MBA Project on Fundamental and Technical Analysis of Kotak Bank - Copy

Fundamental And Technical Technical Analysis

EXECUTIVE SUMMARY: In the recent past, the bank interest rates have been increased increased steadily. steadily. But the rate of Inflation has also been increased. There is no big difference between the inter interest est rate rate and Infla Inflati tion on rate. rate. Beca Because use of infla inflati tion, on, value value of mo money ney has been been decreased and cost of living has been increased. increased. This has created panic among lower, middle and upper middle class families who considered keeping their savings in banks as safe as well as remunerative. remunerative. So, the invertors are searching searching for proper investment investment avenues. ere, an attempt is made to predict the future movement of scrips. This study helps the investors to invest in shares.

India has registered a growth rate of !." percent in F# $%%&'%! and is e(pected to grow at the rate of )%* plus in this fiscal year, and is one of the fastest growing economies in the world. It is one of the ma+or attractions for FIs and FIIs. FIIs invest in India through secondary -arkets. There is a great scope for India for becoming member of '! nations nation s committee.

The stock e(change comes in the secondary market. Stock e(change performs activities such as trading in share, securities, bonds, mutual fund / commodities. Stock Broking industry is growing at an enormous rate, as more and more people are attracted towards stock e(changes with the hope of making profits.

But during this period the country also registered a fairly high industrial growth. The old industries and business establishments who wanted to e(pand the activities activities as well as the new industries industries and the business establishments establishments floated shares in the market to raise capital for their activities. The companies, which registered steady growth, earned confidence of the people and their shares, were rated high in the market.


This pro+ect report helps the reader to understand the techni0ues of investing in th thee st stock ock ma marke rkett pa parti rticu cular larly ly in th thee sec second ondar ary y ma mark rket. et. So Some me of th thee pro prove ven n techni0ues have been used in this report to help the reader or investor. Fundamental Analysis is the study of everything from the overall economy

and industry industry conditions conditions,, to the financia financiall conditi condition on and managem management ent of specifi specificc companies 1i.e., using real data to evaluate a stocks value2.

Technical analysis is the e(amination of past price movements to forecast

future price movements. Technical analysts are sometimes referred to as chartists because they rely almost a lmost e(clusively on charts cha rts for their analysis.

Objecties !" the study:

To know the future movement of selected companies shares through fundamental and technical analysis.

Sub ob+ectives o

To predict the future price of the selected companies shares.

o

To study study the strategies to be adopted by the retail investors based on the technical and fundamental analysis.

o

To know the floor and cap price of the stock.

o

To analy3e individual company scrip by considering the factors relating to the economy, industry and the respective company.

o

To predict investor positions 1Buy, sell / hold2 based on historical price trends and the likely company prospects.


Findings and suggestion: EXPECTED MARKET PRICE OF BHEL year particulars 2008 F"#D F"#DAM AME# E#T TAL A#ALI #ALI$I $I$ $ 2!%2 2!%2&% &%0 0 TECH#ICAL A#AL*$I$ curre curre+t +t ,ar-et ,ar-et price. price.%!/ %!/0% 0%/0 /08 8

20!0 %(2 %(2&) &)2 2

$4 %%

5& 4%

210)! 210)!&% &%

EXPECTED MARKET PRICE OF L3T year Particulars 2008 F"#D F"#DAM AME# E#T TAL A#ALI #ALI$I $I$ $ 2%2 2%2&% &%% % TECH#ICAL A#AL*$I$ curre+t ,ar-et price

200 2'0' 2'0'&( &(2 2

200 2(! 2(!&% &%8 8

20!0 28( 28(&( &(! !

664%

800

%102(&80

I78IA7 ST9:; -A<;=T OVERVIE# OF E$UITY MAR%ET I& I&'IA

Fundamental And Technical Analysis

BS= 1Bombay Stock =(change2 SENSEX - THE BAROMETER OF INDIAN CAPITAL MARKETS Int(!ducti!n:

For the premier Stock =(change that pioneered the stock broking activity in India, )$! years of e(perience seems to be a proud milestone. A lot has changed since )!&4 when 5)! persons became members of what today is called >The Stock =(change, -umbai> by paying a princely amount of
print as well

as electronic media.

The Inde( was initially calculated based on the >Full -arket :apitali3ation> methodology but was shifted to the free'float methodology with effect from September ), $%%5. The >Free'float -arket :apitali3ation> methodology of inde( construction is regarded as an industry best practice globally. All ma+or inde( providers like -S:I, FTS=, ST9, S/ and 8ow Cones use the Free'float methodology. 8ue to its wide acceptance amongst the Indian investors, S=7S= is regarded to be the pulse of the Indian stock market. As the oldest inde( in the country, it provides the time series data over a fairly long period of time 1From )@&@ onwards2. Small wonder, the S=7S= has over the years become one of the most prominent brands in the country.


The growth of e0uity markets in India has been phenomenal in the decade gone by.
&SE /&ATIO&A0 STOC% EXC1A&2E3 The O(4ani5ati!n:

The 7ational Stock =(change of India Dimited has genesis in the report of the igh owered Study roup on =stablishment of 7ew Stock =(changes, which recommended promotion of a 7ational Stock =(change by financial institutions 1FIs2 to provide access to investors from all across the country on an e0ual footing. Based on the recommendations, 7S= was promoted by leading Financial Institutions at the behest of the overnment of India and was incorporated in 7ovember )@@$ as a ta(' paying company unlike other stock e(changes in the country. 9n its recognition as a stock e(change under the Securities :ontracts 1
The 7ifty is relatively a new comer in the Indian market. S/ :7 7ifty is a 4% stock inde( accounting for $5 sectors of the economy. It is used for purposes such as benchmarking fund portfolios inde( based derivatives and inde( funds. The base period selected for 7ifty is the close of prices on 7ovember 5, )@@4, which marked the completion of one'year of operations of 7S=?s capital market segment. The base value of inde( was set at )%%%. S/ :7 7ifty is owned and managed by India Inde( Services and roducts Dtd. 1IISD2, which is a +oint venture between 7S= and :

have a consulting and licensing agreement with Standard / oor?s 1S/2, who are world leaders in inde( services.

FII in Indian stock market As part of its initiative to liberali3e its financial markets, India opened her doors to foreign institutional investors in September, )@@$. This event represents a landmark event since it resulted in effectively globali3ing its financial services industry. *ear !2/% !%/( !(/ !/) !)/' !'/8 !8/ !/00 2000/0! 200!/02 2002/0% 200%/0( 200(/0 200/0) 200)/0'

+et i+4est,e+t 5y FII (&2' (((&) ('')&) )'20& '%8)&2 08&( / '2&!! ')&!% )82&2 82'2& 2))8& ((000&0% (!(!)&( )'(%2&%( (%2'&8'

Ehat does India 7eed ' F8I or FII F8I usually is associated with e(port growth. It comes only when all the criteria to set up an e(port industry are met. That includes, reduced ta(es, favorable labor law, freedom to move money in and out of country, government assistance to ac0uire land, full grown infrastructure, reduced bureaucratic involvement etc. IT, B9, Auto arts, harmaceuticals, une(plored service sectors including accounting drug testing, medical care etc are key sectors for foreign investment. -anufacturing is a brick and mortar investment. It is permanent and stays in the country for a very long time. uge investments are needed to set this industry. It provides employment potential to semi skilled and skilled labor. 9n the other hand the service sector re0uires fewer but highly skilled workers. Both are needed in India. :onventional wisdom is that :hina will have an upper hand in manufacturing for a long time. If


India plays its cards right India may be the hub for the service sector. Still high end manufacturing in auto parts and pharmaceuticals should be Indias target. The FII 1Foreign Institutional Investor2 is monies, which chases the stocks in the market place. It is not e(actly brick and mortar money, but in the long run it may translate into brick and mortar. Sudden influ( of this drives the stock market up as too much money chases too little stock. In last four months an influ( of about G).4 Billion has driven the Indian stock market $%* higher. Ehere F8I is a bit of a permanent nature, the FII flies away at the shortest political or economical disturbance. The late nineties economic disaster of Asian Tigers is a key e(ample of the latter. 9nce this money leaves, it leaves ruined economy and ruined lives behind. ence FII is to be welcomed with strict political and economical discipline. :hina receives mainly the F8I. They do not have instruments to receive the FII i.e. laws, institutions and political and +udicial framework. 9n the contrary, India should welcome both and work hard to retain both.

I&TRO'UCTIO& TO %OTA% SECURITIES


T1E %OTA% MA1I&'RA 2ROU6:

The ;otak -ahindra roup was born in )@!4 as ;otak :apital -anagement Finance Dimited. This company was promoted by Hday ;otak, Sidney A. A. into and ;otak / :ompany. Industrialists arish -ahindra and Anand -ahindra took a stake in )@!", and that?s when the company changed its name to ;otak -ahindra Finance Dimited. ;otak -ahindra is one of India?s leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates. As on 8ecember 5), $%%", the group has a net worth of over
$.$

million.

The group speciali3es in offering top class financial services, catering to every segment of the industry. The various group companies include ). ;otak -ahindra :apital :ompany Dimited $. ;otak -ahindra Securities Dimited 5. ;otak -ahindra Inc 6. ;otak -ahindra 1International2 Dimited 4. lobal Investments 9pportunities Fund Dimited ". ;otak -ahindra 1H;2 Dimited &. ;otak Securities Dimited !. ;otak -ahindra 9ld -utual Dife Insurance :ompany Dimited @. ;otak -ahindra Asset -anagement :ompany Dimited )%. ;otak -ahindra Trustee :ompany Dimited )). ;otak -ahindra Investments Dimited )$. ;otak Fore( Brokerage Dimited )5. ;otak -ahindra rivate'=0uity Trustee Dimited )6. ;otak -ahindra rime Dimited


;otak -ahindra has international partnerships with oldman Sachs 1one of the world?s largest investment banks and brokerage firms2, Ford :redit 1one of the world?s largest dedicated automobile financiers2 and 9ld -utual 1a large insurance, banking and asset management conglomerate2. %!ta7 Secu(ities , an affiliate of ;otak -ahindra Bank, is the stock'broking

and distribution arm of the ;otak -ahindra roup. The institutional business division, which provides A;S=SS, primarily covers secondary market broking. It caters to the needs of foreign and Indian institutional investors in Indian e0uities 1both local shares and 8
The accolades that ;otak Securities has been graced with include

). rime

them. ;otak Securities has )@4 branches servicing more than $,$%,%%% customers and a coverage of $5) :ities. ;otaksecurities.com, the online division of ;otak Securities Dimited offers Internet Broking services and also online I9 and -utual Fund Investments. ;otak Securities Dimited manages assets over $4%% crores of Assets Hnder -anagement 1AH-2 .The portfolio -anagement Services provides top class service, catering to the high end of the market. ortfolio -anagement from ;otak Securities comes as an answer to those who would like to grow e(ponentially on the crest of the stock market, with the backing of an e(pert.

I#TROD"CTIO# TO THE TOPIC FU&'AME&TA0 A&' TEC1&ICA0 TEC1 &ICA0 A&A0YSIS: A&A0YSIS:


Fundamental analysis The basic purpose of buying a security is to earn dividends and ultimately ultimately sell it at higher price. An investor therefore is interested in obtaining estimates of future prices of the share. These in turn will depend upon u pon the performance of the industry to which the company belongs and the general economic situation of the country. The multitude of factors affecting a companys profitability can be broadly classified as

). =conomic wide factors these includes the factors like growth rate of the econom economy y, the the rate rate of infl inflati ation, on, forei foreign gn e(chan e(change ge rates rates etc whic which h affe affect ctss profitability of all co mpanies.

$.

Indu Industr stry y wide wide factor factors s these include factors which are specific to industry to which the company belongs. For instance the demand supply gap in the industry, the emergence of substitutes, and changes in government policies towards industry indu stry affects the company belonging be longing to an industry. industr y.

5. :omp specificc to a firm firm.. Th Thee firm firm :ompan any y wide wide fact factor or these factors are specifi specific factors like plant and machinery, machinery, the brand image of the product, and ability of the management to affect the profitability. Fundame Fund amental ntal anal analysi ysiss cons conside iders rs the fina financia nciall and eco economi nomicc data tha thatt may influence the viability of a company. There There are many flavors of fundamen fundamental tal analysis centered on such concepts as value, growth and turnarounds. Technical analysis is the study of the price chart. It assumes that by looking at the progress of that little s0uiggly line you can forecast the future trend of a stock. Fundamental analysis is essential to most investors, and technical analysis is essential to most traders and speculators.

An investor with rational and scientific approach will therefore be interested in analy3ing the influence of the e(pected performance of the company, industry and


economy as a whole on share prices, even before taking the investment investment decision such analysis is called fundamental analysis.

Fundamental analysis is the method of evaluating securities by attempting to measure the intrinsic intrinsic value of a particular particular stock. It is the study of everything from the overall economy and industry conditions, to the financial condition and management of specific companies 1i.e., using real data to evaluate a stocks value2. The method utili3es items such as revenues, earnings, return on e0uity and profit margins to determine a companys underlying value and potential for future growth.

9ne of the ma+or assumptions assumptions under fundamental analysis analysis is that, even though things get mis priced in the market from time to time, the price of an asset will eventu eventuall ally y gravit gravitat atee towa toward rd its its true true value. value. Th This is seems seems to be a reason reasonab able le bet consider considering ing the long upward march of 0uality 0uality stocks stocks in general general despite despite regular regular setbacks and periods of irrational e(uberance. The key strategy for the fundamentalist is to buy when prices are at or below this intrinsic value and sell when they got overpriced.

