Fundamental Analysis 2

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FUNDAMENTAL ANALYSIS
FUTURE OF INDIAN ECONOMY
➢ India is among the world's youngest nations with a median age of 25 years
➢ India has the second largest area of arable land in the world, making it one of the world's
largest food producers - over 200 million tonnes of foodgrains are produced annually.
➢ With the largest number of listed companies -10,000 across 23 stock exchanges,
➢ India's healthy banking system with a network of 70,000 branches is among the largest in
the world
➢ According to a study by the McKinsey Global Institute (MGI), India's consumer market
will be the world's fifth largest (from twelfth) in the world by 2025
Topic: “Fundamental Analysis”

Submitted By: Shankar Kumar
Submitted To: Prof. N. N. Pandey
Enrollment No: 208250 (B1) SIMS GHAZIABAD Date:
19/09/09
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Economy Analysis
2006-07 2007-08
Foreign exchange reserve($) 247.76 309.72

FII ($) 10.3 16.1
FDI ($) 15.7 24.57
The indian economy grew at 9.6 percent in 2006-07 and 9 percent in emerging as the second
fastest growing major economy in the world.
POSITION OF INDIA

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

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Inflation rate in 2009 went up to negative but now it’s improving and came back in
positive. We can expect that till 2010 it will be around 4-5% which is good for our
economy.
Central stastical org.
Per capita income has been increased by Rs. 4207 over last year. So we can say that the
purchasing power of people will also increase. If purchasing power will increase than
there will be demand for goods and service and it will force the producer to produce the
goods and service. So the GDP rate will increase and there will be good condition for
investment in future.

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INVESTMENT IN FIXED ASSETS % OF GDP
This graph is showing that it is increasing year after year.
CONCLUSION

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ECONOMY WILL BE GOOD FOR INVESTMENT IN 1-2 YEARS.

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INDUSTRY ANALYSIS
Industrial production rate
(Annual percentage increase in industrial production (includes manufacturing, mining, and

construction).

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Industry wise Growth Rates of Select Performance Indicators

over the Quarters of 2008-09
(Percent)
Sales Expenditure
Industry / industry group Number of Q1 Q2 Q3 Q4

Q1 Q Q2 Q3 Q4
companies 1
1 2 3 4 5 6 7 8 9 10
1. 1 Tea 25 25.8 35.2 24.9 14.2 22.4 29.9 29.3 21.9

plantation
2. Mining & 35 67.7 41.5 17.7 -11.5 31.5 31.9 31.2 20.1
quarrying
3. Textiles 270 20 15.1 5.3 .7 20.4 16 5.4 1.7
4. Paper & 38 6.9 24.7 16.1 5.3 8.6 27.1 25.3 3.2
paper
products

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5. Pharmaceuti 116 24.6 16.8 11.4 11 24.6 20.8 20.7 6.8

cals &
Medicines
6. Cement & 38 13.3 17.3 13.2 17.9 24.4 28.3 23.5 13.5
cement
products
7. Iron & Steel 117 44 48.1 -1.2 -1.4 45.6 55 11.7 -4.7
8. Construction 73 48.3 41.1 33.3 23.7 47.2 40 37 22.5
9. Computer & 179 22.9 24.4 18.8 7.5 26.1 22.2 17.4 7.7
related
activities
10 Petroleum 15 68.4 79.8 15 -5 97.8 93.8 7.3 -10.3

. refinery
Sales performance of cement industry has increased in last quarter and it is maintaining a
consistent performance quarter after quarter.
Industry wise Growth Rates of Select Performance Indicators

over the Quarters of 2008-09 (Concld.)
Gross profits Expenditure
Industry / industry group Number of Q1 Q2 Q3 Q4 Q1 Q Q2 Q3 Q4

companies Q
1 2 11 12 13 14 15 16 17 18
1. Tea 25 7.6 34.9 2.5 $ -18.5 30.9 -0.1 $

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plantation
2. Mining & 35 183.2 91.5 -13.9 -44.8 225.4 98.5 -19.6 -51.3
quarrying
3. Textiles 270 -19 -20.6 -62.8 -20 -63 -70.3 $ $
4. Paper & 38 -11.4 2.1 -8.1 -8.4 -22.3 -15.7 -25.7 -11.4
paper
products
5. Pharmaceu 116 3.6 -2.4 -27.3 30.6 -10.6 -33.8 -76.2 -26.3
ticals &
Medicines
6. Cement & 38 -9.2 -16.6 -12.5 12.1 -18.7 -22.2 -16.5 9.4
cement
products
7. Iron & 117 34.4 36.6 -77.5 -43.5 27.9 25.8 $ -54
Steel
8. Constructio 73 32.4 35.5 15.4 20.5 38 26.7 62 1.6

n
9. Computer 179 8.7 10.6 3.8 4.7 -2.1 7.9 -5.7 9.2
& related
activities
10. Petroleum 15 14.2 17.8 -9.3 21 14.3 8.5 -71.5 6.4

refinery
Due to economy slowdown the performance of every industries were not good but cement
industry came back with a great rate in the last quarter along with construction.
Percentage change in sales over the quarters of 2008-09

