that the fundamental analyst would ask to determine if economic conditions are right for the stock market. Industry Analysis The company's industry obviously influences the outlook for the company. Even the best stocks can post mediocre returns if they are in an industry that is struggling. It is often said that a weak stock in a strong industry is preferable to a strong stock in a weak industry. Company Analysis After determining the economic and industry conditions, the company itself is analyzed to determine its financial health. This is usually done by studying the company's financial statements. From these statements a number of useful ratios can be calculated. The ratios fall under five main categories: profitability, price, liquidity, leverage, and efficiency. When performing ratio analysis on a company, the ratios should be compared to other companies within the same or similar industry to get a feel for what is considered "normal." Fundamental analysis looks at both quantitative data (eg. revenue growth, margins and financial ratios) and qualitative data (eg. management strength, market position, patents and proprietary technology). Under this method, the companys valuation is based on past performance, industry trends, growth potential management and competition. Unlike the Efficient Market Theory (EMT), which says that all information is already reflected in current prices and
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therefore cannot be predicted, fundamental analysis believes that an intrinsic value may be derived and that investors can profit by buying undervalued shares and, where short selling is allowed, selling overvalued shares. Undervalued shares are those that have a higher intrinsic valuation compared to the current market price. Conversely, overvalued shares are those with intrinsic valuations less than the current market price. The assumption here is that in the long run, shares will move towards the intrinsic valuation or the correct price. Earnings It is often said that earnings are the "bottom line" when it comes to valuing a company's stock, and indeed fundamental analysis places much emphasis upon a company's earnings. Simply put, earnings are how much profit (or loss) a company has made after subtracting expenses. During a specific period of time, all public companies are required to report their earnings on a quarterly basis through a 10-Q Report . Earnings are important to investors because they give an indication of the company's expected dividends and its potential for growth and capital appreciation. That does not necessarily mean, however, that low or negative earnings always indicate a bad stock; for example, many young companies report negative earnings as they attempt to grow quickly enough to capture a new market, at which point they'll be even more profitable than they otherwise might have been. The key is to look at the data underlying a company's earnings on its financial statements and to use the following profitability ratios to determine whether or not the stock is a sound investment.
Approaches to Fundamental Analysis

Top-down and bottom-up There are two approaches to conducting fundamental analysis: top-down and bottom-up. Both have their strengths and weaknesses and both have the same goal of choosing the best companies for investment. The important thing is to use the approach that you are comfortable with and which suits your investment style.
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The bottom-up approach starts from the individual company before proceeding to the general economic and market conditions. Advocates of this approach such as Warren Buffett, Peter Lynch and Benjamin Graham primarily look for companies that are financially healthy, have a strong track record of earnings growth and good prospects. The general idea behind this is that there are the companies that can deliver profits in any market environment and thrive even under difficult conditions. Industry and macroeconomic factors are then considered, but are only secondary under this approach. On the other hand, the top-down approach, as the name suggests, begins from the macro level (general or broad) and ends at the micro level (specific). Under this approach, one first looks at the global market conditions, then drills down to the state of a countrys economy, then a specific sector and finally an individual company.
Fundamental Analysis Tools

Earnings Per Share: Earnings Per Share = Net Earnings / Outstanding Shares Earnings per share serve as an indicator of a company's profitability. An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal would be a "better" company. EPS plays major role in investment decision. One should look for high EPS stocks and the higher the better is the stock. EPS comparison should be done from one company to another which are in the same industry/sector and not from one company from Auto sector and another company from IT sector. There are three types of EPS numbers: Trailing EPS - Trailing EPS means last years EPS which is considered as actual and for ongoing current year. Current EPS - Current EPS means which is still under projections and going to come on
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financial year end. Forward EPS - Forward EPS which is again under projections and going to come on next financial year end The EPS is helpful in comparing one company to another, assuming they are in the same industry, but it alone doesnt tell you the whole story of the company. For that information, we need to look at some more ratios. Price to Earnings Ratio: The P/E looks at the relationship between the stock price and the companys earnings. The P/E is the most popular metric of stock analysis You calculate the P/E by taking the share price and dividing it by the companys EPS. P/E = Stock Price / EPS The P/E gives you an idea of what the market is willing to pay for the companys earnings. The higher the P/E the more the market is willing to pay for the companys earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stocks future and has bid up the price. Conversely, a low P/E may indicate a vote of no confidence by the market or it could mean this is a sleeper that the market has overlooked.. What is the right P/E? There is no correct answer to this question, because part of the answer depends on your willingness to pay for earnings. The more you are willing to pay, which means you believe the company has good long term prospects over and above its current position, the higher the right P/E is for that particular stock in your decisionmaking process. Another investor may not see the same value and think your right P/E is all wrong.
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Many investors try finding low P/E ratios stocks of high value growth companies and make investments in such stocks which may prove real diamonds in future. Generally the P/E ratios are compared of one company to other companies in the same sector/industry and not in other industry before selecting any particular share. Dividend Payout Ratio: The Dividend Payout Ratio measures what a companys pays out to investors in the form of dividends.You calculate the DPR by dividing the annual dividends per share by the Earnings Per Share. DPR = Dividends Per Share / EPS Growing companies will typically retain more profits to fund growth and pay lower or no dividends. Companies that pay higher dividends may be in mature industries where there is little room for growth and paying higher dividends is the best use of profits (utilities used to fall into this group, although in recent years many of them have been diversifying). The payout ratio and the retained earning ratio are the indicators of the amount of earnings that have been ploughed back in the business. The lower the payout ratio, the higher will be the amount of earnings ploughed back in the business and vice versa. A lower payout ratio or higher retained earnings ratio means a stronger financial position of the company. Dividend Yield: The dividend yield of a company's stock offerings is the yearly total dividend payments that the corporation makes divided by its market capitalization. The dividend yield can also be expressed as dividend per share divided by the share price. This is the return to shareholders based on current share prices (as determined by the market).
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Interpretation of Dividend Yield High Dividend Yield Shows that stock is underpriced (less than its real value) Indicates future dividend payments may NOT be as high as the current one - Shows the company is relatively - Shows the company has been hit hard in times of economic depression and financial hardship financially stable Indicates future dividend payments might actually be higher than the current dividend payments Low Dividend Yield Shows that stock is overpriced (more than its real value)
Return on Equity: Return on Equity (ROE) is one measure of how efficiently a company uses its assets to produce earnings. You calculate ROE by dividing Net Income by Book Value. ROE = Net Income/ Book Value A healthy company may produce an ROE in the 13% to 15% range. Like all metrics, compare companies in the same industry to get a better picture. The investors favour the company with higher ROE. Return on Capital Employed:
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This ratio shows the relationship between the profit earned before interest and tax and the capital employed to earn such profit. Return on Capital Employed = Net Profit before Interest, Tax and Dividend/Capital Employed x 100 Where Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus + Long-term Loans Fictitious Assets Or Capital Employed = Fixed Assets + Current Assets Current Liabilities Return on capital employed measures the profit, which a firm earns on investing a unit of capital. The profit being the net result of all operations, the return on capital expresses all efficiencies and inefficiencies of a business. This ratio has a great importance to the shareholders and investors and also to management. To shareholders it indicates how much their capital is earning and to the management as to how efficiently it has been working. This ratio influences the market price of the shares. The higher the ratio, the better it is. Inventory Turnover Ratio Cost of goods sold / Average inventory at cost Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investment.
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3.2 TECHNICAL ANALYSIS