TEC1&ICA0 A&A0YSIS: A&A0YSIS:

Technical analysis is the e(amination of past price movements to forecast

future price movements. Technical analysts are sometimes referred to as chartists because they rely almost a lmost e(clusively on charts cha rts for their analysis.


M!in4 Ae(a4e:

A -oving Average is an indicator that shows the average value of a security?s price over a period of time. Ehen calculating a moving average, a mathematical analysis of the security?s average value over a predetermined time period is made. As the securities price changes, its average price moves up or down. There are several popular ways to calculate a moving average. -eta Stock for Cava calculates a >simple> moving average''meaning that e0ual weight is given to each price over the calculation period. Inte(8(etati!n :

The most popular method of interpreting a moving average is to compare the relationship between moving averages of the security?s price with the security?s price itself. A buy signal is generated when the security?s price rises above its moving average and a sell signal is generated when the security?s price falls below its moving average.

This type of moving average trading system is not intended to get you in at the e(act bottom nor out at the e(act top.

The advantage of moving average system of this type 1i.e., buying and selling when prices break through their moving average2 is that you will always be on the >right> side of the market prices cannot rise very much without the price rising above its average price. The disadvantage is that you will always buy and sell some late. If the trend does not last for a significant period of time, typically twice the length of the moving average, you will lose your money. Su88!(t and Resistance:

Support and resistance represent key +unctures where the forces of supply and demand meet. In the financial markets, prices are driven by e(cessive supply 1down2 and demand 1up2. Supply is synonymous with bearish, bears and selling. 8emand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. Ehen supply and demand are e0ual, prices move sideways as bulls and bears slug it out for control. #hat Is Su88!(t9

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell andJor a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their e(pectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. 9nce support is broken, another support level will have to be established at a lower level.


#he(e Is Su88!(t Established9

Support levels are usually below the current price, but it is not uncommon for a security to trade at or near support. Technical analysis is not an e(act science and it is sometimes difficult to set e(act support levels. In addition, price movements can be volatile and dip below support briefly. Sometimes it does not seem logical to consider a support level broken if the price closes )J! below the established support level. For this reason, some traders and investors establish support 3ones. #hat Is Resistance9

#he(e Is Resistance Established9


So, ere, Identification of key support and resistance levels is an essential ingredient to successful technical analysis. =ven though it is sometimes difficult to establish e(act support and resistance levels, being aware of their e(istence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be e(tra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. If a support or resistance level is broken, it signals that the relationship between supply and demand has changed. A resistance breakout signals that demand 1bulls2 has gained the upper hand and a support break signals that supply 1bears2 has won the battle.

6(ice Oscillat!(:

The rice 9scillator displays the difference between two moving averages of a security?s price. The difference between the moving averages can be e(pressed in either points or percentages. The rice 9scillator is almost identical to the -A:8, e(cept that the rice 9scillator can use any two user'specified moving averages. 1The -A:8 always uses )$ and $"'day moving averages, and always e(presses the difference in points.2

Inte(8(etati!n:

-oving average analysis typically generates buy signals when a short'term moving average 1or the security?s price2 rises above a longer'term moving average. :onversely, sell signals are generated when a shorter'term moving average 1or the security?s price2 falls below a longer'term moving average. The rice 9scillator illustrates the cyclical and often profitable signals generated by these one or two moving average systems. 6(ice Rate-O"-Chan4e:


The rice <9:>2 indicator displays the difference difference between the current price and the price price ('time periods periods ago. The difference difference can be displayed displayed in eithe eitherr point pointss or as a perce percenta ntage. ge. Th Thee -om -omen entum tum indic indicato atorr displa displays ys the same same information, but e(presses it as a ratio. Inte(8(etati!n:

It is a well'recogni3ed phenomenon that security prices surge ahead and retract in a cyclica cyclicall wave'li wave'like ke motion. motion. This This cyclic cyclical al action action is the result result of the changing changing e(pectations as bulls and bears struggle to control prices. The <9: displays the wave'like motion in an oscillator format by measuring the amount that prices have changed changed over a given time period. As prices prices increase, the <9: rises as prices prices fall, the <9: falls. falls. The greater greater the change in prices, the greater greater the change in the <9:. The time period used to calculate the <9: may range from )'day 1which results in a volatile chart showing the daily price change2 to $%%'days 1or longer2. The most popular time periods are the )$' and $4'day <9: for short to intermediate' intermediate' term term tradi trading. ng. Th These ese time time perio periods ds were were pop popul ulari ari3e 3ed d by era erald ld Appel ppel and Fred Fred itschler in their book, Stock -arket Trading Systems. T he

)$'day

<9 :

is

an

e(cellent

short'

to

intermediate'term

overboug overboughtJ htJover oversold sold indicator indicator.. The higher the <9:, <9:, the more more overboug overbought ht the secu securi rity ty the the lowe lowerr the the <9:, <9:, the the mo more re like likely ly a rall rally y. owe oweve verr, as with with all all overboughtJoversold overboughtJoversold indicators, indicators, it is prudent to wait for the market to begin to correct 1i.e., turn up or down2 before placing your trade. A market that appears overbought overbought may remain overbought overbought for som somee time. time. In fact, fact, e(treme e(tremely ly overboug overboughtJo htJovers versold old readings usually imply a continuation of the current trend. The )$'day <9: tends to be very cyclical, oscillating back and forth in a fairly regular cycle. cycle. 9ften, price changes changes can be anticipated by studying the previous cycles of the <9: and relating the previous cycles to the current market


Relatie St(en4th Inde /RSI3:

The 1>22 is a popular popular oscillator oscillator.. It was first first introduced by Eelles Eilder in an article in :ommodities 1now known as Futures2 -aga3ine in Cune, )@&!. The name > is slightly misleading as the Internal >Internal Strength Inde(.> Inte(8(etati!n:

Ehen Eilder introduced the failure swing.> The failure swing is considered a confirmation of the impending reversal. In -r. Eilder?s book, he discusses five uses of the

5. Failu(e 1also o know known n as supp suppor ortt or resi resist stan ance ce pene penetr trat atio ions ns or Failu(e S=in4s S=in4s 1als breakouts2. This is where the
T(end lines:

In the preceding section, we saw how support and resistance levels can be penetrated by a change in investor e(pectations 1which results in shifts of the supplyJ supp lyJdema demand nd lines2. lines2. This This type type of a change change is often often abrupt and >news >news based.> based.>

In this section, we?ll review >trends.> A trend represents a consistent change in prices 1i.e., a change in investor e(pectations2. Trends differ from supportJresistance supportJresistan ce levels in that trends represent change, whereas supportJresistance levels represent barriers to change. change .


As shown in the following chart, a rising trend is defined by successively higher low'prices. A rising trend can be thought of as a rising support level''the bulls are in control and are pushing prices higher.

As shown in the ne(t chart, a falling trend is defined by successively lower high'prices. A falling trend can be thought of as a falling resistance level''the bears are in control and are pushing prices lower.

The ;a( Cha(t:

The Bar chart is one of the most popular types of charts used in technical analysis. As illustrated on the left, the top of the vertical line indicates the highest price at which a security traded during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar and the opening price is shown on the left side of the bar. A single bar like the one to the left represents one day of trading.


The chart below is an e(ample of a bar chart for AT/T 1T2

The advantage of using a bar chart over a straight'line graph is that it shows the high, low, open and close for each particular day. Candle stic7s Cha(tin4:

:andlestick charts have been around for hundreds of years. They are often referred to as >Capanese candles> because the Capanese would use them to analy3e the price of rice contracts. Similar to a bar chart, candlestick charts also display the open, close, daily high and daily low. The difference is the use of color to show if the stock went up or down over the day.


T6e c6art 5el7 is a+ e9a,ple 7: a ca+;lestic- c6art :7r AT3T .T&
I+4est7rs see, t7 6a4e a >l74e?6ate> relati7+s6ip it6 ca+;lesticc6arts& Pe7ple eit6er l74e t6e, a+; use t6e, :re@ue+tly 7r t6ey are c7,pletely tur+e; 7:: 5y t6e,& T6ere are se4eral patter+s t7 l77- :7r it6 ca+;lestic- c6arts / 6ere are a :e 7: t6e p7pular 7+es a+; 6at t6ey ,ea+&

This is a bullish pattern ' the stock opened at 1or near2 its low and closed near its high

&


The opposite of the pattern above, this is a bearish pattern. It indicates that the stock opened at 1or near2 its high and dropped substantially to close near its low.

;nown as >the hammer>, this is a bullish pattern only if it occurs after the stock price has dropped for several days. A small body along with a large range identifies a hammer. This pattern indicates that a reversal in the downtrend is in the works.

;nown as a >starK. For the most part, stars typically indicate a reversal and or indecision. There is a possibility that after seeing a star there will be a reversal or change in the current trend.

6!int and Fi4u(e Cha(t:

The point / figure 1/F2 chart is somewhat rare. In fact, most charting services do not even offer it. This chart plots day'to'day increases and declines in price increases are represented by a rising stack of >>s, while decreases are represented by a declining stack of >9>s. This type of chart was traditionally used for intraday charting 1a stock chart for +ust one day2, mainly because it can be long and tedious to create a /F chart manually over a longer period of time.

The idea behind /F charts is that they help you to filter out less significant price movements and to focus on the most important trends. Below is an e(ample of a /F chart for AT/T 1T2


6O6U0AR C1ARTI&2 6ATTER&S:


Technical analysts often use proven successful price patterns from great stocks as tools to find new great stocks. Det?s look at a few e(amples •

Cu8 and 1andle ' This is a pattern on a bar chart that can be as short as seven

weeks and as long as "4 weeks. The cup is in the shape of a >H>. The handle has a slight downward drift. The right'hand side of the pattern has low trading volume. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for anywhere from four days to four weeks, then it will take off. This pattern looks like a pot with a handle. It is one of the easier patterns to detect and investors have made a lot of money using it.

•

1ead and Sh!ulde(s ' This is a chart formation resembling an >-> in which a

stock?s price

'

The first and third peaks are shoulders, and the second peak forms the head. This pattern is considered a very bearish indicator.


•

'!uble ;!tt!m ' This pattern resembles a >E> and occurs when a stock price

drops to a similar price level twice within a few weeks or months. #ou should buy when the price passes the highest point in the handle. In a perfect double bottom, the second decline should normally go slightly lower than the first decline to create a shakeout of +ittery investors. The middle point of the >E> should not go into new high ground. This is a very Bullish indicator.

The belief is that, after two drops in the stock price, the +ittery investors will be out and the long'term investors will still be holding on.


Importance of pro+ect ). The pro+ect gives thorough knowledge of fundamental and technical analysis $. In this pro+ect report the =ngineering sector is analy3ed by considering budget and demand and supply of the industry. 5. In the pro+ect report the $ companies have selected and analy3ed the companys future market price by two distinct theories. 6.

9b+ective of the study Main !bjectie:

To know the future movement of selected companies shares through fundamental and technical analysis. Sub !bjecties o

To predict the future price of the selected companies shares.

o

To study the strategies to be adopted by the retail investors based on the technical and fundamental analysis.

o

To know the floor and cap price of the stock.

o

To analy3e individual company scrips by considering the factors relating to the economy, industry and the respective company.

o

To predict investor positions 1Buy, sell / hold2 based on historical price trends and the likely company prospects.

'ata c!llectin4 meth!d!l!4y

The data collected for the study is secondary data. The data I have used for the study is ). istorical shares value of the stocks collected from I:I:I 8I<=:T<:9-. $. The balance sheet and Income statement got from companies web site. 5. Some of the information about the industry is collected from other financial web site.


T1E MEASUREME&T TEC1&I$UE

The following techni0ues are used for the study. ). Simple moving average. 4. =(ponential moving average 1=-A2 ". The relative strength inde( 1
0IMITATIO&S OF T1E STU'Y:

). The study is limited only to these $ sectors and 6 companies. $. ere, an attempt is made to predict the future movement stock. It contains an element of guess work 5. ere, I have used only 5 Technical tools to predict the movement of Scrips


Technical analysis !" selected sect!( s!c7s is as "all!=s

ere you can see the charts of B=D, D/T and 7IFT# which is designed 1derived2 by -S =(cel sheet. For calculating of
A simple moving average is formed by computing the average 1mean2 price of a security over a specified number of periods. Ehile it is possible to create moving averages from the 9pen, the igh, and the Dow data points, most moving averages are created using the closing price. For e(ample a 4'day simple moving average is calculated by adding the closing prices for the last 4 days and dividing the total by 4. =( if the closing prices are as follows )%, )), )$, )5, )6, )&, )$MMMMM )%N))N)$N)5N)6O"% 1"%J42O)$ ere )$ is a first moving average obtained from the given closing prices, ne(t moving average can be calculated by deducting first cl price i.e )% and adding ne(t cl. rice i.e )& and again dividing it by 4.

E8!nential M!in4 Ae(a4e /EMA3 In order to reduce the lag in S-A, technicians often use =-A. =-A?s reduce the lag by applying more weight to recent prices relative to older prices. The weighting applied to the most recent price depends on the specified period of the moving average. The shorter the =-A?s period, the more weight that will be applied to the most recent price. For e(ample a )%'period =-A weighs the most recent price )!.)!* while a $%'period =-A weighs the most recent price @.4$*. As such, it will react 0uicker to recent price changes than a S-A. ere?s the calculation formula


EMA /cu((ent3 > //8(ice /cu((ent3-EMA /8(e33  multi8lie(? EMA/8(e3 Ehere, -ultiplier P $JnN) n' 7umber of days for which =-A is calculated If we take the same e(ample of S-A 4 day =-A is calculated as follows. =-AO 1)$'))2  %.""" N )) O ))."" Ehere multiplier O $J 14 N)2 O %.""" For ne(t =-A ))."" acts as previous =-A and so on

Relatie St(en4th Inde<

8eveloped by C. Eelles Eilder and introduced in his )@&! book, 7ew :oncepts in Technical Trading Systems  the

BHEL Company Charts


). Short term moving averages of B=D :ompany.

