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Safal Niveshak Stock Analysis Excel (Ver. 3.

www.safalniveshak.com

HOW TO USE THIS SPREADSHEET


Step 1 - This spreadsheet works only on Screener.in. The first step is to create a free account here - https://www.screener.in/re
Step 2 - After creating your account, while you are logged in to Screener.in website, visit this page - https://www.screener.in/ex
Step 3 - Visit the home page of Screener.in and choose a company of your choice. Once you do that, you will see details of you
financial statement table called "Quarterly Results" and click on "View Consolidated". Now, all data you see for this company wi
Step 4 - Scroll back to the top of the page, and you will see a button "Export to Excel" on the right side. Click the button and the
the exact format as "Safal Niveshak's Stock Analysis Excel Ver. 3.0". Now onwards, any excel you export for any company on S
Step 5 - Email me your love and testimonial for helping you with this excel. :-)

IMPORTANT INSTRUCTIONS
1. Ensure that the company whose data you are downloading has numbers at least starting from FY08 (March 2008). This is be
from, say, FY10, you will see incorrect data for FY08 and FY09 (which will be of Hero Motocorp on whose financials I have crea
2. All financial data of your chosen company will be automatically updated in the sheet you download, except "Cash and Bank"
figures, which you must update manually from the company's annual reports. Dont forget to make these changes as these num
3. You may update the sheet and add your own analysis, formulae etc. and then upload again to Screener.in site using the Step
"Data Sheet" because this will cause errors in your future downloads.
4. DONT touch any cell except the black ones, where you are required to update the numbers manually from Annual Reports (j
the growth assumptions etc.
4. I have added Comments and Instructions wherever necessary so as to explain the concepts. Read those carefully before wo
5. This sheet is not a replacement of the work required to read annual reports as part of the analysis process. So please do tha
some discrepancy in numbers (though rare), but you will know this only when you read annual reports.
6. I could not find a bug/errors in this spreadsheet, but if you notice some, please email me at - vishal@safalniveshak.com - and
7. I will keep on updating the sheet from time to time and will update the same on the website. I invite you to share your feedba
together.
8. This excel won't work for banking and financial services companies.

Note: All data is sourced from Screener.in


Safal Niveshak Stock Warning! Excel can be a wonde
the past. But it can be a we
Analysis Excel (Ver. 3.0) destruction to predict the future
of what you are getting into. He
always equal garba
www.safalniveshak.com
Basic Company Details
Parameters Details
Company HERO MOTOCORP LTD
Current Stock Price (Rs) 3,919 Remember! Focus on decision
Face Value (Rs) 2.0 Look for disconfirming evidenc
No. of Shares (Crore) 20.0
Market Capitalization (Rs Crore) 78,259

Key Financials - Trend


Please! It's your money. Please
Parameters Details
results of this excel cause you
Sales Growth (9-Year CAGR) 11.9% designed this excel to aid your
Profit Before Tax Growth (9-Year CAGR) 14.2% you alone are responsible for yo
Net Profit Growth (8-Year CAGR) 14.9% live peacefully ever after! I am
Average Debt/Equity (5-Years, x) 0.0 wants you to do the hard wo
Average Return on Equity (5-Years) 37.1% companies on your own. But I'd
compass instead of a map, for
Average P/E (5-Years, x) 18.8
map with territory and lose it
Latest P/E (x) 23.0
Excel can be a wonderful tool to analyze
past. But it can be a weapon of mass
on to predict the future! So be very careful
you are getting into. Here, garbage in will
always equal garbage out.

ber! Focus on decisions, not outcomes.


disconfirming evidence. Calculate. Pray!

t's your money. Please don't blame me if


of this excel cause you to lose it all! I've
d this excel to aid your own thinking, but
are responsible for your actions. I want to
acefully ever after! I am not a sadist who
you to do the hard work by analyzing
es on your own. But I'd rather give you a
ss instead of a map, for you can confuse
ith territory and lose it all. All the best!
Buffett Checklist - Read, Remember, Follow!
Source - Buffettology by Mary Buffett & David Clark
Parameter

Consumer monopoly or commodity?