Introduction
Should I buy today? What will prices be tomorrow, next week, or next year? Wouldn't investing be easy if we knew the answers to these seemingly simple questions? technical analysis has the answers to these questions. Technical analysis is the process of analyzing a security's historical prices in an effort to determine probable future prices. This is done by comparing current price action (i.e., current expectations) with comparable historical price action to predict a reasonable outcome. Simply put, technical analysis is the study of prices, with charts being the primary tool. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis. Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply and demand. Price refers to any combination of the open, high, low or close for a given security over a specific timeframe. The time frame can be based on intraday (tick, 5-minute, 15-minute or hourly), daily, weekly or monthly price data and last a few hours or many years. Technicians, as technical analysts are called, are only concerned with two things: What is the current price? What is the history of the price movement?
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The price is the end result of the battle between the forces of supply and demand for the company's stock. The objective of analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach. Technicians believe it is best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it.
Characteristics
Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, intermarket and intra-market price correlations, cycles or, classically, through recognition of chart patterns.
Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis "ignores" the actual nature of the company, market, currency or commodity and is based solely on "the charts," that is to say price and volume information, whereas fundamental analysis does look at the actual facts of the company, market, currency or commodity. For example, any large brokerage, trading group, or financial institution will typically have both a technical analysis and fundamental analysis team.
Principles
Technicians say that a market's price reflects all relevant information, so their analysis looks at the history of a security's trading pattern rather than external drivers such as economic, fundamental and news events. Price action also tends to repeat itself because investors collectively tend toward patterned behavior hence technicians' focus on identifiable trends and conditions. The field of technical analysis is based on three assumptions:
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The market discounts everything. Price moves in trends. History tends to repeat itself.
The Market Discounts Everything
A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market.
Price Moves in Trends In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption.
History Tends To Repeat Itself Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to
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analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves. Other Usage Technical analysis can be used on any security with historical trading data. This includes stocks, futures and commodities, fixed-income securities, forex, etc. In this tutorial, we'll usually analyze stocks in our examples, but keep in mind that these concepts can be applied to any type of security. In fact, technical analysis is more frequently associated with commodities and forex, where the participants are predominantly traders. Now that you understand the philosophy behind technical analysis, we'll get into explaining how it really works. One of the best ways to understand what technical analysis is (and is not) is to compare it to fundamental analysis. We'll do this in the next section. Charting Terms and Indicators Types of charts OHLC "Bar Charts" Open-High-Low-Close charts, also known as bar charts, plot the span between the high and low prices of a trading period as a vertical line segment at the trading time, and the open and close prices with horizontal tick marks on the range line, usually a tick to the left for the open price and a tick to the right for the closing price. Candlestick chart Of Japanese origin and similar to OHLC, candlesticks widen and fill the interval between the open and close prices to emphasize the open/close relationship. In the West, often black or red candle bodies represent a close lower than the open, while white, green or blue candles represent a close higher than the open price. Line chart Connects the closing price values with line segments.
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Point and figure chart a chart type employing numerical filters with only passing references to time, and which ignores time entirely in its construction. Concepts Resistance a price level which acts as a ceiling above prices Support a price level which acts as a floor below prices Breakout the concept whereby prices forcefully penetrate an area of prior support or resistance, usually, but not always, accompanied by an increase in volume. Trending the phenomenon by which price movement tends to persist in one direction for an extended period of time Average true range averaged daily trading range, adjusted for price gaps Chart pattern distinctive pattern created by the movement of security prices on a chart Momentum the rate of price change Point and figure analysis a priced-based analytical approach employing numerical filters which may incorporate time references, though ignores time entirely in its construction. Overlays Overlays are generally superimposed over the main price chart. Resistance an area that brings on increased selling Support an area that brings on increased buying Trend line a sloping line of support or resistance
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Channel a pair of parallel trend lines Moving average an average that lags behind the price action but filters out short term movements.
4. CEMENT INDUSTRY
Industry Background
Pre Independence The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company endeavored to manufacture cement from Argillaceous (kankar). But the first endeavor to manufacture cement in an organized way commenced in Madras. South India Industries Limited began manufacture of Portland cement in 1904.But the effort did not succeed and the company had to halt production. Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and production of 1000 installed. The First World War gave the impetus to the cement industry still in its initial stages. The following decade saw tremendous progress in terms of manufacturing units, installed capacity and production. This phase is also referred to as the Nascent Stage of Indian Cement Industry.
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During the earlier years, production of cement exceeded the demand. Society had a biased opinion against the cement manufactured in India, which further led to reduction in demand. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers. In 1927, the Concrete Association of India was formed with the twin goals of creating a positive awareness among the public of the utility of cement and to propagate cement consumption. Post Independence The growth rate of cement was slow around the period after independence due to various factors like low prices, slow growth in additional capacity and rising cost. The government intervened several times to boost the industry, by increasing prices and providing financial incentives. But it had little impact on the industry. In 1956, the price and distribution control system was set up to ensure fair prices for both the manufacturers and consumers across the country and to reduce regional imbalances and reach self sufficiency. Period of Restriction (1969-1982) The cement industry in India was severely restrained by the government during this period. Government hold over the industry was through both direct and indirect means. Government intervened directly by exercising authority over production, capacity and distribution of cement and it intervened indirectly through price control. In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. But still the growth rate was below par. In 1979 the government introduced a three tier price system. Prices were different for cement produced in low, medium and high cost plants. However the price control did not have the desired effect. Rise in input cost, reduced profit margins meant the manufacturers could not allocate funds for increase in capacity. Partial Control (1982-1989)
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To give impetus to the cement industry, the Government of India introduced a quota system in 1982.A quota of 66.60% was imposed for sales to Government and small real estate developers. For new units and sick units a lower quota at 50% was affected. The remaining 33.40% was allowed to be sold in the open market. These changes had a desired effect on the industry. Profitability of the manufacturers increased substantially, but the rising input cost was a cause for concern. Post Liberalization In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. In 1991 the industry was de licensed.This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. Most of the major players invested heavily for capacity expansion.To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports. The role of the government has been extremely crucial in the growth of the industry. Cement is one of the core industries which plays a vital role in the growth and expansion of a nation. It is basically a mixture of compounds, consisting mainly of silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminium oxide and iron oxide. The demand for cement depends primarily on the pace of activities in the business, financial, real estate and infrastructure sectors of the economy. Cement is considered preferred building material and is used worldwide for all construction works such as housing and industrial construction, as well as for creation of infrastructures like ports, roads, power plants, etc. Indian cement industry is globally competitive because the industry has witnessed healthy trends such as cost control and continuous technology upgradation.
Current Scenario
The Indian cement industry is the 2nd largest market after China. The cement industry in India has received a great impetus from a number of infrastructure projects taken up by the Government of India like road networks and housing facilities. While the Indian
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cement industry enjoys a phenomenal phase of growth, experts reveal that it is poised towards a highly prosperous future over the very recent years. The countrys cement production is projected to grow at a compound annual growth rate (CAGR) of around 12 per cent during 2011-12 - 2013-14 to reach 303 million metric tonnes (MMT), as per the RNCOS research report. Indias cement industry has suffered two major setbacks recently. The largest domestic supplier of coal to cement plants, Coal India Ltd, recently increased their prices by 30%. In addition to this, the governments 2011 Budget outlined a 2% hike in excise duty for the already suffering cement sector. The two setbacks are likely to reduce profits in the upcoming year. Despite a bad performance during the last four quarters, the cement sector had started to turn around since December when the industry saw a gradual increase of demand, in particular from the realty sector. Indian cement industry comprises of 137 large and 365 mini cement plants. The large plants employ 120,000 people, according to a recent report on the Indian cement industry published by Cement Manufacturers Association (CMA). Cement Production & Despatches (P) 2010-11 2009-10 (Apr-Jan) 136.51 135.56 130.85 130.09
Description Cement Production Cement Despatches
Jan-11
Dec-10 Jan-10
14.52 14.47
13.59 13.60
14.65 14.59
Source: Cement Manufacturers' Association Cement production during April to January 2010-11 was 136.51 million tonnes as compared to 130.85 million tonnes during the same period for the year 2009-10. Despatches were estimated at 135.56 million tonnes during April to January 2010-11 whereas during the same period for the year 2009-10, it stood at 130.09 million tonnes.
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Key Drivers of Cement Industry