$. Dong'term moving averages of B=D :ompany.


Interpretation for short term moving averages ). The above chart of B=D is of short term analysis say for e(ample )4 days to "% days. $. The above chart shows support and resistance level which is shown by arrow mark above. 5. The chart shows the buying and selling signals which is shown in red green and red arrow marks and circle is the point which specifies the e(act price to buy or sell the stock. 6. And from above chart one can see the trend line violation which is shown by black arrow mark.

Interpretation for long term moving averages ). As we can see from the above chart the buy and sell levels are

5. ere in long term moving average chart one can see that the $4 days S-A going upwards and )$4 days =-A coming downwards. So if in future the $4 days S-A goes upwards and crosses the )$4 days =-A then again the bull run rally start.

Target price for B=D according to Technical charts ). At the beginning of the chart the support level is around
after its resistance in august $%%" at
5. After breaking its resistance of
Ta(4et 8(ices "!( ;1E0 Su88!(t- ),.. Resistance- @). Ta(4et 8(ice- @).-),..>B.


The(e "!( > B. ? @).> @.. 0!n4 te(m ta(4et Su88!(t- ),. Resistance- @,.. Ta(4et 8(ice- @,..-),.>*. The(e "!( > *. ? @,..> B+.

5. )6 days

L&T company Charts


). Short term moving average of D/T :ompany


$. Dong term moving averages of D/T

Interpretation for short term moving average ). The stock is showing upward trend line from Aug $%%" to Cune $%%&. $. There is a buy signal on -arch $%%& at
Interpretation for long term moving average ). The long term moving average of D/T stock is bit attractive which is showing 5 phases of Bull
Target price for D/T according to Technical charts


Sh!(t te(m ta(4et Su88!(t- @,.. Resistance- B. Ta(4et 8(ice- B.-@,..>,. The(e "!( > ,.?B.>DD.

0!n4 te(m ta(4et Su88!(t- @,.. Resistance- DB.. Ta(4et 8(ice- DB..-@,..>).. The(e "!( > DB..-)..>,..

5. )6 8A#S

). At present the D/T :ompany


Nifty Charts

). 7IFT# moving averages


$.
Analysis: /Sh!(t te(m !( inte(mediate3

).

If we look at @% day =-A of 7ifty chart, for the past one and half year the

trend

has been Bullish.

$.

From $%th Can $%%! onwards there has been shift in the trend towards Bearish.

5.

The )!day =-A / S-A of 7ifty has broken down below @% day =-A. So

this is

one more conclusive evidence for reversal of trend from Bull to Bear.

Immediate Futu(e:

As we can see from the graph it is clear that market is finding support at 664% to 6"%%1which is previous resistance for the market2. At this level market is likely to consolidate for the medium time period.

Si4ni"icance !" Futu(e T(end:

In future unless and until market finds re0uired strengths to come to the previous level i.e. resistance at 4"5% P 4%, there will be no signs of market turning Bullish.


And if in future market breaks the resistance level i.e. 4"5%'4% then it will rally up to *,.-+.@.< 1Target2

0!n4 te(m analysis

).

-arket is sentiment driven and swings and hypes in market are so strong that

they prevail even for years that have happened at present. $.

There has been shift in market trend and it has turned bearish though there is

no clear sign of bear trend 1its a long term correction not e(actly bearish2 but present situation is of complete chaos has left market in a state of volatility so we should wait and see market movement closely. 5.

-arkets long term support is at 5))!'5)5% and ne(t support is at 64%% level

so ne(t rally from that level 64%% is )5!%')6%%164%%'5))%2 and we can see some )4%' $%% points abortive rally has been occurred and has reached "%4%. 6.

At that level market was waiting for correction. Bad clues from HS slow down

had made market to take DT correction and market has turned to be volatile and has yet to settle down at previous support of 64%%.

Sh!(t te(m analysis:

)2 T(end sh!(t te(m !( inte(mediate t(end "!( the sc(i8 has been "lat< &!= tu(nin4 in t! bea(ish<

$2 %ey sh!(t te(m su88!(t and (esistance leels "!( the sc(i8< As we can see from the )% day =-A /S-A graph the scrip has established strong support at )5%')6% price band.

6(ice m!ement the scrip has undergone ma+or consolidation 1sideway

movement2 phase. And it seems that the scrip has made abortive attempt to breach the flat trend and start rally, but in vain and the obvious reason for this failure is market crash. In the month Feb $%%! the scrip has broken the key support 1)5%')6%2 and turned out to be bearish


Futu(e as the scrip has already broken the key support, the short term traders

should sell it and the fresh buy signal for the stock is known only when scrip establishes support. If in case scrip regains the strength to come back to the level of )5%')6%, investors should still wait till it clearly breaches above that level but with e(panding volume. T(adin4 tactics "!( sh!(t te(m inest!(s:

As it can be clearly seen from the graph, the stock is purely a trading stock. So to trade in the scrip one should look for key support and also look for cue from
Fundamental analysis of selected sector socks is as fallows Fundamental analysis

The basic purpose of buying a security is to earn dividends and ultimately sell it at higher price. An investor therefore is interested in obtaining estimates of future prices of the share. These in turn will depend upon the performance of the industry to which the company belongs and the general economic situation of the country. The multitude of factors affecting a companys profitability can be broadly classified as

). =conomic wide factors these includes the factors like growth rate of the economy, the rate of inflation, foreign e(change rates etc which affects profitability of all companies.


$.

Industry wide factors these include factors which are specific to industry to which the company belongs. For instance the demand supply gap in the industry, the emergence of substitutes, and changes in government policies towards industry affects the company belonging to an industry.

5. :ompany wide factor these factors are specific to a firm. The firm specific factors like plant and machinery, the brand image of the product, and ability of the management to affect the profitability.

=conomic wide factors The following are the some of the important economic factors which influence the investment of investor over a period of time.

Indian Ec!n!my Oe(ie=

India?s economy is on the fulcrum of an ever increasing growth curve. Eith positive indicators such as a stable !'@ per cent annual growth, rising foreign e(change reserves, a booming capital market and a rapidly e(panding F8I inflows, India has emerged as the second fastest growing ma+or economy in the world. The economy has been growing at an average growth rate of !.! per cent in the last four fiscal years 1$%%5'%6 to $%%"'%&2, with the $%%"'%& growth rate of @." per cent being the highest in the last )! years. Significantly, the industrial and service


sectors have been contributing a ma+or part of this growth, suggesting the structural transformation underway in the Indian economy. For e(ample, industrial and services sectors have logged in a )%."5 and )).)! per cent growth rate in $%%"'%& respectively, against !.%$ per and )).%) cent in $%%4' %". Similarly, manufacturing grew by !.@! per cent and )$ per cent in $%%4'%" and $%%"'%& and transport, storage and communication recorded a growth of )6."4 and per cent )"."6 per cent, respectively. Another significant feature of the growth process has been the consistently increasing savings and investment rate. Ehile the gross saving rate as a proportion of 8 has increased from $5.4 per cent in $%%)'%$ to 56.! per cent in $%%"'%&, the investment rate'reflected as the gross capital formation as a proportion of 8'has increased from $$.! per cent in $%%)'%$ to 54.@ per cent in $%%"'%&.

The Cu((ent Fiscal Yea(

The process continues in the current fiscal year. 9n the back of @.@ per cent growth in the first half of $%%"'%&, 8 grew by @.) per cent during April'September $%%&. •

Ehile overall industrial production grew by @ per cent during April'8ecember $%%&, importantly capital goods production rose by $%.$ per cent compared to )!." per cent during same period in $%%".

•

Services grew by )%.4 per cent in April'September $%%&, on the back of ))." per cent during the corresponding period in $%%"'%&.

•

-anufacturing grew by @." per cent during April'8ecember $%%&, on the back of )$.$ per cent growth during same period in $%%"'%&.

•

:ore infrastructure sector continued its growth rate recording " per cent growth in April'7ovember $%%&.


•

Ehile e(ports grew by $).&" per cent during April'8ecember $%%&, imports increased by $4.@& per cent in the same period.

•

-oney Supply 1-52 has grown by a robust $$.! per cent growth 1year'on' year2 as of 8ecember $), $%%& compared to )@.5 per cent last year.

•

The annual inflation rate in terms of EI was 5.4 per cent for the week ended 8ecember $@, $%%& as compared to 4.!@ per cent a year ago.

•

Fiscal and revenue deficit decreased by )) per cent and )&.$ per cent, respectively, during April'7ovember $%%&'%! over corresponding period last year.

Eith such a robust growth rates, the advance estimates of the :entral Statistical 9rgani3ation 1:S92 e(pects the economy to grow by !.& per cent in $%%&'%!.

6e( Ca8ita Inc!me

Along this significant acceleration in the growth rate of Indian economy, India?s per capita income has increased at a rapid pace, e(ceeding an earlier forecast made by oldman Sachs B

India is among the five countries sharing 4% per cent of the world production 1or 82.

•

F8I inflows have +umped by almost three times to HSG )4.& billion in $%%"'%& as against HSG 4.4 billion in $%%4'%".

•

The aggregate income of the top 4%% companies rose by $!.6 per cent in $%%"' %& to total HSG 6"@.4) billion.

•

India?s 7ational Stock =(change 17S=2 ranks first in the stock futures and second in inde( futures trade in the world.

•

Twenty Indian firms have made it to the list of Boston :onsulting roup?s )%% 7ew lobal :hallenger iants list.

•

According to a study by the -c;insey lobal Institute 1-I2, India?s consumer market will be the world?s fifth largest 1from twelfth2 in the world by $%$4.

•

The number of companies incorporated has increased at an annual average of 44,%%% companies in the last two years to !"4,%%%, from &)$,%%% companies at the end of $%%4.

•

Four Indians and seven Indian microfinance companies make it to the Forbes list of Top)% world?s wealthiest :=9s Eorld?s Top 4% -icrofinance Institutions, respectively.

•

India has the most number of private e0uity 1=2 funds operating amongst the B
•

-umbai has been ranked tenth among the world?s biggest centers of commerce in terms of the financial flow volumes by a survey compiled by -aster:ard Eorldwide.

Another significant aspect has been the broad'based nature of the growth process. Ehile new economy industries like Information Technology and biotechnology have


been growing around 5% per cent, significantly old economy sectors like steel have also been ma+or contributors in the Indian growth process. For e(ample, India has moved up two places to become the fifth largest steel producer in the world. And with its manufacturing and service sectors on a searing growth path, Dehman Brothers Asia estimates India to grow by as much as )% per cent every year in the ne(t decade. )< 2(!=th (ate !" indust(ial sect!(:

The growth of industrial sector is an important contributor to the growth of national income. The performance and the growth of industry is measured through an Inde( of industrial product. The industrial growth rate is further disaggregated into growth rates of different sectors like electricity basic goods consumer goods and so

Indust(y

Y!Y  chan4e -ining / Quarrying =lectricity -anufacturing II6

FY..

) &.5 &.$ <

FY.)

5.& 6 4.6 <)

Indust(y FY.@ FY.B

%.4 5.) $.@ @<

4.! 5.$ " <,

FY.D

4.5 4 &.6 +

FY.

6.6 4.$ @.) ,
FY.

) 4.$ @.) ,<@

@< In"lati!n

Inflation prevailing in the economy has considerable impact on the performance of the companies high rates of inflation upsets business plans, results in high input costs and hence reduction in profit margins. 9n the other hand the inflation erodes purchasing power of buyer and results in reduction in demand for goods. The demand for consumer goods will particularly be affected adversely. Inflation is measured by sustainable price inde( number. The whole sale price inde( number is generally used for this purpose.

FY.+

4 ".4 )%.& *<+


Yea( In"lati!n (ate /c!nsume( 8(ices3 Ran7 6e(cent Chan4e 'ate !" In"!(mati!n

$%%5

4.6% *

"6

$%%$ est.

$%%6

5.!% *

@$

'$@."5 *

$%%5 est.

$%%4

6.$% *

)56

)%.45 *

$%%6 est.

$%%"

6.$% *

)$4

%.%% *

$%%4 est.

$%%&

4.5% *

)5@

$".)@ *

$%%" est.

B< Inte(est (ates

Interest rates reflect the cost and availability of credit to the companies operating in the economy. The interest rates and the volume as well as direction of the credit supply in the economy is influenced by monitory policy of the reserve bank of India 1
The lower rate of interest implies lower cost of financing the companys operations and assures higher profitability, higher the rate of interest higher will be the costs of manufacturing and sale, which is e(pected to lead lower profit.

Interest
@-A8( 4.4 ".4

B-A8( 6.! ".5

D-A8( 6.4 "

-A8( 4 "

-A8( 4 "

-'ec 4.5 "

" ! )$.4 )).%')$.%

4 & )$.4 )%.!')).4

6.4 " )%.5 )%.5')).%

6.! " )%.5 )%.5')%.!

4.4 ".4 )%.5 )%.5')%.!

" &.5 )%.5 )).%')).4


8eposit rate of 4 ma+or banks 1maturityR)year2 Average call money rate

&.%'!.4 5."'&.4

4.5'".$ $.%'4.)