Understand how business works

Is the company conservatively financed?

Are earnings strong and do they show an


upward trend?

Does the company stick with what it


knows?

Has the company been buying back its


shares?

Have retained earnings been invested


well?

Is the companys return on equity above


average?

Is the company free to adjust prices to


inflation?
Does the company need to constantly
reinvest in capital?

Conclusion

Never Forget
Buffett Checklist - Read, Remember, Follow!
Source - Buffettology by Mary Buffett & David Clark
Explanation
Seek out companies that have no or less competition, either due to a patent or brand name or similar intangible that
makes the product unique. Such companies will typically have high gross and operating profit margins because of their
unique niche. However, don't just go on margins as high margins may simply highlight companies within industries with
traditionally high margins. Thus, look for companies with gross, operating and net profit margins above industry norms.
Also look for strong growth in earnings and high return on equity in the past.

Try to invest in industries where you possess some specialized knowledge (where you work) or can more effectively
judge a company, its industry, and its competitive environment (simple products you consume). While it is difficult to
construct a quantitative filter, you should be able to identify areas of interest. You should "only" consider analyzing
those companies that operate in areas that you can clearly grasp - your circle of competence. Of course you can
increase the size of the circle, but only over time by learning about new industries. More important than the size of the
circle is to know its boundaries.

Seeks out companies with conservative financing, which equates to a simple, safe balance sheet. Such companies
tend to have strong cash flows, with little need for long-term debt. Look for low debt to equity or low debt-burden ratios.
Also seek companies that have history of consistently generating positive free cash flows.

Rising earnings serve as a good catalyst for stock prices. So seek companies with strong, consistent, and expanding
earnings (profits). Seek companies with 5/10 year earnings per share growth greater than 25% (along with safe
balance sheets). To help indicate that earnings growth is still strong, look for companies where the last 3-years
earnings growth rate is higher than the last 10-years growth rate. More important than the rate of growth is the
consistency in such growth. So exclude companies with volatile earnings growth in the past, even if the "average"
growth has been high.

Like you should stock to your circle of competence, a company should invest its capital only in those businesses within
its circle of competence. This is a difficult factor to screen for on a quantitative level. Before investing in a company,
look at the companys past pattern of acquisitions and new directions. They should fit within the primary range of
operations for the firm. Be cautious of companies that have been very aggressive in acquisitions in the past.

Buffett prefers that firms reinvest their earnings within the company, provided that profitable opportunities exist. When
companies have excess cash flow, Buffett favours shareholder-enhancing maneuvers such as share buybacks. While
we do not screen for this factor, a follow-up examination of a company would reveal if it has a share buyback plan in
place.

Seek companies where earnings have risen as retained earnings (earnings after paying dividends) have been
employed profitably. A great way to screen for such companies is by looking at those that have had consistent
earnings and strong return on equity in the past.

Consider it a positive sign when a company is able to earn above-average (better than competitors) returns on equity
without employing much debt. Average return on equity for Indian companies over the last 10 years is approximately
16%. Thus, seek companies that earn at least this much (16%) or more than this. Again, consistency is the key here.

That's what is called "pricing power". Companies with moat (as seen from other screening metrics as suggested above
(like high ROE, high grow margins, low debt etc.) are able to adjust prices to inflation without the risk of losing
significant volume sales.
Companies that consistently need capital to grow their sales and profits are like bank savings account, and thus bad
for an investor's long term portfolio. Seek companies that don't need high capital investments consistently. Retained
earnings must first go toward maintaining current operations at competitive levels, so the lower the amount needed to
maintain current operations, the better. Here, more than just an absolute assessment, a comparison against
competitors will help a lot. Seek companies that consistently generate positive and rising free cash flows.

Sensible investing is always about using folly and discipline - the discipline to identify excellent businesses, and wait
for the folly of the market to drive down the value of these businesses to attractive levels. You will have little trouble
understanding this philosophy. However, its successful implementation is dependent upon your dedication to learn and
follow the principles, and apply them to pick stocks successfully.

Focus on decisions, not outcomes. Look for disconfirming evidence.