Buoyant real estate market Increase in infrastructure spending Various governmental programmes like National Rural Employment Guarantee Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana
Globalisation of Indian Cement Industry

Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. This has resulted in cement being largely a regional play with the industry divided into five main regions viz. north, south, west, east and the central region. While the southern region always had excess capacity in the past owing to abundant availability of limestone, the western and northern regions are the most lucrative markets on account higher demand and production shortfall. However, with capacity addition taking place at a faster rate as compared to demand, prices have remained southbound, especially in the recent past. Nevertheless, considering the government's thrust on infrastructure long term demand remains intact. Given the high potential for growth, quite a few foreign transnationals have been eyeing the Indian markets and are planning to acquire domestic companies. Thus globalization of Indian Cement Industry has led to many foreign companies engaging in mergers and acquisitions of Indian cement companies. For example, HeidelbergCement-IndoramaCementLtd. Heidelberg Cement Company entered into an agreement for a 50% joint venture with the Indorama Cement Ltd., situated in Mumbai, originally possessed by the Indorama S P Lohia Group. Heidelberg Cement company is the leading German cement manufacturing company. The Heidelberg Cement was set up in 1873 and has a long and prosperous
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history. Being one of the best in the world the Heidelberg Cement Company has its bases in different countries. The Heidelberg Cement Company has two manufacturing units in India. A grinding plant in Mumbai and a cement terminal near Mumbai harbor. A clinker plant is coming up in the state on Gujarat. Holcim Cement - Gujarat Ambuja Cements(GACL) Holcim Cement Company is among the leading cement manufacturing and supplying companies in the world. It has increased its stake from 46.44 per cent to 50 per cent stake in Ambuja Cement through the creeping acquisition route. It has also increased its stake in ACC to reach 50.1 per cent. Italcementi cement - Zuari Cement Limited Italcementi Cement Company with the help of the Ciments Franais, a subsidiary for its global activities, has acquired shares of the famous Indian cement manufacturer - Zuari Cement Limited. The acquisition was of 50% shareholding and the deal was of about 100 million Euros. Italcementi Cement is the 5th largest cement manufacturing company in the world. The production capacity of the Italcementi cement company is about 70 million tons in a year. With the construction boom in India the company looks for a stable future. In 2001 the Italcementi cement entered the Indian market scenario. It took over the plant of the Zuari Cement Limited in Andhra Pradesh in southern India. The joint venture earned revenues of around 100 million Euros and an operating profit of 4 million Euros. Lafarge India is the subsidiary of the Lafarge Cement Company of France. It was established in 1999 in India with the acquisition of the Tisco and the Raymond cement plants. Lafarge Cement presently has three cement manufacturing units in India. One of them is in Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company was set up in the year 1833 by Leon Pavin. Lafarge Cement Company situated in France is the leading cement producing company in the world. It has plans for increasing the cement production through technological innovations and maximization of the capacity of the
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plant. It has a large network of distributors in the eastern part of India. The Lafarge Cement Company is presently producing nearly 5.5 million tons of cement for the Indian cement market. During the first half of FY11, UltraTech Cement merged itself with Samruddhi Cement to become the largest cement company in the country. Considering the long term growth story, fair valuations, fragmented structure of the industry and low gearing, another wave of consolidation would not come as a surprise.
Technological Advancements
Modernization and technology up-gradation is a continous process for any growing industry and is equally true for the cement industry. At present, the quality of cement and building materials produced in India meets international standards and benchmarks and can compete in international markets. The productivity parameters are now nearing the theoretical bests and alternate means. Substantial technological improvements have been brought about and today, the industry can legitimately be proud of its state-of-the-art technology and processes incorporated in most of its cement plants. This technology up gradation is resulting in increased capacity, reduction in cost of production of cement.
SWOT Analysis
Strenghts: High Entry Barriers Cement being a capital-intensive industry creates high entry barriers for the new players. Moreover, the creation of distribution channel, acquisition of limestone reserves etc makes entry of new players extremely difficult. Weakness: Dependence on Government Industry is highly dependent on government authorities for power supply. Cement industry has been suffering from frequent power cuts.
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Increasing dependence on imported coal Over the years, there has been deterioration in the quality of coal. In particular, the ash content has increased implying lower calorific values for coal, and improper and inefficient burning, etc. This has increased the dependence of cement industry on imported coal. Poor port infrastructure and high volatility in exchange rates creates concerns.
Oppurtunities: Growth from newer products - Ready to mix concrete RMC is a value-added semi-finished product that results in a superior quality concrete.Various advantages of RMC are quality control, eco friendly, greater speed of construction, correct proportion of ingredients, lower wastage, reduce manpower requirement etc. RMC is a high margin product as compared to site mixed concrete (SMC). In India, RMC accounting for meager5% of cement production that is converted to RMC as against 70% in developed countries. Though India is the second largest cement manufacturer, it is among the lowest cement consuming countries. In India per capita cement consumption is 122 kg, which is far below the world average of approximately320 kg. With the growth of economy, per capita cement consumption rises at brisk pace. It indicates there is a potential for growth in cement industry. Threats: Rising interest rate Rising interest rates may impact housing demand and thereby affecting cement demand and also capital expenditure. Substitutes Bitumen and Engineering plastic have emerged as substitute of cement in road and building construction.
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Budget 2011: The year 2010 was quite challenging for the entire cement industry. On the one hand, demand off-take was weaker than expected due to lower realty and infrastructure spending. Prolonged monsoons and logistical constraints further dampened the construction activity. On the supply front, overcapacity continued to plague the industry. Cement prices remained under pressure and caused margins to contract severely. The industry is expected to end the current fiscal at about 75% capacity utilisation. And this does not seem to be the end yet. The demand-supply mismatch is here to stay for quite some time as the total industry cement capacity is expected to increase even further over the next 18-24 months. Excess supply would reach its highest level (about 126 mtpa) in FY13 with capacity going up to 393 mtpa. On the cost front, key raw material costs, especially prices of coal show no signs of abating. Going forward, rising interest costs remain a challenge for the construction industry. Much will depend on governments housing and infrastructure initiatives. Given this backdrop, over the next couple of years, the margins of the cement companies will continue to remain under strain. Budget Measures: Incentives have been doled out for end users of cement such as the housing sector and development of infrastructure. To replace excise with ad valorem duties on cement: In case of packaged cement, retail price per 50 kg bag not exceeding Rs 190 per bag (equivalent to Rs 3,800 per tonne) would entail 10% ad valorem duty plus Rs 80 per tonne from Rs 290 per tonne earlier. In case of retail price per 50 kg bag exceeding Rs 190 per bag, there would be an ad valorem duty of 10% plus Rs 160 per tonne from just 10% of retail sales price earlier. 10% ad valorem duty for all goods other than those cleared in packaged form. For cement clinker, there would be an ad valorem duty of 10% plus Rs 200 per tonne from flat Rs 375 per tonne earlier.
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To reduce basic custom duty on two critical raw materials of the cement industry viz. petcoke and gypsum to 2.5% Rate of minimum alternate tax (MAT) on book profits has been increased from 18% to 18.5%.
Budget Impact: Increased budgetary allocation towards infrastructural development and housing is likely to boost demand for cement. Thus, cement manufacturers will continue to benefit owing to increase in volumes. Impact of cut on customs duty on key raw materials such as petcoke and gypsum would bring some relief to cement manufacturers who have been facing margin pressures due to rising input costs. Cash dispensers and their parts have been fully exempted from basic customs duty, to drive the financial inclusion agenda of the Government. This would result in lower input cost and pressure on operating profit margin could marginally ease. The new excise duty structure will increase the tax incidence on the cement industry.
Company Impact: With more incentives being spelled out for the infrastructure and housing sector, cement manufacturers will continue to benefit. This is beneficial to all cement companies, specifically the top layers catering to eastern region such as ACC and Ultratech Cement. Lower duty on key materials will aid the profitability of large players like ACC, Ambuja Cement and Ultratech Cement. Future Ahead of Indian Cement Industry:
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In the Budget 2011, with country's GDP pegged to grow ~8%+ annually going forward, cement industry is likely to grow in double digit over long term and outlook for demand remains positive. The cement industry is pushing for increased use of cement in highway and road construction. The Ministry of Road Transport and Highways has planned to invest US$ 354 billion in road infrastructure by 2012. Housing, infrastructure projects and the nascent trend of concrete roads would continue to accelerate the consumption of cement. Increased infrastructure spending has been a key focus area. Finance Minister Pranab Mukherjee has proposed to earmark US$ 47 billion for infrastructure development during 2011-12. The infrastructure sector has received an impetus in the form of increased funds and tax related incentives offered to attract investors for tapping the infrastructure opportunities around the country. Introduction of tax free bonds, creation of infrastructure debt funds, formulating a comprehensive policy for developing public private partnership projects are some announcements which will give a fillip to the infrastructure sector which is the backbone of any economy.