4.%'4.4 $.)'6.4

4.5'".5 5.5'4.4

".%'&.% 6.$'".$

".!'!.% 4.6')$.%

D< F!(ei4n echan4e (ates

If company is ma+or e(porter or importer its performance and profitability are likely to be affected considerably by the e(change rates of rupee against other currencies. A depreciation of rupee against HS or other currency will make Indian products more competitive price wise. In the foreign markets, thereby stimulating e(port from India

< 2!e(nment bud4et<

The government budget provides detailed information on each of components of government spending and revenues. The deficit is essentially the e(cess of government spending on revenues. A budget deficit is often incurred for creating infrastructural facilities in the economy tends to create inflationary pressure. 8ue to this there is a strong public opinion against the governments creating of deficit without e(panding the revenue. < Sain4s and inestment.

The capital market is channel through which the savings of households are made available to corporate for investment. Therefor the trends in saving and investment are significant in studying their impact on capital market.

Savings and Investment  t! 2'6 at c!nstant 8(ices B! "ector ousehold Savings

FY.)

$).5

FY.@

$).$

FY.B

$$

FY.D

$5.)

FY.

$5.4

FY.

$$


rivate :orporate Sector ublic Sector B! t!#e" o$ a""et" hysical Assets Financial Assets 2(!ss '!mestic Sain4s 7et :apital Inflow ross 8omestic Investment =rrors and 9mission 2(!ss Ca8ital F!(mati!n

6.4 '%.@

6.) ').&

5." '$

6.) '%.&

6.6 )

6.! $.$

)%.& )%.4 @D<* ).) $6.5 ) @B
)) )%.$ @B< %." $6 ).) @B<,

)).$ )%.! @B< %.$ $6.! '$.) @@<@

)$.& )%.6 @< ').$ $4.5 %.) @

)$ )).4 @,<* ')." $&.$ ) @+
)).& )%.5 @*<) ) 5%.) )." B.<@

Indust(ial analysis En4inee(in4: =ngineering is a diverse industry with a number of segments. A company from this sector can be a power e0uipment manufacturer 1like transformers and boilers2, e(ecution specialist or a niche player 1like providing environment friendly solutions2. It can be an electrical, non'electrical machinery and static e0uipment manufacturer too

The sector is relatively less fragmented at the top, as competencies re0uired are high. But it is highly fragmented at the lower end 1like unbranded transformers for the retail segment2 and is dominated by smaller players. The user industries in broad terms are power utilities 1generation, transmission and distribution2, industrial ma+ors 1refining, automotive and te(tiles2, government 1public investment2 and retail consumers 1pumps and motors2.

9rder book si3e determines the performance of the company in the short to medium'term. In order to bag big contracts, companies need to have a big balance


sheet si3e and proven e(ecution capabilities. They need huge working capital in order to e(ecute bigger contracts, as initially they receive only part payment and the remaining comes as pro+ects get e(ecuted.

Tariffs that earlier offered protection to Indian capital goods manufacturers, have been removed. Import duties on a range of e0uipments have also been reduced. This coupled with the high cost of capital in India puts Indian manufacturers at a disadvantage against overseas competition.

ower sector contributes the largest to the engineering companies? revenues. For instance, ABB and B=D derive "%* and &$* of their revenues from supplying e0uipments to the power sector. And with the government planning to add large generation capacities in the eleventh 1$%%&')$2 five'year plan, the potential seems huge for the engineering ma+ors. This is because, apart from the investment in generation capacity buildup, an e0uivalent amount is likely to be spent in the transmission and distribution space as well.

Infrastructure is another key area of operation for ma+or Indian engineering companies. D/T, for e(ample, garners around 5%* of its sales from infrastructure activities like engineering, design and construction of industrial pro+ects and social / physical pro+ects like housing, hospitals, IT parks, e(pressways, bridges, ports, and water / effluent treatment pro+ects.

The high global crude prices on account of growing demand has led to increased activities in the e(ploration and development space. This has helped the engineering companies in this space. -ore importantly, this segment of the engineering business has relatively higher margins than infrastructure, owing to more comple( tasks involved.

%ey 6!ints


Su88ly: Abundant supplies available across most segments, e(cept for technology

intensive e(ecutions

'emand: 8emand growth in this sector is fuelled by e(penditure in core sectors such

as power, railways, infrastructure development, private sector investments and the speed at which the pro+ects are implemented.

;a((ie(s t! ent(y: Barriers to entry are high at upper end of the industry as skilled

manpower and technologies, and ability to fund large pro+ects are a prere0uisite

;a(4ainin4 8!=e( !" su88lie(s: Bargaining power of suppliers is low because of

intense competition. owever, in technology driven high'end segments, suppliers have the upper hand.

;a(4ainin4 8!=e( !" cust!me(s: Bargaining power for technology driven segments

is low.

C!m8etiti!n: -a+ority of the companies compete in terms of pricing, e(perience in

specific field, product differentiation and timely completion of pro+ects. Financial Yea( G.+

F#%& proved to be yet another good year for the Indian engineering and capital goods industry. Strong growth in industrial and manufacturing industries reflected in the picking up of investment activities in areas like power, infrastructure and processes. The capital goods inde( recorded strong growth during the entire year, though with some blips during the months September and 9ctober $%%".

The order books of almost all companies witnessed healthy growth. For engineering ma+ors like B=D and D/T, at the end of -arch $%%&, the value of outstanding orders stood at nearly 5 times and $ times respective F#%& revenues. In general, the growth in order book came from both power and industrial businesses.


The companies were able to bag international orders. The topline of the engineering ma+ors witnessed double'digit growth during the fiscal.

Ehile the industry continued the trend of cost cutting through reducing debt and restructuring operations and manpower rationali3ation, rising input costs dented pared the improvement in profitability. Sharp rise in costs of steel and crude on the back of buoyant global demand and inade0uate supplies, was the biggest dampener to profit growth The fiscal also witnessed ma+ors like Su3lon and :rompton reaves chart out aggressive ac0uisitions in the international arena. The ma+or focus area for these companies was to fill in the niches by way of ac0uiring new technologies and clients and having a diversified geographical presence. ;ud4et @..,-.*:

Eorld'class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private'public partnership is re0uired to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector e(tremely bright. Apart from highway development and construction and modernisation of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in e(ploration and production activities. owever, scale and e(ecution capabilities remain the mantras for success ;ud4et Measu(es


). Fourth H- at Tilaiya to be awarded shortly :hhattisgarh, ;arnataka,

-aharashtra, 9rissa and Tamilnadu urged to bring five more H-s to the bidding stage by e(tending the re0uired support $.
=leventh lan period with a capital subsidy of
ro+ect 1A8<2 in F#%@ 6. roposal to set up a national fund for transmission and distribution 1T/82

reform in the power sector 4. =(emption from 6* additional duty of customs has been withdrawn on power

generation pro+ects 1other than mega power pro+ects2, transmission, sub transmission and distribution pro+ects, and specified goods for high voltage transmission pro+ects ". :ustom duty on pro+ect imports reduced from &.4* to 4* &. Initiatives like skill development programme and setting up of industrial

training institutes to be taken !. 8efense allocation to be increased by )%* @. =(cise duty being e(empted on end'use basis, on refrigeration e0uipment

1consisting of compressor, condenser units, evaporator, etc2 above $ T< 1tonne refrigeration2 utilising power of 4% ;E and above )%. arent company allowed to set'off the dividend received from its subsidiary

company against dividend distributed by the parent company provided that the dividend received has suffered 88T and the parent company is not a subsidiary of another company. ;ud4et Im8act )< Aggressiveness in allotting H-s to prospective bidders e(pected to be

helpful for engineering companies providing e0uipments and =: services for power plants.


@< Setting up of a national fund for T/8 reforms to aid growth prospects of

e0uipment suppliers and T/8 pro+ect developers. B<
transmission and distribution pro+ects to increase cost for companies importing such pro+ects, which shall conse0uently be beneficial for domestic pro+ect developers. owever, on the other hand, reduction in custom duty on pro+ect imports to nullify the impact. D< Initiatives like skill development programme and setting up of industrial

training institutes to reduce talent crunch for engineering companies, which are reporting high levels of attrition < Increase in defense allocation to aid prospect of companies providing defense

e0uipments and technologies

C!m8any Im8act:

). Allocation of H-s to support growth if e0uipment and service providers like B=D, D/T. $.

reater focus on the T/8 front to be beneficial for ABB, Siemens, :rompton reaves, =mco, Bharat Bi+lee. Also, companies providing T/8 pro+ect services like Cyoti Structures and ;alpataru Transmission to benefit.

5.

;ud4et !e( the yea(s: ;ud4et @..-. A special purpose vehicle 1SL2 to be launched to finance infrastructure pro+ects that are financially viable. Investment limit for $%%4'%" is fi(ed at
;ud4et @..-.+ =stimated outlay for Cawaharlal 7ehru 7ational Hrban
78'III to be launched in F#%" to target selected high density highways not forming part of the Q or the 7'S, ='E corridor
;ud4et @..+-., ike in corpus of
rivate sector participation in transmission pro+ects and hike in budgetary support for A8<

Increase in allocation to defense to

reduced from &.4* to 4* =(emption to specified goods :oncessional customs for making capital goods for duty of 4* on specified setting up a unit with an plantation machinery investment of
A;;iti7+al e;ucati7+ cess 7: ! t7 :u+; sec7+;ary a+; 6i6er e;uca

%ey 6!sities !" bud4et @..,-.*: 6!=e( 8lay: Since power utilities are one of the biggest consumers 1generation,

transmission and distribution2 for engineering companies, reforms introduced in the power sector like privatisation of S=Bs will help in strengthening the order book si3e. uge addition in power generation capacity, in order to meet the demand supply gap will be a big positive for the sector. In"(ast(uctu(e deel!8ment: The government is focusing on development of

infrastructure like housing, airports, roads and ports. This will be big positive for engineering and construction companies


Indust(ial Hact: Industrial divisions of engineering companies are likely to benefit

from the increased focus on automation and capacity addition plans drawn by the India Inc. %ey &e4aties !" bud4et @..,-.* Ca8tie c!m8etiti!n: 8uty free import of T/8 e0uipments by captive power

generation units, if allowed by government, can have some impact on margins of the T/8 ma+ors because of competition 6e!8le 8(!blem: =ngineering companies, across the board, are facing troubled times

retaining key employees. This is due to increased levels of competition for talent from -7:s, who have deep pockets and thus better paying capabilities. As a result of increasing levels of attrition, some companies are facing e(ecution issues.

6(!s8ects: Eorld'class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private'public partnership is re0uired to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector e(tremely bright. Apart from highway development and construction and modernisation of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in e(ploration and production activities. :onsidering these factors, we e(pect the sector to grow strongly into the future. owever, scale and e(ecution capabilities will be the key mantras for success for the engineering companies Impetus given for growth of infrastructure and core industry in the last two budgets of the central government is e(pected to increase capacity utilisation of producers of coal, cement, iron ore and likely to increase demand for construction and mining


e0uipments. Industrial growth and capital investment levels have improved and this will drive the growth in the coming years. The government?s initiative to bring clarity to the power sector reforms is a welcome sign for the industry. -ore coordination between the :entre and states for infrastructure development is a step in the right direction. The =lectricity Act $%%5 has introduced a lot of reforms in the power sector. The unbundling in the sector will definitely boost private investment. SHs like 7T: are e(pected to almost double their generation capacity in ne(t few years, which is a good sign for the engineering companies. The shift in focus towards reducing T/8 losses will further increase the order book si3e of the companies operating in this realm. Eith power generation and distribution looking up, power e0uipment companies can look forward to a promising future 8eregulation combined with high global demand for crude has led to a surge in e(ploration and production activities in India and globally. Also, there has been a radical change in the governments approach to =/ 1e(ploration and production2 activities in the country. This thrust in development of new wells and improvement of output from old wells promises bright prospects for engineering companies Automation business has perked as the user industries started realising its benefits. Eith increasing competition among the power companies, the consumers will demand better 0uality and uninterrupted power supply. In such a scenario automation will play an important role. Eith the automation technologies gaining momentum, companies like ABB and Siemens will benefit a lot going forward. :apacity addition and de'bottlenecking e(ercise being carried by various industries like steel, power, refineries, chemicals etc is likely to provide a fillip to the industrial segment of the engineering companies 6e("!(mance !" Indust(y

The industrial sector recorded a healthy growth of )%.5* 1measured in terms of the Inde( of Industrial roduction2 during the period April'9ct. $%%"'%& as compared to !." percent achieved during the corresponding period last year. :apital goods sector, which posted a robust growth of )".@ per cent in $%%4'%", has maintained its growth momentum during the current year as well. According to the Inde( of Industrial


roduction, capital goods sector posted a growth of )4.% per cent during April'9ct. $%%"'%&. The growth trends during Apr'9ct $%%"'%& as compared to Apr'9ct $%%4'%" are given in the table below Sect!( #ise 2(!=th Rates /in 3

$%%4' Eeight %"

$%%4'%" $%%"'%& 1Apr' 9ct2 1Apr'9ct2

!.$ Oe(all

)%%.%

!."

)%.5

%.@

5.6

@.&

)).$

4.$

&.)

).% Minin4 and )%.4 $ua((yin4

@.) Manu"actu(in4 [email protected]

4.$ Elect(icity

)%.$

Use-;ased Classi"icati!n Oe(all

)%%.%

!.$

!."

)%.5

;asic 2!!ds

54."

".&

".5

@.%

)4.!

)".@

)4.%

Ca8ital 2!!ds @.5 C!nsume( 2!!ds

$!.&

)$.%

)5.4

@.!