Balance Sheet
HERO MOTOCORP LTD
Rs Cr Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Equity Share Capital 40 40 40 40 40 40 40 40 40 40
Reserves 2,946 3,761 3,425 2,916 4,250 4,966 5,560 6,501 8,794 10,071
Borrowings 132 78 66 693 719 642 284 - - -
Other Liabilities 1,955 2,206 4,992 7,083 4,886 4,001 4,218 3,987 3,796 4,645
Total 5,074 6,085 8,523 10,732 9,895 9,649 10,102 10,528 12,631 14,757

Net Block 1,156 1,574 1,659 4,080 3,786 3,071 2,243 2,913 3,584 4,396
Capital Work in Progress 408 121 48 50 39 62 854 713 605 465
Investments 2,567 3,369 3,926 5,129 3,964 3,624 4,089 3,154 4,581 5,890
Other Assets 942 1,022 2,890 1,473 2,107 2,892 2,916 3,749 3,860 4,006
Total 5,074 6,085 8,523 10,732 9,895 9,649 10,102 10,528 12,631 14,757

Working Capital -1,013 -1,184 -2,102 -5,610 -2,779 -1,109 -1,302 -238 64 -639
Debtors 297 150 108 131 272 665 921 1,390 1,283 1,562
Inventory 317 327 436 525 676 637 670 815 673 656
Cash & Bank** 4,735 3,367 3,190 3,393 2,605 3,546 4,618
** Manually enter this number; Convert to Rs Crore if not already done in the Annual Reports; Use Cash+Bank+Current Investments from Consolidated Balance Sheet in Annual Reports

Debtor Days 11 4 3 2 4 10 13 18 16 20
Inventory Turnover 33 38 36 37 35 37 38 34 42 43
Fixed Asset Turnover 8.9 7.8 9.5 4.8 6.2 7.7 11.3 9.5 7.9 6.5
Debt/Equity 0.0 0.0 0.0 0.2 0.2 0.1 0.1 - - -
Return on Equity 32% 34% 64% 65% 55% 42% 38% 36% 36% 33%
Return on Capital Employed 509% 257% 202% 88% 178% 71% 75% 76%
Profit & Loss Account / Income Statement
HERO MOTOCORP LTD
Rs Cr Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Trailing
Sales 10,332 12,319 15,758 19,398 23,579 23,768 25,275 27,585 28,443 28,475 29,048
% Growth YOY 19% 28% 23% 22% 1% 6% 9% 3% 0%
Expenses 9,002 10,635 13,096 16,865 19,960 20,484 21,735 24,198 23,988 23,840 24,346
Material Cost (% of Sales) 72% 71% 68% 73% 74% 73% 72% 72% 68% 67% Check for wide fluctuations in key
Power and Fuel 1% 1% 1% 1% 0% 1% 1% 1% 0% 0% expense items. For manufacturing
Other Mfr. Exp 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% firms, check their material costs etc. For
Employee Cost 3% 3% 3% 3% 3% 3% 4% 4% 5% 5% services firms, look at employee costs.
Selling and Admin Cost 9% 9% 9% 7% 5% 6% 6% 7% 7% 8%
Operating Profit 1,330 1,684 2,662 2,533 3,619 3,284 3,540 3,387 4,455 4,635 4,702
Operating Profit Margin 13% 14% 17% 13% 15% 14% 14% 12% 16% 16% 16%
Other Income 243 280 363 290 365 398 446 493 422 522 534
Other Income as % of Sales 2.3% 2.3% 2.3% 1.5% 1.5% 1.7% 1.8% 1.8% 1.5% 1.8% 1.8%
Depreciation 160 181 191 402 1,097 1,142 1,107 540 438 493 512
Interest 2 3 2 15 21 12 12 11 5 6 6
Interest Coverage(Times) 706 705 1,349 160 135 213 244 301 908 771 771
Profit before tax (PBT) 1,410 1,781 2,832 2,405 2,865 2,529 2,867 3,329 4,435 4,658 4,718
% Growth YOY 26% 59% -15% 19% -12% 13% 16% 33% 5%
PBT Margin 14% 14% 18% 12% 12% 11% 11% 12% 16% 16% 16%
Tax 442 500 600 477 487 411 758 943 1,275 1,281 1,310
Net profit 968 1,282 2,232 1,928 2,378 2,118 2,109 2,386 3,160 3,377 3,408
% Growth YOY 32% 74% -14% 23% -11% 0% 13% 32% 7%
Net Profit Margin 9% 10% 14% 10% 10% 9% 8% 9% 11% 12% 12%
EPS 48.5 64.2 111.8 96.5 119.1 106.1 105.6 119.5 158.3 169.1 170.7
% Growth YOY 32% 74% -14% 23% -11% 0% 13% 32% 7%
Price to earning 15.7 17.0 17.4 17.8 17.7 14.3 21.0 20.6 18.8 19.1 23.0
Price 762 1,094 1,941 1,721 2,107 1,517 2,219 2,467 2,982 3,232 3,919
Dividend Payout 39.2% 31.2% 98.4% 108.8% 37.8% 56.6% 61.6% 50.2% 19.0% 18.9%
Market Cap 15,218 21,846 38,767 34,364 42,080 30,296 44,305 49,261 59,556 64,532
Retained Earnings 588 882 35 -169 1,480 920 810 1,188 2,561 2,738
Buffett's $1 Test 4.5