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5. COMPANY ANALYSIS
5.1 ACC Ltd
ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 16 modern cement factories, more than 40 Ready mix concrete plants, 21 sales offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution network of over 9,000 dealers. Since inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology. ACC has a unique track record of innovative research, product development and specialized consultancy
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services. The company's various manufacturing units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry. ACC has rich experience in mining, being the largest user of limestone. As the largest cement producer in India, it is one of the biggest customers of the domestic coal industry, of Indian Railways, and a considerable user of the countrys road transport network services for inward and outward movement of materials and products. Among the first companies in India to include commitment to environmental protection as one of its corporate objectives, the company installed sophisticated pollution control equipment as far back as 1966, long before pollution control laws came into existence. Today each of its cement plants has state-of-the art pollution control equipment and devices. ACC plants, mines and townships visibly demonstrate successful endeavours in quarry rehabilitation, water management techniques and greening activities. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing, suggestions for reuse, recycling and coprocessing. ACC has taken purposeful steps in knowledge building. We run two institutes that offer professional technical courses for engineering graduates and diploma holders which are relevant to manufacturing sectors such as cement. The main beneficiaries are youth from remote and backward areas of the country. During the year ended December 31, 2010, it sold 20.984 million tons of cement and 0.120 million tons of clinker. The Companys subsidiaries include ACC Concrete Limited, Bulk Cement Corporation (India) Limited, ACC Mineral Resources Limited, Lucky Minmat Limited, Encore Cements & Additives Private Limited, National Limestone Co. Private Limited and National Limestone Co. Private Limited. In April 2010, the Company acquired 45% interest in Asian Concrete and Cements Private Limited.
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ACC has made significant contributions to the nation building process by way of quality products, services and sharing expertise. Its commitment to sustainable development, its high ethical standards in business dealings and its on-going efforts in community welfare programmes have won it acclaim as a responsible corporate citizen. ACCs brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer SuperBrands of India. ACC Ltd recorded 2.13% YOY rise in dispatches for the month of December 2010. Cement dispatch in December was 1.92 million tonnes as compared to 1.88 million tons a year ago. Production of cement in December rose to 1.91 million tonnes as against 1.86 million tons in the corresponding period last year. SHAREHOLDING PATTERN: HOLDERS NAME Promoters Foreign Institutions General Public Financial Institutions Other Companies N Banks Mutual Funds Others Foreign NRI Foreign Promoter Central Government Foreign Industries NO. OF SHARES 93888120 28598980 26474104 25834888 7526274 2609322 1191884 791839 541000 287815 1130 % HOLDING 50.01% 15.23% 14.10% 13.76% 4.01% 1.39% 0.63% 0.42% 0.29% 0.15% 0.00%
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Profit and Loss Account of ACC Ltd. Particulars INCOME: Sales Turnover Excise Duty NET SALES Other Income TOTAL INCOME EXPENDITURE: Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalised Provisions Made TOTAL EXPENDITURE Operating Profit EBITDA Depreciation Other Write-offs EBIT Dec'10 12 Months 8,609.29 961.52 7,647.77 0 7,853.49 2,136.91 1,464.10 461.89 1,437.23 509 0 0 6,009.13 1,638.64 1,844.36 392.68 0 1,451.68 Dec'09 12 Months 8,803.17 781.58 8,021.59 0 8,157.76 1,961.34 1,204.68 367.71 1,393.87 530.88 0 0 5,458.48 2,563.11 2,699.28 342.09 0 2,357.19
(Rs in crore) Dec'08 12 Months 8,300.18 1,070.21 7,229.97 0 7,441.56 1,961.86 1,180.15 413.04 1,377.31 514.33 0 0 5,446.69 1,783.28 1,994.87 294.18 0 1,700.69
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Interest EBT Taxes Profit and Loss for the Year Non Recurring Items Other Non Cash Adjustments Other Adjustments REPORTED PAT KEY ITEMS Preference Dividend Equity Dividend Equity Dividend (%) Shares in Issue (Lakhs) EPS - Annualised (Rs)
56.78 1,394.90 424.15 970.75 (35.73) 185.92 -0.9 1,120.01 0 572.63 304.67 1,877.45 59.66
84.3 2,272.89 688.93 1,583.96 1.23 21.54 0 1,606.73 0 431.76 229.73 1,877.40 85.58
39.96 1,660.73 524.6 1,136.13 41.25 35.39 0.02 1,212.79 0 375.33 199.77 1,876.82 64.62
Balance-Sheet of ACC Ltd. Particulars Liabilities Share Capital Reserves & Surplus Net Worth Secured Loans Unsecured Loans TOTAL LIABILITIES Assets Gross Block (-) Acc. Depreciation Net Block Capital Work in Progress. Investments. Inventories Sundry Debtors Cash And Bank Loans And Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities Dec'10 12 Months 187.95 6,281.54 6,469.49 518.05 5.77 6,993.31 8,076.95 2,994.51 5,082.44 1,562.80 1,702.67 914.98 178.28 1,080.03 752.41 2,925.70 2,627.84 1,652.46 4,280.30 Dec'09 12 Months 188.02 5,828.20 6,016.22 559.74 7.18 6,583.14 6,826.27 2,667.98 4,158.29 2,156.21 1,475.64 778.98 203.7 746.38 714.55 2,443.61 2,558.73 1,091.88 3,650.61
(Rs. In crore) Dec'08 12 Months 187.88 4,739.85 4,927.73 450 32.03 5,409.76 5,835.67 2,365.97 3,469.70 1,602.86 679.08 793.27 310.17 984.24 779.76 2,867.44 2,245.39 963.93 3,209.32
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NET CURRENT ASSETS Misc. Expenses TOTAL ASSETS (A+B+C+D+E)
-1,354.60 0 6,993.31
-1,207.00 0 6,583.14
-341.88 0 5,409.76
Comments on Profit and Loss statement of ACC Ltd.
Net Sales has increased by 10.95% in 2009 as compared to year 2008 but it has reduced in the year 2010 by 4.66% compared to year 2009. This is due to reduction in cement sales volumes.
Raw Material consumption has increased by 2.08% in the year 2009. It has further increased by 21.53% in 2010 as compared to 2009. This is because Average cost of raw material has increased
Personal Expenses reduced in the year 2009 by 10.97% as compared to the year 2008 but is has increased by 25.61% in the year 2010 as compared to the year 2009. This increase is due to Annual increase in salary and impact of revision in wage agreement with the trade unions.
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Total expenditure has marginally increased in the year 2009 in comparison with the year 2008. However in the year 2010 total expenditure has increased by 10.09% as compared to 2009.
EBIT increased by 38.60% in 2009 as compared to 2008 but it decreased in the year 2010 by 38.41% as compared to 2009. This is because of reduction in net sales and increase in total expenditure.
Interest expenses has decreased by 32.65% as compared to the year 2009 because of repayment of Rupee Term loan of Rs. 50 crore (Rs. 200 Crore was repaid in the month of Dec 2009).
Reported PAT increased in 2009 by 32.48% as compared to 2008 but has reduced in the year 2010 by 30.29% as compared to 2009 because of reduction in sales and increase in expenditure.
Comments on Balance Sheet of ACC Ltd.
Reserves and Surplus has increased by 22.09% in2009 as compared to 2008 but has increased only by 7.78% in 2010 as compared to 2009.
Secured Loans increased during 2009 by 24.39% as compared to 2008 but it decreased in the year 2010 by 7.45% as compared to the year 2009. Secured Loans decreased because of repayment of rupee term loan of Rs. 50 crore during the current year.
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Unsecured Loans also decreased in 2009 by 77.58% as compared to 2008 and further decreased in 2010 by 19.64% as comparedto previous year. This marginal decrease is due to repayment of Rs. 3.03 as compared to previous year.
Fixed Assets has increased by 19.85% in the year 2009 as compared to the year 2008 and further increased by 22.22% in the year 2010 as compared to 2009. This increase is mainly due to mainly due to commissioning of Bargarh expansion / modernization project, Wadi capacity expansion, captive power plants at Chanda and Bargarh, grinding units at Kudithini and Thondebhavi and other capitalizations.
Capital work in progress decreased by 27.52% as compared to previous year mainly due to capitalization of projects.
Investments increased to a great extent in 2009 by 117.30% as compared to 2008. It further increased in 2010 by 15.39% as compared to 2009. This increase is because of increase in the investment of mutual funds as compared to previous year. As on December 31, 2010 the company invested Rs. 1,307.56 Crore (Previous Year Rs. 1,129.47 Crore) in mutual funds of its surplus cash. 100% Investment in Encore Cement and Additives Private Limited, a Company engaged in manufacturing and supply of ground Slag. 45% Investment in Asian Concretes and Cements Private Limited, a Company engaged in cement grinding.
Inventories decreased in 2009 by 1.80% but increased in the year 2010 by 17.46% as compared to previous year. Stock-in-trade as on December 31, 2010 was higher than the level of December 31, 2009 by Rs. 56.57 Crore. raw materials inventory
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was higher by 50.45% due to increase in inventories of gypsum and slag. Inventory of Coal increased by 44.28% as compared to previous year Sundry Debtors decreased by 34.33% in 2009 as compared to 2008 and it further decreased to 12.48% in the year 2010 as compared to the year 2009 which indicates collection period of ACC Ltd. has improved yoy.
Loans and Advances decreased in 2009 as compared to 2008 but has increased in 2010 by 5.30% as compared to 2010.
Current Liabilities increased by 13.95% in 2009 as compared to 2008 but has marginally increased in 2010 by 2.70% as compared to previous year.
Provisions has increased by 13.27% in 2009 when compared to 2008 but increased further to 51.34% in the year 2010 as compared to previous year. This increase is due to following reasons employee benefits provision has increased by Rs. 22.99 crore on account of change in discount rate as well as change in assumption for salary escalation rate. Proposed a one-time special Platinum Jubilee final dividend of Rs. 7.50 per share. Higher Provision for income tax.
Ratios of ACC Cement Ratios Year 2010 Year 2009
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ROE ROCE Debt Equity Ratio Inventory Turnover Ratio Dividend Payout Ratio Dividend Yield Ratio EPS P/E Net Profit Margin Face Value Dividend Per Share Comments on Ratios
17.31 20.75 2.79 19.04 59.61 2.84 59.66 18.03 12.69 10 30.50
26.70 35.80 3.02 25.22 31.43 2.64 85.58 10.20 19.75 10 23.00
Looking at the ACC Ltd. ratios almost all ratios have decreased in 2010 as compared to 2009.
Debt equity ratio has declined which means company is repaying its debts and concentrating more on equity for its financing.
Return on Equity has declined by 35.17% which indicates company is providing lesser returns to its investors.