(major industry-wise)

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With the help of this chart we can analyze that only cement industry is that sector
whose sales performance is improving. So we can say that market demand is there
for still and in near future demand for cement will increase.
So according to me cement industry is good industry for investment in next 1-2

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

(Major industry-wise)
Here we can say from this chart that only cement is that industry whose net profit is
increasing and standing on the first rank with the percentage change 9.4%.

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Sectoral contribution to India INC sales (June 09)
In general terms, India will continue to be one of the more attractive emerging markets. This is
owing to the resilience of the Indian economy during this downturn. The fact that valuations are
in line with other key emerging markets, and because the Indian market provides a large
spectrum of stocks & sectors where the global investors can invest.
Thus from a macro perspective, I am positive about the Indian markets. I will not want to focus
on the short - term trends in the Indian economy too much, because in short - term a lot will
depend on how the monsoon plays out and how the recovery across the world shapes up.
I will continue to focus on the more structural aspects of the Indian economy which are likely to
play out over the next few years. Because of:
➢ Positive demographics
➢ Increasing infrastructural spending by government
➢ Increasing consumption level
➢ Increasing rural prosperity

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And likelihood of Indian economy being a relatively

impressive performer on the world stage.
CONCLUSION
INFRASTRUCTURE INDUSTRY WILL BE THE MOST GROWING SECTOR IN THE

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SCOPE FOR INFRASTRUCTURE INDUSTRIES
Performance of Basic Infrastructure Industries

Year on Year growth (%)
PRODUCTION IN INFRASTRUCTURE INDUSTRIES

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December April- December % Change

Industry/Infrastructur Unit 2007 2008 2007-08 2008-09 2007- 2008
e 08
Coal Mn 42.81 46.82 305.75 336.52 3.5 10.1
tonnes
Electricity Generation in Gwh 59236. 59630.6 525935. 539443. 6.6 2.6
1 2 1
Crude petroleum 000 2882 2874 25570 25430 0.3 -0.5
tonnes
Petroleum Products 000 12140 12509 107979 112019 7.5 3.7
tonnes
Finished steel 000 4479 4443 38844 39897 6.4 2.7
tonnes
Cement 000 14630 16320 126830 135700 7.7 7.0
tonnes
Overall growth rate 3.2 2.3 - - 5.9 3.5
During April- December 2008-09, six core infrastructure industries registered a growth of 3.5
percent (provisional) as against 5.9 per cent during the corresponding period of the Previous
year.

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The above graph is showing that the production of COAL has increased at a greatest
pace and rest are decreasing with a major changes but only cement is having a
small change in production. So we can say that cement is still in demand.

PRODUCTION IN INFRASTRUCTURE INDUSTRIES

June April--June June %
Change
Industry/Infrastructure Unit 2008 2009 2008-09 2009-10 2008 2009

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Coal Mn 34.19 39.22 105.50 118.90 6.1 14.7

tonnes
Electricity Generation in Gwh 58533. 62645.5 179377. 189700. 2.6 7.0
7 4 8
Crude petroleum 000 2645 2752 8371 8265 -4.7 4.0
tonnes
Petroleum Products 000 12695 12230 37245 35701 5.6 -3.7
tonnes
Finished steel 000 4503 4742 13124 13542 10.4 5.3
tonnes
Cement 000 15160 17100 46070 51651 6.6 12.8
tonnes
Overall growth rate - - - - 5.1 6.5


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Despite concerns on slowdown leading to excess supply pressure, the 224-million tonne cement
industry has surprisingly shown strong growth in the last six months, after having reported
dismal growth till October 2008. Cement dispatches grew by 8-10% in the last five consecutive
months till May 2009. After a strong revival in cement dispatches, the momentum continued in
the beginning of FY2010 as well. The growth in cement consumption was mainly on account of
higher government spending on infrastructure projects and strong demand from personal home
building activity in rural and semi-urban areas, say industry players.
In line with volume growth, cement prices have also improved. On an all-India basis, cement
prices have increased by Rs15-20 per 50 kg bag from February 2009 to April 2009.
The price hike is again on the back of strong demand arising from infrastructure projects,
personal housing construction in rural and semi-urban areas and supply shortage in some areas.
However, for May 2009, the prices have remained stable across the country.
Conclusion
MENT INDUSTRY WILL BE THE MOST GROWING INDUSTRY AND WILL GOOD