TRENDS: 10 YEARS 7 YEARS 5 YEARS 3 YEARS


Sales Growth 11.9% 8.8% 3.8% 4.1%
PBT Growth 14.2% 7.4% 10.2% 17.6%
PBT Margin 13.7% 12.9% 13.2% 14.7%
Price to Earning 18.0 18.5 18.8 19.5

Check for long term vs short term trends here. Check if the growth over
past 3 or 5 years has slowed down / improved compared to long term (7
to 10 years) growth numbers.
Common Size P&L
Rs Cr Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Raw Material Cost 72% 71% 68% 73% 74% 73% 72% 72% 68% 67%
Change in Inventory 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Power and Fuel 1% 1% 1% 1% 0% 1% 1% 1% 0% 0%
Other Mfr. Exp 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Employee Cost 3% 3% 3% 3% 3% 3% 4% 4% 5% 5%
Selling and Admin Cost 9% 9% 9% 7% 5% 6% 6% 7% 7% 8%
Other Expenses 2% 2% 2% 2% 2% 2% 2% 3% 3% 3%
Operating Profit 13% 13% 17% 13% 15% 14% 14% 12% 16% 17%
Other Income 2% 2% 2% 1% 2% 2% 2% 2% 1% 2%
Depreciation 2% 1% 1% 2% 5% 5% 4% 2% 2% 2%
Interest 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Profit Before Tax 14% 14% 18% 12% 12% 11% 11% 12% 16% 16%
Tax 4% 4% 4% 2% 2% 2% 3% 3% 4% 4%
Net Profit 9% 10% 14% 10% 10% 9% 8% 9% 11% 12%
Dividend Amount 4% 3% 14% 11% 4% 5% 5% 4% 2% 2%