Dividend payout ratio is high which means company is not putting much money for expansion.
Dividend paid has increased to higher returns to the investors, which is good sign.
The companys EPS has declined. P/E ratio of company has increased by almost 80% which indicates high demand for shares and high share price and high expectation of future profits.
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ACC Ltd. Chart
From the above chart it can be analysed that ACC Ltd. approximately till December 2010 has been in line with benchmark i.e. sensex and from January 2011 it has outperformed the benchmark.
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5.2 AMBUJA CEMENTS LTD.
Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies in India. The company was incorporated in the year 1981 as Ambuja Cements Pvt Ltd and it was rehabilitated into a public limited company on 19th March 1983 as Gujarat Ambuja Cements Ltd The Company was founded by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia. Sekhsarias business acumen and leadership skills put the company on a fast track to growth. The Company commenced cement production in 1986. ACL has grown dynamically over the past decade. Its current cement capacity is about 25 million tonnes. The Company has five integrated cement manufacturing plants and eight cement grinding units across the country. ACL enjoys a reputation of being one of the most efficient cement manufacturers in the world. Its environment protection measures are on par with the finest in the country. It is one of the most profitable and innovative cement companies in India. ACL is the first Indian cement manufacturers to build a captive port with three terminals along the countrys western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. The Company has its own fleet of ships. ACL has also pioneered the development of the multiple bio-mass co-fired technology for generating greener power in its captive plants.
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ACL company amalgamated its subsidiary company Indo-Nippon Special Cements Ltd in July of the year 2005. It also entered into a partnership with Holcim Ltd of Switzerland through Ambuja Cement India Ltd (ACIL) during 2004-05. Holcim today holds about 50% equity in ACL. The company name was changed from Gujarat Ambuja Cements Limited to Ambuja Cements Limited on April, 2007, the word Gujarat was dropped to reflect the true geographical presence of the company During the year ended December 31, 2010, its cement capacity was about 25 million tons. During 2010, ACL had subsidiaries, including Kakinada Cements Limited, M.G.T Cements (Private) Limited and Chemical Limes Mundwa (Private) Limited. During 2010, commercial production commenced at two new 2.2 million ton clinker production lines, at Bhatapara (Chattisgarh) and Rauri (Himachal Pradesh), as well as two new 1.5 million ton cement grinding facilities, at Dadri (Uttar Pradesh) and Nalagarh (Himachal Pradesh). In June 2011, the Company acquired Dang Cement Industries Pvt. Ltd. In the last decade the company has grown tenfold. The first company in India introduced the concept of bulk cement movement by the sea transport. The company's most distinctive attribute, however, is its approach to the business. Ambuja follows a unique homegrown philosophy for successful survival. Ambuja is the most profitable cement company in India, and one of the lowest cost producers of cement in the world. Ambuja Cements Ltd, one of Indias leading cement manufacturer recorded 5.6% YoY rise in dispatches for the month of December 2010. Cement dispatch in December was 1.93 million tonnes as compared to 1.83 million tonnes a year ago. Production of cement in December rose to 1.79 million tonnes as against 1.74 million tonnes in the corresponding period last year.
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SHAREHOLDING PATTERN: HOLDERS NAME Promoters Foreign Promoter Foreign Institutions Financial Institutions General Public N Banks Mutual Funds Foreign NRI Other Companies Others Foreign Ocb NO. OF SHARES 12081909 759661201 363631987 196889423 117606774 27357102 17312703 8847097 1036570 12870 % HOLDING 0.79% 49.60% 23.74% 12.85% 7.68% 1.79% 1.13% 0.58% 0.07% 0.00%
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Profit and Loss Account of Ambuja Cements Ltd. Dec'10 12 Months INCOME: Sales Turnover Excise Duty NET SALES Other Income TOTAL INCOME EXPENDITURE: Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalised Provisions Made TOTAL EXPENDITURE Operating Profit EBITDA Depreciation Other Write-offs EBIT Interest EBT Taxes Profit and Loss for the Year Non Recurring Items Other Non Cash Adjustments Other Adjustments REPORTED PAT KEY ITEMS Preference Dividend Equity Dividend Equity Dividend (%) Shares in Issue (Lakhs) EPS - Annualised (Rs) 8,286.20 914.68 7,371.52 0 7,500.11 1,924.37 1,420.92 344.91 1,492.93 342.9 -11.36 0 5,514.67 1,856.85 1,985.44 387.19 0.61 1,597.64 48.69 1,548.95 435.55 1,113.40 85.99 64.22 0 1,263.61 0 397.22 129.82 15,298.59 8.26 Dec'09 12 Months 7,763.93 680.72 7,083.21 0 7,258.75 1,584.41 1,691.53 274.29 1,316.46 318.28 -19.33 0 5,165.64 1,917.57 2,093.11 296.99 1.57 1,794.55 22.43 1,772.12 585.14 1,186.98 4.87 26.52 0 1,218.37 0 365.59 119.96 15,237.11 8
(Rs. in crore) Dec'08 12 Months 7,089.89 907.8 6,182.09 0 6,340.25 1,471.30 1,188.46 266.94 1,187.35 305.09 -21.19 0 4,397.95 1,784.14 1,942.30 259.76 1.72 1,680.82 32.06 1,648.76 567.79 1,080.97 310.02 11.28 0 1,402.27 0 334.97 109.99 15,225.99 9.21
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Balance Sheet of Ambuja Cements Ltd. Dec'10 12 Months 307.31 7,022.79 7,330.10 0 65.03 7,395.13 8,778.82 3,151.07 5,627.75 930.7 625.95 901.86 128.18 1,748.17 422.61 3,200.82 1,893.98 1,096.57 2,990.55 210.27 0.46 7,395.13 Dec'09 12 Months 304.98 6,165.92 6,470.90 100 65.7 6,636.60 6,224.13 2,784.09 3,440.04 2,714.43 727.01 683.24 152.2 880.68 292.65 2,008.77 1,582.32 674.04 2,256.36 -247.59 2.71 6,636.60
(Rs. in crore) Dec'08 12 Months 304.86 5,368.01 5,672.87 100 188.67 5,961.54 5,706.94 2,514.19 3,192.75 1,947.22 332.39 939.75 224.6 851.84 351.82 2,368.01 1,412.55 470.56 1,883.11 484.9 4.28 5,961.54
Liabilities Share Capital Reserves & Surplus Net Worth Secured Loans Unsecured Loans TOTAL LIABILITIES Assets Gross Block (-) Acc. Depreciation Net Block Capital Work in Progress. Investments. Inventories Sundry Debtors Cash And Bank Loans And Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities NET CURRENT ASSETS Misc. Expenses TOTAL ASSETS (A+B+C+D+E)
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Comments on Profit & Loss Account of Ambuja Cements Ltd.:
Net Sales has increased by 14.58% in 2009 as compared to year 2008 and in the year 2010 it has increased by 4.07% compared to year 2009.
Raw Material consumption has increased by 42.33% in the year 2009 while in 2010it has decreased by 16% as compared to 2009.
Personal Expenses increased in the year 2009 by 2.75% as compared to the year 2008 and it increased by 25.75% in the year 2010 as compared to the year 2009. This increase is due to Annual increase in salary and impact of revision in wage agreement with the trade unions.
Total expenditure has increased in the year 2009 in comparison with the year 2008. However in the year 2010 total expenditure has increased by 6.76% as compared to 2009. This is because of increase in expenditure.
EBIT increased by 6.77% in 2009 as compared to 2008 but it decreased in the year 2010 by 10.97% as compared to 2009.
Interest expenses has decreased in 2009 by 30.04% as compared to the year 2008 but it has increased drastically in 2010 by 117.08% as compared to previous year.
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Reported PAT reduced in 2009 by 13.11% as compared to 2008 but has increased in the year 2010 by 3.71% as compared to 2009 which shows that company performance has improved as compared to previous year.
Comments on Balance Sheet of Ambuja Cements Ltd.:
Reserves and Surplus has increased by 14.86% in2009 as compared to 2008 and increased by 13.90% in 2010 as compared to 2009.
Secured Loans have been repaid in current year.
Unsecured Loans also decreased in 2009 by 65.18% as compared to 2008 and further decreased in 2010 by 1.00% as compared to previous year.
Fixed Assets has increased by 7.75% in the year 2009 as compared to the year 2008 and further increased by 63.6% in the year 2010 as compared to 2009. This increase is mainly due to mainly due to installation of additional plants.
Capital work in progress decreased by 65.70% in 2010 as compared to previous year mainly due to capitalization of projects.
Investments increased to a great extent in 2009 by 118.72% as compared to 2008. It decreased in 2010 by 13.90% as compared to 2009.
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Inventories decreased in 2009 by 27.30% but increased in the year 2010 by 32.00% as compared to previous year which means more inventory is lying in the company.
Sundry Debtors decreased by 32.24% in 2009 as compared to 2008 and it further decreased to 15.80% in the year 2010 as compared to the year 2009 which indicates collection period of Ambuja Cement has improved yoy.
Loans and Advances decreased in 2009 as compared to 2008 but has increased in 2010 by 44.4% as compared to 2010.
Current Liabilities increased by 12.02% in 2009 as compared to 2008 and has increased in 2010 by 19.07% as compared to previous year.
Provisions has increased by 43.24% in 2009 when compared to 2008 but increased further to 62.70% in the year 2010 as compared to previous year. This increase may be due to employee benefits provision has increased.
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Ratios of Ambuja Cements Ltd.: Ratios ROE ROCE Debt Equity Ratio Inventory Turnover Ratio Dividend Payout Ratio Dividend Yield Ratio EPS P/E Net Profit Margin Face Value Dividend Per Share Year 2010 17.24 21.60 0.01 9.19 36.60 1.82 8.26 17.32 15.10 2.00 2.60 Year 2009 18.83 27.04 0.03 11.36 35.10 2.31 8 12.96 16.76 2.00 2.40
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Comments on Ratios:
Looking at the Ambuja Cements Ltd ratios almost all ratios have decreased in 2010 as compared to 2009.
Debt equity ratio has declined which means company is repaying its debts and concentrating more on equity for its financing. Company has repaid its secured loans.
Return on Equity has marginally declined which indicates company is providing little lesser returns to its investors as compared to previous year.
Dividend payout ratio has increased marginally as compared to previous year which means company is paying a consistent dividend and rest amount is utilised for expansion purpose.
Dividend paid has reduced in percentage terms in 2010 as compared to previous year. Dividend paid in current year is Rs. 2.60 whereas in 2009 dividend was Rs. 2.40. still there is reduction in Dividend Yield Ratio.
The companys EPS has increased. P/E ratio of company has increased by almost 34% which indicates good demand for shares and high share price and high expectation of future profits.
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Net Profit Margin has declined in 2010 because of increase in personal, manufacturing and selling expenses.
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Ambuja Cements. Ltd. Chart
From the above chart it can be analysed that Ambuja Cement Ltd. has almost always outperformed the benchmark i.e. sensex and is highly volatile stock as compared to benchmark.