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CEMENT INDUSTRY ANALYSIS
India is the world’s second largest producer of cement after China with industry capacity of over
200 million tonnes (MT)
➢ Total installed capacity was 204.29 MT as on August 31, 2008
➢ Total dispatches have been 100.17 MT during April–October 2008–09.
➢ 100.96 MT during April–October 2008–09.
All India cement figures
yoy growth mom growth

Mn tons Sep-08 Sep-08 Aug-08 % % YTD‘08 YTD’07 YOY
growth
(%)
Production 13.86 12.76 13.16 8.62 5.32 132.08 122.76 7.59
Dispatches 13.87 12.65 13.19 9.64 5.16 131.86 122.37 7.76
Consumption 13.54 12.36 12.91 9.60 4.89 129.98 119.24 9.01

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Cap utization 81.43 88.49 77.30 _ _ 90.05 88.49 _

(%)
REBOUND IN CONSUMPTION GROWTH; CENTRAL AND SOUTH

REGION OUTERFORM.
India’s cement consumption grew 9.6% yoy.

➢ South market witnessed strong demand supporting firm pricing (up 4.7% yoy) in the
region.
➢ The key concern dips in construction and infrastructure activities in the country.

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SWOT ANALYSIS
STRENGTHS
➢ Second largest in the world in terms of capacity
➢ Low cost of production
WEAKNESS
➢ Effect of global recession on Real Estate and Infrastructure.
➢ Demand-Supply gap, Overcapacity
➢ Increasing Cost of Production
➢ High Interest rates
OPPORTUNITIES
➢ Strong growth of economy in the long run.
➢ Increase in infrastructure projects
➢ Growing middle class
➢ Technological Changes
➢ Increase in government spending.
THREATS
➢ Imports from Pakistan affecting markets in Northern India.
➢ Excess over capacity can hurt margins as well as prices.

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COMPANY ANALYSIS
COMPANY CHOOSEN ON THE BASIS OF MARKET

CAPITALIZATION
ACC
AMBUJA
ULTRATECH
SHREE CEMENT

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Market capitalization and P/E ratio (Jun. 09)
High Market capitalization means, any company whose Market capitalization is high than
that company can survive in bad condition also. So this graph shows that Acc is having
more market capitalization as well as higher price earnings ratio.
Sales performance (Rs/cr.)
Company Dec. 07 Dec. 08 June 08 June 09

Acc 5,285 5,477 2063.99 2,119.86
Ambuja 4,253 4,627 1,569.77 1,888.47
Ultratech 3,908 4,523 1,495.98 1,968.86
Shree cement 1,447 1,909 615.11 9,22.95

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Sales stability
The sales performance of every company is declining and again increasing. But we can observe
from this graph that the sales stability has been maintained only by ACC and other’s sales
performance are varying.
Profit (Rs./cr.)
Company Dec. 07 Dec. 08 Variation Jun. 08 Jun. 09 Variation

Acc 1058 847 -20% 271.42 485.62 78.92%
Ambuja 1203 1076 -10.5% 577.02 324.65 -43.74%
Ultratech 725 668 -7.9% 265.01 417.77 57.64%
Shree 258 342 32.6% 110.9 291.13 162.52%
cement
As this table is showing that the profit earned by the Shree cement is very well but its
market capitalization is so low that I cannot go for this company. So after Shree cement
in the sense of profit only Acc is doing well.
GROSS PROFIT RATIO & NET PROFIT RATIO
Gross profit ratio

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A company’s basic strength is its core business activity performance.
Gross profit = (Operating profit/Net Income) *100
Higher the gross profit ratio, better the performance of that company.
Net profit ratio
It identifies the earnings of the business.
Net profit ratio = (Net Profit/Net Income) * 100
Gross Ratio margin & Net Profit margin (%) for ACC

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

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Gross Ratio margin & Net Profit margin (%) for Shree cement
CONCLUSION
AMBUJA IS GETTING MAXIMUM FROM ITS CORE BUSINESS SO THIS COMPANY IS PERFORMING WELL.