Common Size Balance Sheet


Rs Cr Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Equity Share Capital 1% 1% 0% 0% 0% 0% 0% 0% 0% 0%
Reserves 58% 62% 40% 27% 43% 51% 55% 62% 70% 68%
Borrowings 3% 1% 1% 6% 7% 7% 3% 0% 0% 0%
Other Liabilities 39% 36% 59% 66% 49% 41% 42% 38% 30% 31%
Total Liabilities 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Net Block 23% 26% 19% 38% 38% 32% 22% 28% 28% 30%
Capital Work in Progress 8% 2% 1% 0% 0% 1% 8% 7% 5% 3%
Investments 51% 55% 46% 48% 40% 38% 40% 30% 36% 40%
Other Assets 19% 17% 34% 14% 21% 30% 29% 36% 31% 27%
Total Assets 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Receivables 6% 2% 1% 1% 3% 7% 9% 13% 10% 11%
Inventory 6% 5% 5% 5% 7% 7% 7% 8% 5% 4%
Cash & Bank 3% 4% 22% 1% 1% 2% 1% 2% 1% 1%
A common-size financial statement is displays line
items as a percentage of one selected or common
figure. Creating common-size financial statements
makes it easier to analyze a company over time and
compare it with its peers. Using common-size
financial statements helps investors spot trends that
a raw financial statement may not uncover.
Cash Flow Statement
HERO MOTOCORP LTD
Rs Cr Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Total
Cash from Operating Activity (CFO) 1,212 1,359 2,687 2,254 2,360 1,890 2,963 2,250 3,849 4,028 24,852
Cash from Investing Activity -781 -861 -528 -1,322 93 -733 -1,617 12 -2,206 -1,944 -9,888
Cash from Financing Activity -432 -500 -2,109 -955 -2,458 -1,056 -1,415 -2,231 -1,687 -2,096 -14,939
Net Cash Flow -1 -2 49 -23 -6 101 -69 32 -44 -12 26
CFO/Sales 12% 11% 17% 12% 10% 8% 12% 8% 14% 14%
CFO/Net Profit 125% 106% 120% 117% 99% 89% 141% 94% 122% 119%
Capex** 375 315 212 364 565 607 937 1156 1638 1238
FCF 837 1,044 2,475 1,890 1,795 1,283 2,026 1,094 2,211 2,790 17,446
Average FCF (3 Years) 2,032
FCF/Sales 8% 8% 16% 10% 8% 5% 8% 4% 8% 10%
FCF/Net Profit 86% 81% 111% 98% 75% 61% 96% 46% 70% 83%

** Manually enter this number;


Convert to Rs Crore if not already
done in the Annual Reports; Use
"Capital expenditure" number
shown under "Cash Flow from
Investing Activities" segment of
Consolidated Cash Flow Statement
available in the Annual Reports
Earnings Power Value (Bruce Greenwald)
Read the book - Value Investing: From Graham to Buffett and Beyond by Bruce Greenwald (EPV is explained P
Explanation - Earnings power value (EPV) is a technique for valuing stocks by making an assumption about the sustainability
of capital but assuming no further growth. EPV formula = Adjusted Earnings / Cost of Capital

Company Name HERO MOTOCORP LTD


Latest Year Ended Mar-17

Calculation of Normalized Earnings


(Rs Crore) Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Sales 23,768 25,275 27,585 28,443 28,475
EBIT 2,541 2,879 3,340 4,440 4,665
Less - Adjustment 13 14 17 22 23
EBIT (Adjusted) 2,528 2,865 3,323 4,418 4,641
EBIT Margin'(Adjusted) 11% 11% 12% 16% 16%
Tax Rate 16% 26% 28% 29% 28%
Earnings After Tax (Adjusted) 2,117 2,107 2,382 3,148 3,365
Depreciation 1,142 1,107 540 438 493
Maintenance Capex (See Table Below) 584 755 877 1,534 1,234
Earnings After Tax (Normalized, A) 2,675 2,460 2,045 2,051 2,623
Reported Profit After Tax (B) 2,118 2,109 2,386 3,160 3,377

EPV Process (as per Greenwald's book, slightly modified) -


1. Start with operating earnings, i.e. EBIT. Adjust any one-time charges. I deduct 0.5% of reported EBIT as this adjustment
2. Apply a tax rate to the adjusted EBIT. I use the actual tax rate calculated from the Income Statement. After reducing this tax,
3. Add back Depreciation
4. Subtract Maintenance Capex
5. After these four steps, you arrive at Normalized Earnings
6. Divide this Normalized Earnings number by the Discount Rate to arrive at EPV. I use 12% discount rate/cost of capital.
7. Note that Greenwald's process as per his book is slightly more detailed than what I have used here

Calculation of Maintenance Capex


(Rs Crore) Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Fixed Assets (PPE) 3,071 2,243 2,913 3,584 4,396
Net Sales 23,768 25,275 27,585 28,443 28,475
PPE/Sales 0.13 0.09 0.11 0.13 0.15
Change in Sales 189 1,507 2,310 857 32
Total Capex 607 937 1,156 1,638 1,238
Growth Capex 23 182 279 104 4
Maintenance Capex 584 755 877 1,534 1,234