I2 8urables

4.6

)4.5

)5.@

)5.$

II2 7on' $5.5 )).% )5.4 !.4 durables roduction and growth rates of some of the industries being dealt within the 8epartment of eavy Industry for the period April'9ctober $%%"'%& as compared to April'9ctober $%%4'%" are given below Indust(y

Unit

6(!ducti!n

2(!=th


A8(-Oct @..-.

A8(-Oct @..-.+

Rate /3

Industrial -achinery

-achine Tools

Boilers

Turbines 1SteamJydro2

=lectric enerators

4"@6&.55

6!.)5

ower 8istribution -ill. Transformers ;LA

54.65

[email protected]%

)).4)

Telecommunication Tables

-ill. -tr.

&&&!.&@

6!)5.%@

'5!.

%$:ommercial Lehicles

7umbers $)64)%

$&&!%!

[email protected])

assenger :ars

7umbers 4!%@4$

"!@"6@

)!.&)


1eay En4inee(in4 Indust(y Tetile Machine(y

There are over "%% units engaged in the manufacture of Te(tile -achineries, their components, accessories and spares,and out of these about )%% units are manufacturing the complete te(tile machinery. The range includes te(tile machinery re0uired for sorting, cording,processing of yarnsJ fabrics and weaving. The industry is gearing itself to avail the opportunities of supplying machines re0uired to cater the e(port target of garment manufacturers post -ulti Fibre Agreement 1-FA2.Eith a capital investment of
6(!ducti!n

E8!(ts

Im8!(ts

$%%5'$%%6

)55@

454

$)&@

$%%6'$%%4

)"!4

64&

5$@@

$%%4'$%%"

$$)$

6&"

"&"!

Cement Machine(y

:ement plants based on dry processing and precalcination technology for capacities upto &4%% T8 are being manufactured in the country.-odern cement plants are designed for 3ero downtime, high product 0uality and better output with minimum energy consumed per unit of cement production etc. At present, there are )! units in the organi3ed sector for the manufacture of complete cement plant machinery. Eith an installed capacity of around

Su4a( Machine(y

8omestic manufacturers occupy predominant position in the global scenario and are capable of manufacturing from concept to commissioning stage sugar plants of latest design for a capacity upto )%,%%% T:8 1tons crushing per day2. There are presently $& units in the organised sector for the manufacture of complete sugar plants and components with an installed capacity of around
@..D-@..

@..-@..

Import 6$&

)$4@

@%4

=(port ))5@

$"!$

5&"&

Rubbe( Machine(y

There are at present )@ units in the organi3ed sector for the manufacture of rubber machinery mainly re0uired for tyreJtube industry. The range of e0uipments manufactured in the country includes inter'mi(er, tyre curing presses, tube splicers, bladder curing presses, tyre moulds, tyre building machines, turnet servicer, bias cutters, rubber in+ection moulding machine,bead wires etc. 1
@..D-@..

@..-@..

Import

$4.@)

5".&4

)$.%$

=(port

$$.$@

6".)4

4%.5$


Mate(ial 1andlin4 EJui8ment The range of e0uipment manufactured includes crushing and screening plants, coalJoreJash handling plant and associated e0uipment such as stackers, reclaimers, ship loadersJ unloaders,wagon tipplers, feeders etc. catering to the growing and rapidly changing needs of the core industries such as :oal, :ement, ower, ort, -ining, Fertili3ers and steel plants. There are 4% units in the organised sector for the manufacture of material handling e0uipment.Besides, there are number of units operating in the small'scale sector. The industry is self sufficient in meeting domestic demand and is also capable of meeting global competition. 1
@..D-@..

@..-@..

Import

$6$.4!

$").66

464.46

=(port

6).46

!%.)"

&&.@)

Oil Field EJui8ment The petroleum industry in India is undergoing a ma+or change. Eith the ongoing process of liberalisation, the industry has been thrown open for private sector in all ma+or areas of e(ploration,production, refining and marketing, and this has resulted in increased demand for the oil field and related e0uipments. 8omestic production covers mainly the on'shore drilling e0uipment.Hnder 9ffshore drilling only offshore platforms and some other technological structures are being produced locally. The ma+or producers of these e0uipments are B=D,industan Shipyard, -a3agaon 8ock and Darsen / Toubro.


1
@..D-@..

@..-@..

Import

)6$.6@

"5!.

%$54$.!6

=(port

)"4.!)

5%%.6&

&).!&

Metallu(4ical Machine(y -etallurgical machinery includes e0uipment for mineral beneficiation, ore dressing, si3e reduction, steel plant e0uipments, foundry 5% Indian ublic Sector aiming global heights e0uipments and furnaces. At present, there are 5@ units in the organi3ed sector engaged in the manufacture of various types of metallurgical machinery. The e(isting production capacity in the country is sufficient to meet the demand of these e0uipment in the country. Indigenous manufacturers are in a position to supply ma+ority of the e0uipment for steel plants e.g. blast furnaces, sinter plants, coke ovens, steel melting shop e0uipment, continuous casting e0uipment, rolling mills / finishing line.owever, there is a technological gap in the basic design and engineering for plant and e0uipment re0uired in the ferrous and non'ferrous sector for which the domestic manufacturers are dependent on imported know'how. Since the process of making ferrous and non'ferrous metal is linked up with the design of the e0uipment, there is a need for close interaction between the process know'how, designers and e0uipment manufacturers. 1
@..D-@..

@..-@..

Import

6@4.$!

646.6%

)$%%."4

=(port

656.$5

5&%.&%

454.%6


Minin4 Machine(y The ma+or mining e0uipments are Dongwall -ining =0uipment,
1
@..D-@..

@..-@..

Import

)".!%

5@.%)

6).@@

=(port

).)4

).44

4.@%

'ai(y Machine(y At present, there are )" units in the organi3ed sector, both in private and public sector, manufacturing 8airy -achinery e0uipments such as evaporators, milk refrigerators andstorage tanks, milk and cream deodori3ers, centrifuges, clarifiers, agitators , homogenisers, spray dryers and heat e(changers. Small Scale units are also contributing to the indigenous production. The spray dryers, plate type heat e(changer and other core e0uipment for milk powder plant call for high degrees of polish re0uirement on the e0uipment because the presence of any micro crevices resulting from inade0uate polish tends to be the incubation and breeding ground for the bacteria. The technology gaps e(ist for handling e0uipments such as self cleaning cream, separator, aseptic processing systems, and for the e0uipment re0uired for manufacture of yoghurt and traditional Indian sweets.


/Rs
@..D-@.. @)<. ,<.,

@..-@.. @
Machine T!!ls

-achine Tool Industry is in a position to e(port general purpose and a standard machine tool to even industrially advanced countries. 8uring last four decades, the machine tool industry in India has established a sound base and there are around )"% machine tool manufacturers in the organi3ed sector as also around 6%% units in the small ancillary sector. The industry, however,lacks in design and engineering capability to undertake very high precision :7: -achines.Some companies have taken up manufacture of :7: -achines, but there is a need to upgrade research and development in this field. Indian machine tools are manufactured to the international standard of 0uality J precision and reliability. A number of collaborations have also been approved for bringing in the latest technology in this field of modern machine tools and the industry is now e(porting conventional as well as 7:J:7: high ' tech machine tools. In the field of

6e("!(mance !" the indust(y du(in4 the last th(ee yea(s is tabulated bel!=: /Rs< in c(!(e3 @[email protected]

@..D-@..

@..-@..

+*+<.. *<.. <..

).,*<.D ),@.<,B @<)

)BD@<.. @,**<.. .<..

6(!ducti!n Im8!(t E8!(t

:ompany analysis The company analysis is the last step in =I: analysis framework of fundamental analysis. The industry analysis helps the investor in selecting the industry in which the investments are better rewarded. The investor now has to decide in which of the companies belonging to chosen industries he should invest. This re0uires the company analysis.

The company analysis has to be made in three different parts ). Study of financial information and asses the financial health of the company. $. Si3ing up present situation and prospects. This re0uires an analysis of the present business of the company and its future prospects. 5. =volution of management.


BHEL COMPANY ANALYSIS


). :ompany financial health The financial statements of the company can be used to understand and evaluate the financial performance and health of the company.
$7urces O: Fu+;s T7tal $6are Capital E@uity $6are Capital $6are Applicati7+ M7+ey Pre:ere+ce $6are Capital Reser4es Re4aluati7+ Reser4es #et7rt6 $ecure; L7a+s "+secure; L7a+s T7tal De5t T7tal Lia5ilities Applicati7+ O: Fu+;s
Mar 0)

Mar 0'

2((&') 2((&') 0 0 (18&! 0 (180%&)' 00 %!&0 %!&0 1%%(&')

2((&') 2((&') 0 0 10!&!8 0 12&( 00 (0&0% (0&0% 18%&'

2((&') 2((&') 0 0 1'82&!% 0 )102)&8 00 %)&8 %)&8 )1)%&8'

2((&') 2((&') 0 0 '10)&)2 0 '1%0!&%8 00 8&2( 8&2( '18&)2

2((&') 2((&') 0 0 81(%&0 0 81'88&2) 0 8&%% 8&%% 818''&

%1%('&82 21!'8&8! !1!)&0! )'& !0&%% 2100!&0) (10'&'8 !1!!&(( '1!)&28 !1(&2) 20!&(' 818%&0! (10(&!8 80)&() (100&)( %12&%' & 1%%(&') !10(&8 !)&2)

%1(&!) 21%)&() !10%&'0 !0&' 28&8 21!0%&88 (1)08&(8 !10(&)% 812!)& !1)%&% !1!&0! !!10)&% 1%%&)) !1!%&( )1('&)0 (18&' !'&2 18%&) 8!&' 2!)&%'

%1)28&0 218(&'0 !10(%&80 8&!2 8& 21!)&!! 1'2&!( !1%2&8) !0128!&!! !12!&%% !1'8&0! !%18'&( '12(8& !1%2&( 81'(&(( 1(!%&0! 0 )1)%&88 )0&)8 2()&2(

%182!&)2 218%&' 8!&8% !!&2' 8&2 %1'((&%' '1!)8&0) !1(8%&' !21%)&(0 (1!8)&2' 21)0&0! !12%2&)8 810&!( %1)(&%2 !21(&() )1)'8&22 0 '18&)! ')& 28&%!

(1!%(&)! %1!()&%! 88&% %0)&8 8&2 (12!'&)' 1)&82 210)8&! !182&(0 1!'& %1'(0&00 212%& !!1'&%2 1'08&2 !'1))&' '1'(&(2 0 818''& ')&0 %&0)

Mar 0

Mar 0)

Mar 0'

Profit & Loss account Mar 0% Mar 0(


I+c7,e $ales Tur+74er E9cise Duty #et $ales Ot6er I+c7,e $t7c- A;ust,e+ts T7tal I+c7,e E9pe+;iture Ra Materials P7er 3 Fuel C7st E,pl7yee C7st Ot6er Ma+u:acturi+ E9pe+ses $elli+ a+; A;,i+ E9pe+ses Miscella+e7us E9pe+ses Pre7perati4e E9p Capitalise; T7tal E9pe+ses Operati+ Pr7:it PBDIT I+terest PBDT Depreciati7+ Ot6er ritte+ O:: Pr7:it Be:7re Ta9 E9tra/7r;i+ary ite,s PBT .P7st E9tra/7r; Ite,s Ta9 Rep7rte; #et Pr7:it T7tal alue A;;iti7+ Pre:ere+ce Di4i;e+; E@uity Di4i;e+; C7rp7rate Di4i;e+; Ta9 Per s6are ;ata .a++ualise; $6ares i+ issue .la-6s Ear+i+ Per $6are .Rs E@uity Di4i;e+; . B77- alue .Rs

'1'2'&' '28&( )1&%0 )&08 /(&%2 '102%&0)

818%&!' 8)&(( 810%)&'% !(&)! /%0&)% 81020&'!

!01)82&! !10(%&! 1)%&00 2&8 %&'' !01(%8&'

!(1'%&() !128&0! !%1((!&( %(2&00 %8)&0! !(1!)&()

!108&%% !1)&(( !'1%)2&8 (82&%2 !8!&%' !8102)&8

%1!)0&%8 !&) !10(&)( ('8&!0 %2&8 8!&) 0&00 1'&)2 )&%) !10)&(( (&'8 !10!0&)) !8&% 0&00 82&%! /(&0! '')&%0 2!&! (((&! 21''&2( 0&00 '&0 !2&(

%1)%(&)) !)&8! !1)%&! 8&)' 888&8 !%&8 0&00 '1!2&!2 8%&8 8)8& )0&08 808&! !8&00 0&00 )!0&! %)& !100'&!0 %(8&% )8&! %1!'&() 0&00 !()&8) !&00

10'&)8 220&( !1)0&%8 '8%&(( !100)&%8 !!)&8 0&00 818'&(0 !1%0%&%' !1)%&% 8!&(! !1(8!&( 2!8&8' 0&00 !12)%&0' %0)&)0 !1)&)' )!)&%0 %&(0 %1'''&'! 0&00 !&8! 2)&)(

'10&(0 22&0! !18'8&! !10(&)' !12!)&00 !2)&2' 0&00 !!1)0%&8) 2122%&)0 21)&)0 8&' 210)&8 2(&% 0&00 212)0&2 2&8) 21)0&'8 88!&)! !1)'&!) (10(&() 0&00 %(&0 (&'8

81)!&(! 2&08 21%))&% !1'%%& 88'& !0&0 0&00 !%1&0) %1(&20 (102'&2 (%&%% %18(&! 2((&)! 0&00 %1'%&8 /!%&' %1'2&' !1%!!&0 21(!(&'0 1(%'&) 0&00 &)) 2&8%

21(('&)0 !8&!) (0&00 !)&2)

21(('&)0 2)&8 )0&00 2!)&%'

21(('&)0 %8& 80&00 2()&2(

21(('&)0 )8&)0 !(&00 28&%!