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5.3 ULTRATECH CEMENT
UltraTech Cement Ltd is an India-based company engaged in the production of cement. The company manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. They also manufacture ready mix concrete. They are having 11 integrated plants, one white cement plant, 12 grinding units and five terminals - four in India and one in Sri Lanka. The company is the subsidiary of Grasim Industries Ltd. The company is the country's largest exporter of cement clinker. The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East. The export market comprises of countries around the Indian Ocean, Africa, Europe and the Middle East. The company's subsidiaries are Dakshin Cements Ltd, UltraTech Cement Lanka Pvt Ltd and UltraTech Cement Middle East Investments Ltd. UltraTech Cement Ltd was incorporated on August 24, 2000 as a public limited company with the name L&T Cement Ltd as a 100% subsidiary of Larsen & Toubro Ltd. In November 2003, the name of the company was changed from L&T Cement Ltd to UltraTech ChemCo Ltd. In the year 2004, pursuant to the scheme of arrangement, the cement business of Larsen & Toubro Ltd was de-merged and got transferred to the company with effect from April 1, 2003. In May 14, 2004, the company acquired four crore equity shares of Larsen & Toubro Ceylino (Pvt) Ltd from Larsen & Toubro Ltd at an aggregate consideration
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of Rs. 23.03 crore. In July 2004, Grasim Industries Ltd acquired management control of the company and in October 14, 2004, the name of the company was changed from UltraTech ChemCo Ltd to UltraTech Cement Ltd. Also, Narmada Cement Company Ltd became a subsidiary of the company by virtue of the scheme of arrangement for demerger of cement business of Larsen & Toubro Ltd. During the year 2005-06, the company increased the production capacity of Cement from 155 lakh tonnes to 170 lakh tonnes. As per the scheme of amalgamation, Narmada Cement Company Ltd was amalgamated with the company. Thus, the entire undertaking of Narmada Cement Company Ltd was transferred to the company with effect from October 1, 2005. During the year 2007-08, the company increased the production capacity of Cement from 170 lakh tonnes to 182 lakh tonnes. During the year 2008-09, the company increased the production capacity of Cement from 182 lakh tonnes to 219 lakh tonnes as a result of expansion of capacity at the company's unit at Andhra Pradesh Cement Works (APCW) together with a new split grinding unit at Ginigera, Karnataka. They commenced commercial production of cement from their unit in APCW and grinding unit at Ginigera. During the year, the company commissioned 192 MW captive TPPs at their units at APCW, Hirmi Cement Works (HCW) in Chhattisgarh and Gujarat Cement Works (GCW) in Gujarat in a phased manner. Also, they set up new Ready Mix Concrete (RMC) plants and thus increased the RMC capacity to 4.76 million cubic metres per annum. During the fiscal year ended March 31, 2011 (fiscal 2011), its wholly owned subsidiary, UltraTech Cement Middle East Investments Limited (UCMEIL) acquired ETA Star Cement together with its operations in the United Arab Emirates, Bahrain and Bangladesh and acquired management control. On July 1, 2010, Samruddhi Cement Limited (Samruddhi) amalgamated with the Company. The cement production of UltraTech Cement, the Aditya Birla company, for the period April-March 2011, has moved up by 3.12% at 384.34 lakh mt as against 372.72 lakh mt
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during April-March 2010. Dispatches rose by 3.18% at 384.06 lakh mt in April-March 2011 vis-a-vis 372.22 lakh mt in the corresponding period last year. Cement Production for the month of March 2011 is higher by 2.4% at 37.53 lakh mt, and dispatches, at 37.77 lakh mt, by 2.19% over March 2010. SHARE HOLDING PATTERN: HOLDERS NAME Promoters Foreign Institutions General Public Financial Institutions Other Companies N Banks Mutual Funds Foreign Ocb Foreign NRI Foreign Industries NO. OF SHARES 173605057 36641441 20697181 16987129 13472053 4422337 1499356 945745 51776 % HOLDING 63.35% 13.37% 7.55% 6.20% 4.92% 1.61% 0.55% 0.35% 0.02%
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Profit and Loss Account of Ultratech Cement Particulars INCOME: Sales Turnover Excise Duty NET SALES Other Income TOTAL INCOME EXPENDITURE: Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalised Provisions Made TOTAL EXPENDITURE Operating Profit EBITDA Depreciation Other Write-offs EBIT Interest EBT Taxes Profit and Loss for the Year Non Recurring Items Other Non Cash Adjustments Other Adjustments REPORTED PAT KEY ITEMS Preference Dividend Equity Dividend Equity Dividend (%) Shares in Issue (Lakhs) Mar'11 12 Months 14,858.60 1,652.96 13,205.64 0 13,492.31 3,722.63 2,686.75 666.5 0 3,587.40 0 0 10,663.28 2,542.36 2,829.03 765.73 0 2,063.30 277.11 1,786.19 507.48 1,278.71 0 125.52 0 1,404.23 0 164.42 59.99 2,740.42 Mar'10 12 Months 7,729.13 686.31 7,042.82 0 7,144.53 1,528.33 1,588.44 250.28 1,477.88 224.27 -4.02 0 5,065.18 1,977.64 2,079.35 388.08 0 1,691.27 124.11 1,567.16 494.92 1,072.24 21 0 0 1,093.24 0 74.69 59.99 1,244.87
(Rs. in crore) Mar'09 12 Months 7,160.42 774.92 6,385.50 0 6,484.79 1,805.56 1,193.97 216.76 1,256.46 177.93 -8.38 0 4,642.30 1,743.20 1,842.49 323 0 1,519.49 134.09 1,385.40 384.44 1,000.96 -23.94 0 0 977.02 0 62.24 49.99 1,244.86
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EPS - Annualised (Rs)
51.24
87.82
78.48
Balance Sheet of Ultratech Cement Particulars Liabilities Share Capital Reserves & Surplus Net Worth Secured Loans Unsecured Loans TOTAL LIABILITIES Assets Gross Block (-) Acc. Depreciation Net Block Capital Work in Progress. Investments. Inventories Sundry Debtors Cash And Bank Loans And Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities NET CURRENT ASSETS Misc. Expenses TOTAL ASSETS (A+B+C+D+E) Mar'11 12 Months 278.82 10,387.22 10,666.04 2,789.76 1,354.84 14,810.64 17,942.27 6,542.02 11,400.25 1,105.32 3,730.32 1,956.52 602.29 144.79 1,055.10 3,758.70 4,610.46 573.49 5,183.95 -1,425.25 0 14,810.64 Mar'10 12 Months 126.48 4,482.17 4,608.65 854.19 750.33 6,213.17 8,078.14 3,136.46 4,941.68 259.37 1,669.55 821.7 215.83 83.73 374.92 1,496.18 1,992.60 161.01 2,153.61 -657.43 0 6,213.17
(Rs in crore) Mar'09 12 Months 126.17 3,475.93 3,602.10 1,175.80 965.83 5,743.73 7,401.02 2,765.33 4,635.69 677.28 1,034.80 691.97 186.18 104.49 395.71 1,378.35 1,860.59 121.8 1,982.39 -604.04 0 5,743.73
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Comments on Profit and Loss Account of Ultratech Cement Ltd.:
Net Sales has increased by 10.29% in 2009-2010 as compared to year 2008-2009 and in the year 2010-2011 it has increased by 87.51% compared to year 20092010.
Raw Material consumption has increased by 33.04% in the year 2009-2010 and in the year 2010-2011 it has decreased by 16% as compared to 2009-2010.
Personal Expenses increased in the year 2009-2010 by 15.46% as compared to the year 2008-2009 and it increased by 166.30% in the year 2010-2011 as compared to previous year. This increase may be due to Annual increase in salary of employees.
Total expenditure has increased in the year 2009-2010 by 9.11% in comparison with the year 2008-2009. However in the year 2010-2011 total expenditure has increased by 110.52% as compared to 2009-2010.
EBIT increased by 6.77% in 2009-2010 as compared to 2008-2009 but it decreased in the year 2010-2011 by 10.97% as compared to 2009-2010. This is because net sales has not increased that much as compared to increase in expenditure.
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Interest expenses has decreased in 2009-2010 by 7.44% as compared to the year 2008-2009 but it has increased in the year 2010-2011 by 123.28% as compared to previous year which means company has borrowed more debts.
Reported PAT increased in 2009-2010 by 11.90% as compared to 2008-2009 and has increased in the year 2010-2011 by 28.45% as compared to 2009-2010.
Comments on Balance-Sheet of Ultratech Cement Ltd.:
Reserves and Surplus has increased by 28.95% in2009-2010 as compared to 2008-2009 and increased drastically in 2010-2011 as compared to 2009-2010.
Secured Loans has decreased in 2009-2010 by 27.35% as compared to the year 2008-2009 but it increased in 2010-2011 by 226.60% as compared to previous year which means company is borrowing more debts.
Unsecured Loans also decreased in 2009-2010 by 22.31% as compared to 20082009 and increased in 2010-2011 by 80.57% as compared to previous year.
Fixed Assets has increased by 6.60% in the year 2009-2010 as compared to the year 2008-2009 and further increased by 130.70% in the year 2010-2011 as compared to 2009-2010. This increase may be mainly due to installation of additional plants.
Investments increased in the year 2009-2010 by 61.34% as compared to 20082009. It further increased in 2010-2011 by 123.43% as compared to 2009-2010.
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Inventories increased in 2009-2010 by 18.75% and further increased in the year 2010-2011 by 138.11% as compared to previous year. This means a lot of inventory is lying which is not yet sold.
Sundry Debtors increased by 15.93% in 2009-2010 as compared to 2008-2009 and it further increased to 179.06% in the year 2010-2011 as compared to the year 2009-2010 which indicates collection period of Ultratech Cement Ltd. is disappointing.
Loans and Advances decreased in 2009-2010 as compared to 2008-2009 but has increased in 2010-2011 by 181.42% as compared to 2009-2010.
Current Liabilities increased in 2009-2010 as compared to 2008-2009 and has increased in 2010-2011 by 131.38% as compared to previous year.
Provisions has increased by 32.19% in 2009-2010 when compared to 2008-2009 and increased further to 256.18% in the year 2010-2011 as compared to previous year.
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Ratios of Ultratech Cement Ltd.: Ratios ROE ROCE Debt Equity Ratio Inventory Turnover Ratio Dividend Payout Ratio Dividend Yield Ratio EPS P/E Net Profit Margin Face value Dividend Per Share Year 2010 13.17 13.93 0.39 7.59 13.60 0.53 51.24 22.13 9.68 10.00 6.00 Year 2009 23.73 27.22 0.35 22.65 7.96 0.52 87.82 13.17 15.22 10.00 6.00
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Comments on Ratios: Looking at the Ultratech Cement ratios I found that:
Debt equity ratio has increased which means company has borrowed more debts. It has raised its equity also but increase in debt proportion is more.
Return on Equity has declined which indicates company is providing lesser returns to its investors.
Dividend payout ratio is high as compared to previous year which means company is not putting much money for expansion.
Dividend paid has increased to higher returns to the investors, which is good sign.
The companys EPS has declined. P/E ratio of company has increased by almost 70% which indicates high demand for shares and high share price and high expectation of future profits.
Ultratech Cement Ltd. Chart
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From the above chart it can be analysed that Ultratech Cement Ltd. has almost always under performed the benchmark i.e. sensex and volatility of the stock is almost inline with the benchmark.
6. FINDINGS AND SUGGESTIONS
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6.1 FINDINGS
Comparative Analysis of three companies for one year