Calculating Maintenance Capex, as per Greenwald's book -


1. Calculate the Average Gross Property Plant and Equipment (PPE) / Sales ratio over 5-7 years
2. Calculate current years increase in sales
3. Multiply PPE/Sales ratio by increase in sales to arrive at Growth Capex
4. Maintenance Capex = Total Capex figure from the cash flow statement minus Growth Capex calculated above
(Bruce Greenwald)
nd by Bruce Greenwald (EPV is explained Page 93 onwards)
king an assumption about the sustainability of current earnings and the cost
rmula = Adjusted Earnings / Cost of Capital

EPV with Different Cost of Capital


Discount Rate EPV Net Cash** Total EPV Per Share
10% 26,232 4,618 30,850 1,545
12% 21,860 4,618 26,478 1,326
15% 17,488 4,618 22,106 1,107
Current Market Cap (Rs Crore) 78,259
EPV as % of Market Cap 34%

** Change the "Cash & Bank" number in "Balance Sheet" sheet


(Row #19) so that the correct number automatically reflects here

5% of reported EBIT as this adjustment


e Income Statement. After reducing this tax, we arrive at Adjusted Earnings After Tax

use 12% discount rate/cost of capital.


at I have used here

over 5-7 years

owth Capex calculated above


Dhandho Intrinsic Value Calculation
Read the book - The Dhandho Investor by Mohnish Pabrai

HERO MOTOCORP LTD HERO MOTOCORP LTD


Dhandho IV - Lower Range Dhandho IV - Higher Range
Year FCF (Rs Cr) PV of FCF (Rs Cr) Assumed FCF Growth Year
0 Excess Cash (Latest) 4,618 Year 1-3 15% 0 Excess Cash (Latest)
1 FY18 2,336 2,086 Year 4-6 10% 1 FY18
2 FY19 2,687 2,142 Year 7-10 5% 2 FY19
3 FY20 3,090 2,199 Discount Rate 12% 3 FY20
4 FY21 3,399 2,160 4 FY21
5 FY22 3,739 2,122 Last 5-Years' CAGR 5 FY22
6 FY23 4,113 2,084 Sales 4% 6 FY23
7 FY24 4,318 1,953 PBT 10% 7 FY24
8 FY25 4,534 1,831 FCF 9% 8 FY25
9 FY26 4,761 1,717 9 FY26
10 FY27 4,999 1,610 10 FY27
10 49,991 16,096 10
Intrinsic Value 40,618 Intrinsic Value
Current Mkt. Cap. 78,259 Current Mkt. Cap.
Premium/(Discount) to IV 93% Premium/(Discount) to IV

Note: See explanation of this model here

P.S. In case of companies earning negative FCF, where this model will not work, you must use a normalized positive FCF as
starting number. This number is your assumption of FCF the business will earn in a normal year, without capex. Check the his
this business while arriving at your assumption, and use your judgment wisely without twisting the model to fit your version of
Calculation
by Mohnish Pabrai

HERO MOTOCORP LTD


Dhandho IV - Higher Range
FCF (Rs Cr) PV of FCF (Rs Cr) Assumed FCF Growth
Excess Cash (Latest) 4,618 Year 1-3 20%
2,438 2,177 Year 4-6 15%
2,926 2,332 Year 7-10 10%
3,511 2,499 Discount Rate 12%
4,037 2,566
4,643 2,635
5,340 2,705
5,873 2,657
6,461 2,609
7,107 2,563
7,818 2,517
117,264 37,756
Intrinsic Value 67,634
Current Mkt. Cap. 78,259
Premium/(Discount) to IV 16%

ust use a normalized positive FCF as the


al year, without capex. Check the history of
sting the model to fit your version of reality.
Ben Graham Formula (Low Range) Ben Graham Formula (High Range)
Company Name HERO MOTOCORP LTD Company Name
Year Ended Mar/17 Year Ended