21(('&)0 8&)) 2(&00 %&0)

BHEL Ratios calculations

sl&+7 ! 2 %

rati7 #et 7r-i+ capital curre+t rati7 @uic- rati7

:7r,ula CA/CL CA?CL CA/.st7c-Gprepai; e9p?CL

200' ''(&(2 !&(% !&!%

year 200) ))'8&22 !&% !&!'

200 (!%&0! !&)% !&22


(  ) ' 8  !0 !! !2 !% !( ! !) !' !8 ! 20 2! 22 2%

i+4e+t7ry tur+74er rati7 ;e5t e@uity rati7 i+terest c74erae rati7 r7ss pr7:it ,ari+ #et pr7:it rati7 c7st 7: 77;s s7l; rati7 Operati+ pr7:it rati7 retur+ 7+ e@uity retur+ 7+ assets retur+ 7+ capital e,pl7ye; EP$ DP$ P?E price t7 577- 4alue rati7 577- 4alue per s6are ;i4i;e+; pay7ut rati7 ear+i+ yiel; ;i4i;e+; yiel; t7tal asset tur+74er rati7 capital tur+74er rati7

CO<$?a4 I# l7+ tr, DBT? $6 67l;ers e@ EBIT?I#TER$T
%&%2 0&0! %&(2 ! !%&! 80&)% 20&(! 2'&(8 2'&) ((&!8 8&)) 2(& 22&! )&%0 %&0) 2(&8% (&%) !&08 !&8 !&

%&!0 0&0' (%&() !(&'! !2&! 8)&%% !)&( 2%&00 22&!! %0&28 )8&) !(& %2&' '&% 28&%! 2!&!( %&0 0&) !&(8 !&

Inte(8(etati!n: &et =!(7in4 ca8ital: 7E: represents the e(cess of current assets over current liabilities. :ompanies

should have sufficient 7E: in order to be able to meet the claims of the creditors and

%&0( 0&08 !&8 !!&2 &8 2&08 !%&2 !&82 !&'' 20&82 %8& 8 !&'0 %&!2 2()&2( 20&( &08 !&0( !&% !&('


the day to day needs of business. The greater is the amount of 7E: greater is the li0uidity of the firm. In B=D company the three year 7E: is as follows. #ear Sl.no
current liabilities. The rule of thumb says that the current ratio should be at least $ that is, the current a""et" "%ou&' (eet current &ia)i&itie" at &ea"t t*ice+ #ear sl.no
$%%" ).45)

$%%4 )."5)

$uic7 (ati!:

The 0uick ratio, also referred to as acid test ratio, e(amines the ability of the business to cover its short'term obligations from its 0uickK assets only 1i.e. it ignores stock2. :learly this ratio will be lower than the current ratio, but the difference between the two 1the gap2 will indicate the e(tent to which current assets consist of stock. year sl.no
This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product. year

sl.no 6

In $%%& )$J 5.5$O 5.") months

Formula

$%%&

$%%"

$%%4

:9SJavg I7L

5.5$

5.)%

5.%6


In $%%" )$J5.)O5.!& months In $%%4 )$J5.%6O 5.@4 months. ere we can see that the companys working efficiency increased over a period of time. They are able to convert their inventory into sale in 5.") months.

'ebt eJuity (ati!:

This ratio indicates the e(tent to which debt is covered by shareholders funds. It reflects the relative position of the e0uity holders and the lenders and indicates the companys policy on the mi( of capital funds. The ratio reflects the relative contribution of creditors and owners of business in its financing. year sl.no
Inte(est C!e(a4e Rati!:

This ratio indicates how well the firms earning can cover the interest payments on its debt. sl.no
Formula =BITJI7T=
year $%%& @5.6$

$%%" 65.6"

$%%4 )@.!

7ormally the gross profit has to rise proportionately with sales. It can also be useful to compare the gross profit margin across similar businesses although there will often be good reasons for any disparity. year sl.no

&et 8(!"it (ati!:

year sl.no
C!st !" 4!!ds s!ld (ati!:

year sl.no
This ratio reveals the profitability of sales resulting from regular business as well as buying, selling, and manufacturing operations. sl.no
Formula =BITJ 7et sales

year $%%& $%.6)

$%%" )".46

$%%4 )5.4$

Retu(n !n EJuity:

This ratio shows the profit attributable to the amount invested by the owners of the business. <9= measures the amount of money that the company has managed to generate for its shareholders. sl.no
Formula 7et profitJ share holders e0uity

year $%%& $&.6!

$%%" $5.%%

$%%4 )4.!$


ere we can see that the companies return on e0uity is increasing constantly so we can say that the profitability to ordinary shareholders is strong and showing an upward trend.

Retu(n !n assets:

This ratio gives you an idea on the company?s management effectiveness in utili3ing its assets to make a profit for its shareholders. year sl.no
Retu(n !n ca8ital em8l!yed:

sl.no
year $%%&

Formula on

$%%"

$%%4

capital

)5 employed =BITJ Total capital 66.)! 5%.$! $%.!$ This ratio shows how efficiently the long term funds of owners and lenders are being used.

Ea(nin4 6e( Sha(e:

For an e0uity investor, a companys =S is the most important indicator of its performance. If the =S is good, the company can pay dividends, plough back the surplus into reserves and issue bonus shares in the future. For these reasons, the market price of any companys share is largely influenced by its pro+ected =S Sl.no

ratio

Formula 7et profit available e0 shJ 79

year $%%&

$%%"

)6 =S shares @!."" "!." Ee can see here the companys =S gone three times higher from three year.

$%%4 5!.@4


'iidend 8e( Sha(e:

#ear Sl.no ratio Formula $%%& $%%" $%%4 )4 8S div paid to ord sh J 7o of shares $6.4 )6.4 ! This indicates the dividend paid for each share. Shareholders would, naturally like to receive the ma(imum possible dividends from a company, consistent with its profits and need for retained earnings.

6KE Rati!:

J= ratio is a useful indicator of what premium or discount investors are prepared to pay or receive for the investment. The higher the price in relation to earnings, the higher the J= ratio which indicates the higher the premium an investor is prepared to pay for the share. This occurs because the investor is e(tremely confident of the potential growth and earnings of the share. sl.no
Formula -SJ=S

year $%%& $$.@)

$%%" 5$.&4

$%%4 )@.&%

The above ratio shows that the shares were traded at a much higher premium in $%%& than were in $%%4. In $%%4 the price was )@.& times higher than earnings while in $%%&, the price is $$.@) times higher. 6(ice t! b!!7 alue (ati!:

year sl.no

with low JB ratio had consistently higher returns compared to the firms with high JB ratio. ;!!7 alue 8e( sha(e:

year sl.no
$%%4 $6".$6

indicates that the company has strong reserves, indicating scope for bonus shares, of course sub+ect to necessary guidelines of the S=BI.

'iidend 8ay!ut (ati!:

This ratio looks at the dividend payment in relation to net income and can be calculated as follows sl.no
Formula 8SJ=S)%%

year $%%& $6.!5

$%%" $).)6

$%%4 $%.46

Ea(nin4 yield:

This ratio highlights as a percentage a companys earnings vis'a'vis the current market value of its share. For blue chip companies this ratio tends to be around 4 per cent to " per cent. sl.no
Formula =SJ-S )%%

#ear $%%& 6.5"

$%%" 5.%4

$%%4 4.%!

'iidend yield:

The dividend yield ratio indicates the return that investors are obtaining on their investment in the form of dividends. This yield is usually fairly low as the investors are also receiving capital growth on their investment in the form of an increased share price.

sl.no
Formula 8SJ-S)%%

#ear $%%& ).%!

$%%" %."4

$%%4 ).%6


T!tal asset tu(n!e( (ati!:

#ear sl.no
Ca8ital tu(n!e( (ati!:

#ear sl.no

Bharat Heavy Electricals Limited: Bharat eavy =lectricals Dimited 1B=D2 is one of the largest engineering enterprises of its kind in India. B=D is the largest domestic capital goods manufacturer in India and the )$th largest in the world. The international competitors of B=D are eneral =lectric, Siemens, Alstom and ABB. B=D offers a wide spectrum of e0uipment, systems and services in the field of power, transmission, industry,

transportation,

oil

/

gas, non'conventional energy sources

and

telecommunication. ower sector constitutes over half of its total business. The company has )6 manufacturing divisions, ! service centres and 6 power sector regional centres. Its first plant was set up at Bhopal in )@4" under technical collaboration with A=I, H; followed by three more ma+or plants at ardwar, yderabad and Tiruchirapalli with
6(!ducts L se(ices

B=D manufactures over $%% products under 5% ma+or product groups. The company has installed e0uipment for over )%%,%%% mw of power generation for utilities, captive and industrial users. Its strengths are comparable product range and cost competitiveness with foreign manufacturers. The c!m8any en+oys a crucial advantage of depreciated assets. The company is cost'competitive when it comes to power plant e0uipment and has bagged a number of power pro+ect orders placed in India against open international competitive bidding. The company has +oint venture with Siemens for servicing old Indian fossil fuel power plants and with = for designing of heavy'duty gas turbines. Thirty' two thermal power stations e0uipped with Bhels generating sets have been given productivity awards by the power ministry. 9f these power stations, eight have


received gold medals. The awards have been given for meritorious and efficient performance based on account of reduced inputs. The company already manufactures products re0uired by the distribution systems like transformers, switchgears etc. The company is planning towards becoming an application service provider. The company will continue to focus on pro+ect management, reducing cycle time and cost control. In the power sector, the company plans to obtain a part of the business generated by independent power producers through a combination of approaches including consortium route, e0uity participation and limited financial syndication. I

It has e0uipped itself with the new type of once'through design boiler

technology, and for pollution control ' bag filter technology. B=D entered into new business in integrated gasification combined cycle systems, coal washeries, and D

;ey
The companys 5&,%%% -E of order flow for B=D over F#%@')$=, in addition to the e(isting strong order backlog. Any delay in second phase of e(pansion from )%,%%% -E to )4,%%% -E could severely impact B=Ds earnings, given the strong deliverables over ne(t three'four years. The first phase of e(pansion from ",%%% -E to )%,%%% -E had been delayed by nine months.

Sl!=d!=n in 8ace !" 8!=e( (e"!(ms

iven the recent momentum in power reforms, it is e(pected the balance =leventh lan orders and &%* of Twelfth lan orders to be placed by F#)$. Any significant delay in the awarding activity could be a huge dampener for B=Ds outlook going ahead, given that the company is the market leader 1"4* market share in countrys installed capacity as in F#%&2. Inc(ease in 8(iate sect!( inestments in 8!=e( 8(!jects > intensi"yin4 c!m8etiti!n

As per :=A, 54* of the power capacity addition in the Twelfth lan will be undertaken by the private sector. Any subse0uent change in the mi(, in favour of the private sector, could result in lower order intake for B=D. Ehile central and state sector pro+ects are B=Ds forte 1&%* plus market share2, the companys market share in private sector pro+ects has been lower 1$%'$4*2 on account of stiff competition. Sti"" in8ut 8(ices c!uld a""ect ma(4ins

Although it have not built in benefits on account of raw material pricing over F#%@ )$=, any unprecedented rise in input costs above F#%&'%!= levels could dampen B=Ds margins. =(ecution delays could lead to de'rating The re'rating in B=Ds


valuations over the past one year builds in strong visibility over the ne(t few years. The key concern now is B=Ds ability to e(ecute this huge opportunity, failing wherein could lead to the stock being de'rated.