Company ACC Ltd. Ambuja Cements Ultratech Cement Share Price (Rs.) 1075.6 (31st Dec 2010) 143.05 (31st Dec 2010) 1133.8 (31st March 2011) EPS 59.6 6 8.26 51.2 4 P/E 18.0 3 17.3 2 22.1 3 Target Price 1193.2 165.2 1024.8
6.2 SUGGESTIONS:
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From the above findings based on EPS and P/E I found that target price (which is for long term) of ACC Ltd is higher than share price of 2010 by Rs.117.60. Investors will get an approximate returns of 11%. According to me those investors who already have these shares should hold the shares and those investors who want to make an investment in share market can invest in shares of ACC Ltd. As P/E ratio has increased as compared to last year which means there is demand for shares of ACC Ltd.
Target price of Ambuja Cement Ltd is 165.2 which is high as compared to price of 143.05 as on 31st December 2010. Investors can expect approximate returns of 15% in future which is calculated taking target price into consideration. So investors should buy these shares. EPS has also increased in the year 2010 as compared to last year which is also a good sign for investors.
In case of Ultratech Cement target price is less as compared to share price in March 2011. So investors should sell shares of Ultratech Cement as shares of Ultratech Cement are expected to go down (WRT) the lower earnings which shows over valued stock. So its better to avoid any new position in this stock.
According to me both the companies ACC Ltd. and Ambuja Cement Ltd are expected to generate good returns in future investors can make an investment in both the stocks but by investing in Ambuja Cements Ltd. investors will get higher returns than by investing in ACC Ltd. and amount required for investing in Ambuja Cements Ltd. is also less.
As per chart analysis also Ambuja Cement Ltd. has always outperformed the benchmark i.e. sensex whereas ACC Ltd. initially was in line with the benchmark
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and then afterwards it outperformed the benchmark and in case of Ultratech cement Ltd. it has always underperformed the benchmark. So Ambuja Cements Ltd is a preferred choice over both ACC Ltd. and Ultratech Cement Ltd.
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7. CONCLUSION
We had done our summer internship as trainee in Birla Sunlife Insurance Company where we were asked to achieve target and, in turn we were being provided training on equity research and wealth management. We were given a traditional plan to sell the policy. This policy was for a long tenure of 22 years or 35 years. When we approached to people we found that people were reluctant to make an investment in this plan for such a long period of time. It was also found that people prefer LIC to make an investment than making an investment in any private company. So it was difficult task to sell this policy. Our training program helped us to understand various aspects of training module. We got knowledge of share market, mutual funds and our mentor advised to make project on equity research or on IPO or on mergers and acquisitions or on mutual funds. We also learnt preparing a dummy portfolio as an activity by choosing stocks and maintaining the NAV.
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8. RECOMMENDATIONS
The training room should be more spacious. There is a need for an improvement in companys system as it takes more time to execute the policy. At times the operational system used to be down and because of that there was delay in login of the policy. To overcome this, the company should have a smooth operational system in place. The policy documents also took time of 15-20 days to reach to the clients which can be improved if the policy gets login on the day when company receives all client details along with money. Interns should be given two-three insurance plans to sell so that it becomes easy for interns to achieve the targets. Smaller duration plans should be promoted as people are ready to invest in such plans. Company should even focus on ULIP plan though it is totally based on equity which is a risky investment but in a period of 10-12 years share market provides good returns to investors. The company should start promoting by emphasizing on its recent achievement of 100% claim settlement. This will surely help them to attract new customers and improve their market position. The company should also come up with innovative products to meet the tough competition.
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Equity Research on Cement Sector