Avg 5-Yr Net Profit (Rs Crore) 2,630.0 Avg 5-Yr Net Profit (Rs Crore)
PE Ratio at 0% Growth 8.5 PE Ratio at 0% Growth
Long-Term Growth Rate 3.6 Long-Term Growth Rate

Ben Graham Value (Rs Crore) 41,465 Ben Graham Value (Rs Crore)
Current Market Cap (Rs Crore) 78,259 Current Market Cap (Rs Crore)

EXPLANATION
Ben Graham's Original Formula: Value = EPS x (8.5 + 2G)
Here, EPS is the trailing 12 month EPS, 8.5 is the P/E ratio of a stock with 0% growth and g is the growth rate for the next 7-10

Ben Graham's Revised Formula: Value = [EPS x (8.5 + 2G) x 4.4] / Y


Here, 4.4 is what Graham determined to be his minimum required rate of return. At the time of around 1962 when Graham was

Note: I have used Graham's original formula in the above calculations


m Formula (High Range)
HERO MOTOCORP LTD
Mar/17

2,630.0
8.5
7.3

60,575
78,259

g is the growth rate for the next 7-10 years

e of around 1962 when Graham was publicizing his works, the risk free interest rate was 4.4% but to adjust to the present, we divide this nu
e present, we divide this number by todays AAA corporate bond rate, represented by Y in the formula above.
Dicounted Cash Flow Valuation
HERO MOTOCORP LTD

Initial Cash Flow (Rs Cr) 2,032 46,250


78,259
Years 1-5 6-10 59%
FCF Growth Rate 15% 12%
Discount Rate 12%
Terminal Growth Rate 2%

Net Debt Level (Rs Cr) (4,618)

Year FCF Growth Present Value


1 2,336 15% 2,086
2 2,687 15% 2,142
3 3,090 15% 2,199
4 3,553 15% 2,258
5 4,087 15% 2,319
6 4,577 12% 2,319
7 5,126 12% 2,319
8 5,741 12% 2,319
9 6,430 12% 2,319
10 7,202 12% 2,319

Final Calculations
Terminal Year 7,346
PV of Year 1-10 Cash Flows 22,599
Terminal Value 23,652
Total PV of Cash Flows 46,250
Current Market Cap (Rs Cr) 78,259

Note: See explanation of DCF here


Valuation
LTD

DCF Value (As calculated in cell B29)


Current Market Cap
DCF as % of Current Mkt Cap
Expected Returns Model
HERO MOTOCORP LTD
Particulars Mar/08 Mar/09 Mar/10 Mar/11 Mar/12 Mar/13 Mar/14
Net Profit (Rs Crore) 968 1,282 2,232 1,928 2,378 2,118 2,109
Net Profit Margin 9% 10% 14% 10% 10% 9% 8%
Return on Equity 32% 34% 64% 65% 55% 42% 38%

Calculations (Enter values only in black cells)


Estimated CAGR in Net Profit over next 10 years 12%
Estimated Net Profit after 10 years (Rs Cr) 10,489
Current P/E (x) 23.2
Exit P/E in the 10th year from now (x, Estimated) 20.0
Esti. Market Cap (10th year from now; Rs Cr) 209,776
Cost of Capital/Discount Rate 12%
Discounted Value (Rs Cr) 67,542
Current Market Cap (Rs Cr) 78,259

Note: See explanation of this model here


el
Mar/15 Mar/16 Mar/17 CAGR (9-Yr) CAGR (5-Yr)
2,386 3,160 3,377 15% 7%
9% 11% 12%
36% 36% 33%
Intrinsic Value Range
HERO MOTOCORP LTD
Lower Higher Remember! Give importance to a stock's valuations / fair va
EPV 26,478 only "after" you have answered in "Yes" to these two questio
Dhandho 40,618 67,634 (1) Is this business simple to be understood? and (2) Can
Ben Graham 41,465 60,575 understand this business?
DCF 46,250 Don't try to quantify everything. In stock research, the less n
Expected Return 67,542 mathematical you are, the more simple, sensible, and useful
Current Market Cap. 78,259 be your analysis and results. Great analysis is generally "ba
of-the-envelope".