Lalue anchor Period & months

CA
2008/03

2009/03

2010/03

#et Operati+ I+c7,e EXPENSES

20822&)2

2('!&'(

2('&)

!&20

Material C7+su,pti7+ Ma+u:acturi+ E9pe+ses Pers7+el E9pe+ses $elli+ E9pe+ses A;,i+istrati4e E9pe+ses C7st 7: $ales Rep7rte; PBDIT Ot6er Recuri+ I+c7,e A;uste; PBDIT Depreciati7+ A4erae Di4i;e+; pay7ut rati7 A;uste; PBIT Re@uire; rate 7: rate Fi+a+ical E9pe+ses E9pecte; r7t6 rate i+ ;i4i;e+; A;uste; PBT P/E Ratio Ta9 C6ares A< PE rati7 A;uste; PAT ei6te; PE rati7 #7+/recurri+ Ite,s Ot6er #7+/cas6 A;ust,e+ts REPORTED PAT +7& 7: s6ares

!0!&'2 2('2&!!) 2!&(0 2(8&2'% (2&%

!2%0'&)) %0))&! 28%'&!'8 2''&(%!( !0%8&8()

!(!&8 %80(&8%( %!0)&2 %!0&0!%8 !!((&!8

!&2! !&2( !&0 !&!2 !&!0

16,410.45

19,528.03

23,281.20

4,412.17

5,443.70

6,666.41

INCOME

'8%&(%28

!220&'' !0!&)( 5,195.60 6,664.28 ris- :ree rate 8,568.05 Beta 28&) 2&282'%&%!'! 288&!0( 4,937.04 !8&) 6,390.96 8,279.14 8 !&! (!&%((! !)&02%&(0') %'&)(%% 4,895.69 &8! 6,351.51 8,241.49 !''!&0( 2%&'(2%2&%(' %2%!&)!' 3,124.65 !)&'8 3,959.17 5,009.88 /!%&()0% /8&820) /&'8)0

Expecte EPS !OR " #E$R

3,111.19

3,950.34

5,004.09

2(&(8

2(&(8

2(&(8

%'()*

%+%("'

),(,

=(pected future price of the B=D :ompany *ear alue a+c6er

2008

2009

2010

2!%2&%0

2'0'&(2

%(2&)2

Calculati!n !" Int(insic alue Ae(a4e 'iidend 8ay!ut (ati!> sum !"  yea(s '6RK  ReJui(ed (ate !" (ate> (is7 "(ee (ate ?/betaNEM6R3

!&) EMRP !&0) & 0& !&%' !&% 0&)) 0&'8


E8ected 4(!=th (ate in diidend> a4 !" (etenti!n (ati!N a4 !" ROE 6KE RATIO> AV2 '6R K /(eJui(ed (ate !" (is7-e8 4(!=th (ate in di3 AV2 6E (ati!>  yea(s 6E (ati!K  #ei4hted 6E (ati!> calculated 6E (ati!?AV2 6E (ati!K@ Value anch!( > =ei4hted 6E (ati!N e8ected ma(7et 8(ice

L&T COMPANY ANALYSIS


). :ompany financial health The financial statements of the company can be used to understand and evaluate the financial performance and health of the company.
D/T :ompany balance sheet and profit and loss account Balance Sheet Mar 0% Mar 0(

$7urces O: Fu+;s T7tal $6are Capital E@uity $6are Capital $6are Applicati7+ M7+ey Reser4es Re4aluati7+ Reser4es #et 7rt6 $ecure; L7a+s "+secure; L7a+s T7tal De5t T7tal Lia5ilities Applicati7+ O: Fu+;s
Mar 0

Mar 0)

Mar 0'

2(8&)' 2(8&)' 0&0( %12'&% %(&%( %1)2&8 21'0%&!! ('2&8 %1!')&00 )1'%8&8

2(&88 2(&88 0&00 21'!'& %2&)! 21''&0( !10(&2 2'&!0 !1%2(&% (10&%

2&8 2&8 0&00 %1%!2&2 %0&0 %1%)&!% '%&'2 !10)&%( !18&0) 1228&!

2'&(8 2'&(8 0&00 (18%&%2 2&%' (1)(0&!' ()&' 8'&'8 !1(%&' )10%&'(

)&) )&) 0&00 1)8%&8 2'&% 1')8&(% 2(&(0 !18%2&% 210''&' '18()&!8

)12%!&'

210%8&!

21!0)&

21%00&)8

218')&%0


Less= Accu,& Depreciati7+ #et Bl7cCapital 7r- i+ Pr7ress I+4est,e+ts I+4e+t7ries $u+;ry De5t7rs Cas6 a+; Ba+- Bala+ce T7tal Curre+t Assets L7a+s a+; A;4a+ces Fi9e; Dep7sits T7tal CA1 L7a+s 3 A;4a+ces Curre+t Lia5ilities Pr74isi7+s T7tal CL 3 Pr74isi7+s #et Curre+t Assets Miscella+e7us E9pe+ses T7tal Assets C7+ti+e+t Lia5ilities B77- alue .Rs

212)&!2 %1'&)' '2&)0 !1!)0&%' 210&0! !180&%' 2'&!! (1'!&( !1(8(&% (!&(2 )12(&(( (1%)0&'% (2(&' (1'8&(8 !1(&) )&8 )1'%8&8 )2&' !(!&88

!10(&)% 88&2 2)&2% )&88 !18!2&%0 %1%!(&8 282&0 1(08&% !1(2%&%( %&22 )12&( (1!!& ))0& (182&( 210'2& ()&2! (10&% )&8) 220&(

Profit & Loss account Mar 0% Mar 0(

I+c7,e $ales Tur+74er E9cise Duty #et $ales Ot6er I+c7,e $t7c- A;ust,e+ts T7tal I+c7,e E9pe+;iture Ra Materials P7er 3 Fuel C7st E,pl7yee C7st Ot6er Ma+u:acturi+ E9pe+ses $elli+ a+; A;,i+ E9pe+ses Miscella+e7us E9pe+ses Pre7perati4e E9p Capitalise; T7tal E9pe+ses Operati+ Pr7:it PBDIT I+terest PBDT Depreciati7+ Ot6er ritte+ O:: Pr7:it Be:7re Ta9 E9tra/7r;i+ary ite,s PBT .P7st E9tra/7r; Ite,s Ta9 Rep7rte; #et Pr7:it

!108&( !10!'&0! )&82 )0&'0 21%!0&8( %1)%&)0 %(&)' )1)2&!! !18)0&!8 ('%&% 81)2&)( 102%&2% '(&)( 18!'&8' %1!((&'' %&8 1228&! )2&!0 2)&(

82&22 !1%!8&() 28)&0) !1!&2 212!0&2' (18!(&!) %8&'! '1(2%&!( 210)!&0 !8(&( 1))&!% )1!0)&0( !10!&%' '1!2!&(! 21('&'2 2!&8 )10%&'( %0& %%&)!

!1!22&8% !1'%&(' ('!&22 %1!0(&(( %100!&!( 10(&)( %&)8 1(&() 21((&!( !00&' !210(&% 81%)2&0! !1!80&!% 1(2&!( 210'&2! &8( '18()&!8 2'0&22 202&)

Mar 0

Mar 0)

Mar 0'

1%!&8 !8& 1(!2& 2(8&2! /!&! 1))0&0

1!'&2 2'2&20 1)(&%2 %!&! (%2& !01()&0)

!%1(0(&2' 2!(&) !%1!8&'! )%(&( 8)&8( !%1!!&(

!10%0&8! 2%&8) !(1'')& 2'&2 /!0%&2( !120!&2%

!'18%&%' %%8&08 !'1)(&2 (&80 !2!&') !8122)&8

%1000&2 ))&( ))8&(0 2180!&'' !1!((&!2 2!(&(0 /!&8 81(8(&' 2'&2' !1!'&(8 %88&!% '8'&% %0(&' 0&00 (82&'8 (&% (8'&!% ''&!0 (%%&!0

%1'2&0) )&! )'8&08 (100&)( ))2&2! !!&! /0&'( 1%%&% '%8&) !1!2&'! 2'%&! 8)&) 8(&% 0&00 ''2&0% (&% '')&) 2%)&08 %2&'

12!!&8 0&%% ')(&! 1!'0&22 8''&)0 !('&20 /%&! !2128&) !10!'&8) !1)2&80 280&! !1%'2&2 8'&2 0&00 !128(&'' 8&02 !122&' %02&2 8%&8

(1!0&'8 22!&0 80&0% )1)('&'0 )& !2&00 /!&8 !%1%8&'! !128(&00 !18!!&2 %2!&%( !1(0&!8 !0'&!2 0&00 !1%8%&0) /!&8 !1%8!&2! %))&!2 !10!2&!(

1%20&8 %08&!% !128&2! '1(!&0' !1222&80 !))&! /%&%0 !1'2(&0( 210(%&0! 2102&8! %%!&() 21!'!&% !)0&!% 0&00 210!!&22 /&%( 2100&88 )0!&8' !1(0%&02


T7tal alue A;;iti7+ Pre:ere+ce Di4i;e+; E@uity Di4i;e+; C7rp7rate Di4i;e+; Ta9 Per s6are ;ata .a++ualise; $6ares i+ issue .la-6s Ear+i+ Per $6are .Rs E@uity Di4i;e+; . B77- alue .Rs

1(8%&) 0&00 !8)&80 2%&%

1)!0&2 0&00 !&0( 2&(

'10()&'! 0&00 %'&2! (&(!

818'8&% 0&00 %02&2 (2&%

!01(0%&0) 0&00 %)8&2 %&%(

21(8)&) !'&(2 '&00 !(!&88

!12((&02 (2&82 800&00 220&(

!12&2( '&'2 !1%'&00 2)&(

!1%'%&8) '%&)' !1!00&00 %%&)!

218%2&'! (&% )0&00 202&)

Rati!s calculati!ns

Sl.no ) $ 5 6 4 " & ! @ )%

))
8S J= rice to book value ratio Book value per share 8ividend payout ratio =arning yield 8ividend yield

Formula :A':D :AJ:D :A'1stockNprepaid e(p2J:D :9SJavg I7L Dong trm 8BTJ Sh holders e0

=BITJI7T=
#ear $%%& $%%" $%%4 $,4%&.$) $,46&.&$ 5,)66.&& ).$" ).5" ).46 %.@5 ).%5 ).)$ 4.$6 ".%" 4.5% %.5" %.5) %.44 &.4$ 4.%5 6.65 )%.") &.@) & &.&6 "."@ &.55 !@.)) @%.") @$.@6 )).4$ !."5 &."" $6.66 $$.))

$).@4 $).!!

[email protected]& $6.)!

46.@!

66.%!

5&.")

[email protected]

&5."&

&4.&$

)5 5$."@ &.@@ $%$."4 $".$4 5.%" %.!%

$$ 55.%$ &.$4 554.") $@.!" 5.%5 %.@%

$&.4 )5.)6 5.!& $4".@6 5".5$ &.") $.&"


$$ Total asset turnover ratio $5 :apital turnover ratio

:9SJtotal asst :9SJcapital employed

$.%% $.&6

$.$% $.@%

$.56 5."&

). 7et working capital Sl.n o
#ear Formula $%%& $%%" $%%4 $,4%&. $,46&. 5,)66. ) 7et working capital :A':D $) &$ && ere we can see that the D/T company has maintained a constant 7E: which is a good sign it implies that the company is able to good li0uidity to its creators

$. :urrent ratio Sl.no
Formula :AJ:D

$%%& ).$"

#ear $%%" ).5"

$%%4 ).46

The short term creditors prefer high current ratio since it reduces their risk. As a share holder one should prefer low current ratio so that the company may use its current assets for e(pansion purpose. ere we can see that the companys current ratio has reduced over a period of time so we can say that the companies using its current assets for e(pansion purpose. 5. Quick ratio #ear Sl.no
$%%4 ).)$

current liabilities. This ratio reali3es that some of current assets are not easily convertible to cash e.g. inventories. In the ratio above we can see that the companys 0uick ratio reduced over a period of time. 6. Inventory turn over ratio. Sl.no
Formula :9SJavg I7L

$%%& 4.$6

#ear $%%" ".%"

$%%4 4.5%


This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. This ratio should be higher because it indicates that the company is efficiently converting its inventory into sales. $%%& )$J4.$6 O $.$@ times $%%" )$J".%" O ).@! times $%%4 )$J4.5% O $.$" times

4. 8ebt e0uity ratio. #ear Sl.no
$%%4 %.44

there was %.5" rupee of debt. This compares to %.44 rupee in $%%4.

". Interest coverage ratio. #ear Sl.no
$%%4 6.65

tolerable in that the ability of the firm to service its interest payments would not be adversely affected. ere the companys Interest coverage ratio has increased which is dangerous sign.

&. ross profit margin #ear Sl.no
!. 7et profit margin

$%%4 &


Sl.no
#ear $%%" "."@

$%%4 &.55

improvement to &.&6* in $%%&. owever, to know how well the firm is performing one has to compare this ratio with the industry average or a firm dealing in a similar business

@. :ost of goods sold Sl.n o

#ear
Formula

$%%&

$%%"

$%%4

@ ratio :9SJ net sales)%% !@.)) @%.") The cost of goods sold ratio shows what percentage share of sales is consumed by

@$.@6

cost of goods sold and conversely what proportion is available for meeting e(penses such as selling and general distribution e(penses as well as financial e(penses consisting of ta(es interest and dividend and so on.

)% 9perating profit ratio Sl.no
#ear $%%" !."5

$%%4 &.""

ability to withstand adverse economic conditions when selling price is declining.

)).
Formula 7et profitJ share holders e0uity

$%%& $6.66

#ear $%%" $).@4

$%%4 [email protected]&


ere the profitability to ordinary shareholders is bit weaker and showing an downward trend.

)$.
$%
Formula

$%%&

$%%"

%4 $6.

)$
)5.
#ear
Formula

$%%&

$%%"

)5 employed =BITJ Total capital 46.@! 66.%! This ratio shows how efficiently the long term funds of owners and lenders are being

$%%4 5&.")

used.

)6. =arnings er Share Sl.no

Formula 7et profit available e0 shJ 79

$%%&

#ear $%%"

)6 =S shares [email protected] &5."& Ehatever income remains in the business after all prior claims, other than owners claims 1i.e. ordinary dividends2 have been paid, will belong to the ordinary shareholders who can then make a decision as to how much of this income they wish to remove from the business in the form of a dividend, and how much they wish to retain in the business. The shareholders are particularly interested in knowing how much has been earned during the financial year on each of the shares held by them. For this reason, an earning per share figure must be calculated.

$%%4 &4.&$


)4. 8ividend per Share Sl.no
#ear $%%" $$

receive the ma(imum possible dividends from a company, consistent with its profits and need for retained earnings. But the companys 8S has reduced drastically in D/T :ompanys case.

)". = ratio Sl.n o )" J=

#ear
Formula -SJ=S

$%%& 5$."@

$%%" 55.%$

$%%4 )5.)6

The J= ratio reflects the price currently being paid by the market for each rupee of currently reported =S. igh J= generally reflects lower risk andJor higher growth prospects for earnings. The above ratio shows that the shares were traded at a much higher premium in $%%& than were in $%%4. In $%%4 the price was )5.)6 times higher than earnings while in $%%&, the price is 5$."@ times higher. )&. rice to book value #ear Sl.no
$%%4 $&.4


)!. Book value per share Sl.no
#ear $%%" 554.")