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Dividend by Acc
Dividend by Ambuja

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Dividend by Ultratech
Dividend by Shree cement

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CONCLUSION FOR DIVIDEND
ND PAID BY ACC IS MORE THAN OTHERS AND ALSO IN THE CONSISTAN
Quick Ratio (Acid Test Ratio)
This is one of the tool which is used to measure the liquidity of a company.
Quick Ratio = (quick assets/current liabilities)
Quick assets are the assets that can be easily converted into cash or cash
equivalents. The current asset that is a major problem to business
enterprises is the INVENTORY. Inventory has to be converted into sales to
make it a cash equivalent.
A very low ratio indicates the short-term debt trap of a company and a very
high ratio compared to the industry standards indicates too much of asset
holding that do not yield high returns to the company.
Quick ratio (Acc)

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Quick ratio (Ambuja)
Quick ratio (ultratech)

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Quick ratio (Shree cement)
CONCLUSION FOR QUICK RATIO
NLY ACC IS ABLE TO KEEP THIS RATIO LOW WHICH INDICATES THE PO
Debt Equity Ratio

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This measures how much debt a company has compared to its equity. If this
ratio is 1, then the company still has the equity backup to borrow further. If
this ratio is more than 2, then it is considered as risky.
Acc Ltd.
Ambuja

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Ultratech
Shree cement

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Conclusion for D/E Ratio
IS MAKING THE BALANCE YEAR AFTER YEAR AND MAINTAINED TO LIVE BELOW THE R
Inventory turnover ratio
Company 2008 2007 2006 2005

Acc 24.85 22.40 17.69 12.29
Ambuja 11.13 17.19 9.55 9.07
Ultratech 31.16 34.61 21.20 11.04
Shree cement 28.34 15.74 11.14 20.27
Here Ultratech is doing well but its performance is not so consistence so it is not easy to say that
what will be this ratio in future. But Acc is improving regularly.
CONCLUSION FOR THE COMPANY

OD RETURN ON IVESTMENT WITHOUT CONSIDERING OF MUCH RISK.
SO FOR
19/09/09
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BIBLIOGRAPY
➢ Dalal Street
➢ BS 1000
➢ RBI Bulletin
➢ Economic survey
➢ Internet
➢ Books

19/09/09

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Page 1 of 36

FUTURE OF INDIAN ECONOMY

Topic: “Fundamental Analysis”

Foreign exchange reserve($) 247.76 309.72

Topic: “Fundamental Analysis”

GDP GROWTH RATE

Topic: “Fundamental Analysis”

Central stastical org.

Topic: “Fundamental Analysis”

INVESTMENT IN FIXED ASSETS % OF GDP

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

Topic: “Fundamental Analysis”

ECONOMY WILL BE GOOD FOR INVESTMENT IN 1-2 YEARS.

Topic: “Fundamental Analysis”

Industrial production rate

(Annual percentage increase in industrial production (includes manufacturing, mining, and

Topic: “Fundamental Analysis”

Industry wise Growth Rates of Select Performance Indicators

Industry / industry group Number of Q1 Q2 Q3 Q4

1. 1 Tea 25 25.8 35.2 24.9 14.2 22.4 29.9 29.3 21.9

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

Topic: “Fundamental Analysis”

5. Pharmaceuti 116 24.6 16.8 11.4 11 24.6 20.8 20.7 6.8

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

10 Petroleum 15 68.4 79.8 15 -5 97.8 93.8 7.3 -10.3

Industry wise Growth Rates of Select Performance Indicators

Gross profits Expenditure

Industry / industry group Number of Q1 Q2 Q3 Q4 Q1 Q Q2 Q3 Q4

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

Topic: “Fundamental Analysis”

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

8. Constructio 73 32.4 35.5 15.4 20.5 38 26.7 62 1.6

10. Petroleum 15 14.2 17.8 -9.3 21 14.3 8.5 -71.5 6.4

Percentage change in sales over the quarters of 2008-09

Topic: “Fundamental Analysis”

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

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

Topic: “Fundamental Analysis”

Sectoral contribution to India INC sales (June 09)

Topic: “Fundamental Analysis”

And likelihood of Indian economy being a relatively

INFRASTRUCTURE INDUSTRY WILL BE THE MOST GROWING SECTOR IN THE

Topic: “Fundamental Analysis”

SCOPE FOR INFRASTRUCTURE INDUSTRIES

Performance of Basic Infrastructure Industries

PRODUCTION IN INFRASTRUCTURE INDUSTRIES

Topic: “Fundamental Analysis”

December April- December % Change

Topic: “Fundamental Analysis”

Performance of Basic Infrastructure Industries

Performance of Basic Infrastructure Industries

PRODUCTION IN INFRASTRUCTURE INDUSTRIES

Topic: “Fundamental Analysis”

Coal Mn 34.19 39.22 105.50 118.90 6.1 14.7

Performance of Basic Infrastructure Industries

Topic: “Fundamental Analysis”

Topic: “Fundamental Analysis”

CEMENT INDUSTRY ANALYSIS

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

➢ Total dispatches have been 100.17 MT during April–October 2008–09.

➢ 100.96 MT during April–October 2008–09.

All India cement figures

yoy growth mom growth