EQUITY RESEARCH ON AUTOMOBILE SECTOR OF INDIA

MADE BY HITESH THAPAR A1802011333

INTRODUCTION
Automobile industry of India is one of the core industry, contributing approximately 6% to the GDP. Analysis of the automobile sector, determining if it is the right time to invest in this sector or not. Investment in the stocks of the automobile companies involves huge risks but they tend to yield greater returns too.

OBJECTIVES, SCOPE AND LIMITATIONS

Analyse the automobile sector of India through fundamental analysis and assist the investors in making investment decision Scope Fundamental analysis of the companies including the analysis of the 4 automobile players of India Mahindra and Mahindra Tata Motors Hero motocorp Ashok Leyland Limitation the analysis if fully based on secondary data and hence the accuracy of data is the main concern

RESEARCH METHODOLOGY
TYPE OF STUDY
The project will be exploratory in the initial stage and the knowledge thus gained will be used for further descriptive research

DATA
The project is done using secondary data

SAMPLE SIZE
4 automobile companies listed in the national stock exchange

FOREIGN INVESTMENTS OF THE AUTOMOBILE SECTOR

Presently, Indian automobile industrys foreign sector is worth US$ 15 million M&M set up a utility assembly in Brazil in collaboration with Bramont M&M collaborated with Bavarian motors to set up an assembly plant in Egypt Tata motors acquired jaguar and landrover for the estimated price price of US$ 1.5 bn It is expected that the share of the automobile sector in the GDP of India will rise from 5% to 10%

SEGMENTATION OF THE AUTOMOBILE SECTOR

The automobile sector of India is majorly categorized into 4 categories; Two wheelers 76% Three Wheelers 3.39% Passenger vehicles 16.25% Commercial vehicles 4.36 %

INTRODUCTION TO FUNDAMENTAL ANALYSIS

E-I-C approach Macroeconomic analysis ( economic cycle, political equation, foreign exchange reserves, inflation, interest rates, taxation, government policies) Industry analysis, includes Industry lifecycle ( introduction, growth, maturity, decline) Also includes Porters five forces model Barrier to entry Threat of substitutes Bargaining power of suppliers Bargaining power of customers Rivalry among competitors.

COMPANY ANALYSIS (final stage of fundamental analysis) The management The company The annual report Balance sheet, P&L A/c Cash flows Ratios

CURRENT SCENARIO
LOW SALES AND HIGH INVENTORY LEVELS JAIPAL REDDYS PROPOSAL

HUGE DIFFERENCE IN THE RATES OF PETROL AND DIESEL LEADING TO LOWER SALES OF PETROL DRIVEN CARS

MAHINDRA AND MAHINDRA

Increase in the fixed assets by 40% Liabilities decreased by 16% Very less cash available with the company because major amount of cash is used up in the investing activities Various macro-economic factors affecting the sales of M&M 1) Diesel engines 2) Domestic company 3) Launch of suvs at a very reasonable price

FUNDAMENTAL ANALYSIS (findings and conclusions)

EPS increased considerably, recovered from 2008 global meltdown Higher P/E ratio shows high confidence level among investors Entry into electrical vehicle segments shows better future prospects.

 Increase in the sales revenue and COGS Fundamental analysis EPS was continously rising till 200708, but then in 2008 EPS was extremely low due to global meltdown and acquisition of landrover and jaguar. Rise in DPS and dividend payout ratio

Findings and conclusions of TATA MOTORS LTD. Increase in the fixed assets by 20%

Hero motocorp
Worlds largest manufacturer of two wheelers based in India ABOUT TWO WHEELER INDUSTRY This segment is least affected by the prevailing headwinds in the industry due to the following factors. Lower impact of fuel prices on two wheeler owners Lower impact of interest rate hikes on two wheeler owners Marginally lower impact of commodity inflation on two wheeler ( rubber) Monsoon factor

Cost per vehicle Cost of commodities (INR) Increase in commodity prices (%)

Two wheelers 8456 10

Passenger vehicles 78,739 10

Medium and heavy commercial vehicle 458,067 10

Increase in commodity prices (INR)

Total raw material cost

846

7874

45807

27000

232000

880000

Increase in raw material cost (%)

3.1

3.4

5.2

Findings and conclusions of hero motocorp

On looking at the balance sheet we can observe that the total debt of the company has increased by 21.59% when compared with the previous year In application of funds column there was a very marginal increase in the net assets by 0.25%

Ashok Leyland
Finding and conclusion
EPS increased drastically in the year 2010-11 and it shows that the company has recovered from the slowdown and is back to normal The company has also got a lot of projects from the governments which ensures stable returns for a few years.