$%%4 $4".@6

indicates that the company has strong reserves, indicating scope for bonus shares, of course sub+ect to necessary guidelines of the S=BI.

)@. 8ividend payout ratio Sl.n

#ear

o
$%%4 5".5$

calculated

$%. =arning yield #ear Sl.no
$%%4 &.")

market value of its share. For blue chip companies this ratio tends to be around 4 per cent to " per cent.

$). 8ividend yield Sl.no
Formula 8SJ-S)%%

$%%& %.!%

#ear $%%" %.@%

7otice here there is a decrease in the yield from $%%4 to $%%&. The main reason for this is that the dividend per share decreased while at the same time, the price of a share increased.

$$. Total asset turnover ratio

$%%4 $.&"


#ear Sl.no
$%%4 $.56

its assets. The higher ratio indicates the more efficient management.

$5. :apital turn over ratio Sl.no
Formula :9SJcapital employed

$%%& $.&6

#ear $%%" $.@%

$%%4 5."&


:apital turnover ratio measures the efficiency of a firm in managing and utili3ing its capital. The higher ratio indicates the more efficient management.

Value anch!( !" the 0LT C!m8any is in the net 8a4e<


6e(i!d L m!nths I&COME 6e(i!d L m!nths 7et 9perating Income I&COME EX6E&SES 7et 9perating Income -aterial :onsumption -anufacturing =(penses EX6E&SES ersonnel =(penses -aterial :onsumption Selling =(penses -anufacturing =(penses Administrative =(penses ersonel =(penses :apitali3ed =(penses Selling =(penses :ost of Sales
@..,K.B i+c7,e state,e+t @..*K.B L3T C7,pa+y @..+K.B $%4$).5@

)&,"64.$@ 4!$".46 @))$.6@ )6"!.6@ 4,)@@.$$ $5$.!4 &,&4@.$% )56&.6" ),$4!.$) '6.!% $%%.!6 )&,@!5.%6 $,45!.54 ),)@&.@@ 6@5.@5 '5.5 5,%5$.$! )4,")$.)" )!&.!" $,%55.)5 $,!66.6$ 64!.4" 56&.!@ $,6@)."@ $,6@".45 &$4.&" )"%.)5 ),&&%.&& $,55).4" %.4@ 55).6" 4.4$ $,%%%.)%

@.).K.B

@..K.B @..K.B @..DK.B $5!"".$@ $&&4".5@

)6,&&".@4 )5,)!@.&) "[email protected] )%&%).!$ )&)5.@)4,)$4.)6 6,")6.%$ $"@.@" ",!"@.$% 4,$"%.44 )4)4.4@ !@%.%5 '".@& &"6.4) )4".&6 $%,&$5.!" )&%.)! 5,)6$.65 !").$& @&$.$$ ').!@45$.%$ '5.)4 5,"&6.64 )5,4%%.5$ )$,)&!.4% $$%.6% ),$&"."5 ),%)).$) 5,646.%" [email protected]!5"4.)5 $5%.@) ),")".)) 5,%!!.@5),$6$.)$ )%&.)$!&4.)4 !&.4$ $,$)5.&!),)46."% ),4%!.@@ %.$! 5$).56 $!%.4) '4.&% ),)!&."4 !&6.%@

@,"64.5$ &5)&.5& )$4"!.56 $%%%.5" 5,$@".6& 5)$.@@ 6,%&!.!5 )&%6."@ "&!.%! ')%.)5 ))).)" $5,!@5.") 5,!"$.&& &6!.4) 4&5.%4 '%.&6 6,654.!$ !,@)$.5) $4!.4" &55.%) 6,)&&.$" 56%."& 5!5.$$ ),%&5."! 5,&@6.%5 )%44.$! !6.45 $,&5!.&4 @!@.)4 %.)5 $&5.)4 4.!@ &)".%%

@..BK.B ).)"

@,6)$.@@ ).)$ ).)& ).)& 5,%%$.%& ).)" 5,64!.&) ).)$ ""!.6 ).64 "%@.5@ &6@.)5 ).%!').@! !,6!4.&$ ).)& @$&.$& 5!!.)5 ).%4 ),5)4.6% ).$) 5%6.4& ),%)%.!5 %.6! 5!!.)5 ').%5 "$$.&%

ea(nin4s 8e( Items sha(e 7on'recurring 9ther 7on'cash Ad+ustments

"%).!& ),&&".!! ),5@!.$5 55.6% B<@. ).$6 '4.56

<=9
),5@6.)5

),%%&.&$

@!5.!4

456.@5

4&".!"

no. of shares

$!.55

)5.&6

)$.@@

)$.66

$6.!&

ea(nin4s 8e( sha(e

D*<@)

+B
+<+D

DB<..

@B<@.

),%$!.$6

&)!.&%

"$!."$

5"%.@4

$4$.&!

)5.%%

$$.%%

$&.4%

!%.%%

&.4%

5"!.$@

5%$.$!

54&.$$4

@@4.$

)!".4$4

%.&6

%.&)

%."6

%."&

%.66

4,"!5.!4

6,4!5.5$

5,5)$.$4

$,&)&.44

5,[email protected]

$5.5"

$).54

$!.4!

)!.!$

)".54

),")@.)4 5$.@%

$,65$.&% 55.)&

@@@.4 )5.

%$4&6.54 )5.5"

)!6.44 &.@"

5"".)$ $5".%! $,$%!.5" 5%$.$@ $,&66.&! !$).45 [email protected]& 4&).!% 6&@.@$ 6".6$ *<)B )!!.%6 <.* 6%6.%5 4%.6! ').!4 !.%$ 6.45

:A<

&&.) 464."% ).)! $".@) 6.54


ris- :ree rate Di4i;e+; pay7ut rati7 re@uire; rate 7: rate e9pecte; r7t6 rate i+ ;i4i;e+; p/e ratio A< PE rati7 ei6te; pe rati7

)&) !' !&2 )(&2) 2%&!) (%&'!

8

5eta

EMRP

!



The "!ll!=in4 table sh!=s the e8ected ma(7et 8(ices !" 0LT C!m8any< year

4alue a+c67r

2008 2%2&%%

200 2(!&%8

20!0 28(&(!

The following is the D/T company management review The following lines e(plain the chairmans speech of D/T :ompany it tells about the companys strategy of future e(pansion and development strategy.

6e("!(mance !e(ie=:

India is one of the fastest growing economies globally with 8 growing at @.6* last year. igh capacity utilisation across various sectors is fuelling an up trend in capital e(penditure. The scale of investment in infrastructure envisaged in the ))th Five #ear lan 1$%%&'$%)$2 will call for greater engagement by the private sector and international institutions. All these are lead indicators for growth. The conducive business environment coupled with a slew of measures taken by the :ompany for improvement of operational efficiency, institutionali3ation of a risk management framework and more +udicious selection of pro+ects, have yielded significant benefits. In Financial #ear $%%"'$%%&, the :ompany?s order inflows /


sales have grown by 5&* and )@* respectively. The :ompany bagged its largest ever order in domestic / international markets such as e(pansion / modernisation of 8elhi International Airport and an offshore platform pro+ect in Qatar. The order book as on -arch 5), $%%& stood at
Inestin4 "!( 8(!"itable 4(!=th:

Investments are the o(ygen of growth. Eithin the larger conte(t of the country?s increasing investments in building a brighter future, the :ompany is also investing in multiple spheres ' people, technology, capacity e(pansion both domestically / internationally and brand building. This is essential for sustaining the growth momentum and continuous value creation.

6e!8le - Talent mana4ement:

Talent ac0uisition and retention is one of the key result areas for our senior managers. 9n an on'going basis, the :ompany renews, re+uvenates and adds uman

Techn!l!4y - ;uildin4 !n c!(e en4inee(in4 st(en4th:

iven

our

commitment

to

becoming

a

knowledge'based

premium

conglomerate, investments in technology across all businesses continue to remain at the forefront of the :ompany?s business strategy. The :ompany has set up =ngineering design centers at -umbai, Baroda, :hennai, Bangalore, and 8elhi as well as in the -iddle =ast. In line with our ob+ective of emerging as a player with end'to'end capabilities in the power sector, the :ompany has signed an agreement with -itsubishi eavy Industries Dimited, Capan for super critical boiler technology and is close to achieving a similar tie'up in the field of turbines.

Inte(nati!nal ;usiness - St(en4thenin4 8(esence bey!nd India:

The :ompany continues to forge alliances and to invest in international business for enhancing capabilities and achieving its vision of becoming an Indian multinational with focus in the -iddle =ast and :hina. Coint ventures have been set up in ;uwait and Saudi Arabia for electromechanical construction in oil / gas, power and infrastructure sectors. The -odular Fabrication yard being set up at Sohar, 9man will strengthen the :ompany?s presence in the ulf region. The :ompany is receiving encouraging response from clients for pro+ect e(ecution and 8esign / =ngineering services. The :ompany has set up manufacturing facilities in :hina for high' end switchgear / rubber processing machinery and a factory is also being built for industrial valves. These initiatives will accelerate the :ompany?s thrust towards its UDakshya? target of achieving $4* revenues from international business.

Ca8acity E8ansi!n:

The :ompany is e(panding capacity internationally and within India. Substantial capacity augmentation at a3ira will help us address the growing demand in oil / gas industry. The =lectrical / =lectronics division is e(panding its capacity at -ysore, Ahmednagar and -ahape to take care of rapid growth in the sector. The :ompany crossed a ma+or milestone with the inauguration of the first two units at its 5%%'acre campus in :oimbatore. The facilities for the manufacture of industrial valves


and switchboards are already accomplished. The campus will progressively see the establishment of manufacturing facilities for advanced tooling and high precision components in aerospace, nuclear power, defence sectors etc. The :ompany is building a state of the art eavy Dift'cum'ipelay vessel in partnership with Sapura:rest etroleum Berhad, -alaysia that will give offshore installation capability and achieve significant competitiveness. All the divisions of the :ompany have planned increased investments in ac0uisition and installation of new e0uipment and manufacturing facilities.

0!!7in4 Ahead:

As we move on, the :ompany is well positioned to e(ploit the opportunities that will emerge from hydrocarbon, infrastructure, power, minerals / metals and other industrial sectors. The ublic rivate artnership model is going to be the way forward for infrastructure pro+ects in the country. D/T Infrastructure 8evelopment ro+ects Dimited has already consolidated its position with some completed pro+ects and several under implementation across various sectors. Eith its capabilities augmented through the recent tie'up for manufacture of super critical boilers and the proposed collaboration for turbines, the :ompany will be in a position to set up complete power pro+ects. D/T Infrastructure Finance :ompany Dimited has initiated funding in the infrastructure segment. The :ompany has commenced building ships at its a3ira Eorks. Ee are also scouting for a suitable site in India to set up a world'class facility for shipbuilding and repair, comparable to the best worldwide. The defence, nuclear power and aerospace sectors show potential and promise. The

I am happy to share that the :ompany was ranked number ) in two critical attributes ' ?Quality? and ?

Findin4 and su44esti!n: )< The "!ll!=in4 table sh!=s the e8ected ma(7et !" the ;1E0 st!c7 "!( the 8e(i!d !" B yea(s i
$4%%

200 2')&%'

20!0 %(!&)2

5&4%

210)!&%

Analysis: At present the company share price is very attractive and fundamentally undervalued Because the intrinsic value of the share is $)&%.!4 and current market price is $%").54 So one can have buy view on this stock from long term point of view.

Suggestion

;uy for long term point of view.


@< The "!ll!=in4 table sh!=s the e8ected ma(7et !" the 0LT st!c7 "!( the 8e(i!d !"

B yea(s i
EXPECTED MARKET PRICE OF L3T year Particulars 2008 F"#DAME#TAL A#ALI$I$ 2%2&%%

664%

TECH#ICAL A#AL*$I$ Curre+t ,ar-et price

200 2(!&%8

20!0 28(&(! 800

%102(&80

Analysis:

Above table shows the company script is mainly technical driven there is less scope for fundamental analysis. :ompanys intrinsic value is
But when we analy3e by technically the stock is having good support and resistance so we can say that the stock moves upto 664% in short run and in long term the stock is predicted to go around 4!%%.

Suggestion If investor at present holding this stock should wait for some time to get good return in short term the stock may go for
Suggestion support.

C!nclusi!n

old

for time being and sell when stock breaks its previous


=ngineering is a diverse industry with a number of segments. A company from this sector can be a power e0uipment manufacturer 1like transformers and boilers2, e(ecution specialist or a niche player 1like providing environment friendly solutions2. It can be an electrical, non'electrical machinery and static e0uipment manufacturer too

The economy has been growing at an average growth rate of !.! per cent in the last four fiscal years 1$%%5'%6 to $%%"'%&2, with the $%%"'%& growth rate of @." per cent being the highest in the last )! years. Significantly, the industrial and service sectors have been contributing a ma+or part of this growth, suggesting the structural transformation underway in the Indian economy. Technical and fundamental analysis is the strong theory accepted world wide some investor strongly believes on fundamentals of company and some believe technical plays very important role in investing. But it is mainly depends on demand and supply for the stocks in the stock market. An effort is made to make understand the reader of this pro+ect what is fundamental analysis and what is technical analysis. By this pro+ect report one can strive to calculate intrinsic value of the shares and understanding what graphs are showing about the script.

;ibli!4(a8hy

MBA Project on Fundamental and Technical Analysis of Kotak Bank - Copy

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