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF MASTER OF MANAGEMENT STUDIES BY

GURPREET SINGH SALUJA ROLL NO. : 2010129

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Signature of the student

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

1. INTRODUCTION AND RESEARCH METHODOLOGY

1.2 OBJECTIVE OF THE STUDY:

Equity Research on Cement Sector

1.4 RESEARCH METHODOLOGY:

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Integrity, Commitment, Passion, Seamlessness, Speed

Equity Research on Cement Sector

Equity Research on Cement Sector

Hewitt Best Employers in India 2004.

Sponsorship Acknowledgement for - The Asia Insurance Review.

Future Business Continuity Plan

BSLIS Business Continuity Management Policy

Equity Research on Cement Sector

Equity Research on Cement Sector

What is Equity Shares?

How to invest in Equity Shares?

Equity Research on Cement Sector

Why should one invest in Equity in particular?

Equity Research on Cement Sector

3.1 FUNDAMENTAL ANALYSIS

Fundamental analysis includes:

Equity Research on Cement Sector

Equity Research on Cement Sector

Approaches to Fundamental Analysis

Equity Research on Cement Sector

Fundamental Analysis Tools

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

3.2 TECHNICAL ANALYSIS

Equity Research on Cement Sector

Equity Research on Cement Sector

The Market Discounts Everything

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Equity Research on Cement Sector

Description Cement Production Cement Despatches

Equity Research on Cement Sector

Key Drivers of Cement Industry

Globalisation of Indian Cement Industry

Equity Research on Cement Sector