Also, your calculated "fair value" will be proven wrong in t


future, so don't invest your savings just because you fall in
with it. Don't look for perfection. It is overrated. Focus on
decisions, not outcomes. Look for disconfirming evidenc
importance to a stock's valuations / fair value
ave answered in "Yes" to these two questions -
ness simple to be understood? and (2) Can I
understand this business?

fy everything. In stock research, the less non-


are, the more simple, sensible, and useful will
and results. Great analysis is generally "back-
of-the-envelope".

lated "fair value" will be proven wrong in the


vest your savings just because you fall in love
ook for perfection. It is overrated. Focus on
outcomes. Look for disconfirming evidence.
HERO MOTOCORP LTD
SCREENER.IN
Narration Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Sales 6,794 6,905 6,809 7,224 7,505 7,399 7,796 6,365 6,915 7,972
% Growth YOY 10% 7% 14% -12% -8% 8%
Expenses 6,111 5,863 5,714 6,093 6,316 6,169 6,427 5,285 5,958 6,676
Operating Profit 683 1,042 1,096 1,131 1,189 1,230 1,369 1,079 958 1,296
Other Income 93 104 112 90 117 120 152 132 118 132
Depreciation 90 103 109 114 115 115 119 124 135 133
Interest 1 1 1 1 1 2 2 2 1 2
Profit before tax 686 1,042 1,097 1,106 1,190 1,234 1,400 1,085 939 1,293
PBT Margin 10% 15% 16% 15% 16% 17% 18% 17% 14% 16%
% Growth YOY 74% 18% 28% -2% -21% 5%
Tax 209 295 311 313 357 351 396 313 221 379
Net profit 477 748 786 793 833 883 1,004 772 718 914
% Growth YOY 75% 18% 28% -3% -14% 4%
OPM 10% 15% 16% 16% 16% 17% 18% 17% 14% 16%
COMPANY NAME HERO MOTOCORP LTD
LATEST VERSION 2.10 PLEASE DO NOT MAKE ANY CHA
CURRENT VERSION 2.10

META
Number of shares 19.97
Face Value 2
Current Price 3918.9
Market Capitalization 78259.2

PROFIT & LOSS


Report Date Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Sales 10331.8 12319.12 15758.18 19397.93 23579.03 23768.11
Raw Material Cost 7391.84 8760.22 10730.41 14135.17 17365.41 17364.86
Change in Inventory -14.14 18.21 -5.95 24.06 83.84 -32.8
Power and Fuel 56.55 73.7 81.05 100.47 112.66 129.18
Other Mfr. Exp 95.65 113.33 143.49 164.83 187.56 213.96
Employee Cost 321.16 370.71 437.83 618.95 735.52 820.92
Selling and admin 903.74 1047.27 1401.46 1396.59 1155.37 1392.12
Other Expenses 218.89 287.75 296.02 473.29 487.57 529.79
Other Income 242.77 280.3 363.33 289.62 364.57 398.38
Depreciation 160.32 180.66 191.47 402.38 1097.34 1141.75
Interest 2 2.53 2.1 15.17 21.3 11.91
Profit before tax 1410.28 1781.46 2831.73 2404.76 2864.71 2529.2
Tax 442.4 499.7 599.9 476.86 486.58 411.04
Net profit 967.88 1281.76 2231.83 1927.9 2378.13 2118.16
Dividend Amount 379.41 399.38 2196.56 2096.72 898.59 1198.13

Quarters
Report Date Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
Sales 6793.87 6904.76 6809.26 7223.51 7505.17 7398.91
Expenses 6110.54 5862.76 5713.68 6092.7 6315.99 6168.83
Other Income 92.88 104.39 111.52 90.2 116.76 120.37
Depreciation 89.74 102.96 109.05 113.94 114.74 115.24
Interest 0.75 1.21 1.23 1.23 1.22 1.5
Profit before tax 685.72 1042.22 1096.82 1105.84 1189.98 1233.71
Tax 209.19 294.68 310.7 312.61 356.69 350.62
Net profit 476.53 747.54 786.12 793.23 833.29 883.09
Operating Profit 683.33 1042 1095.58 1130.81 1189.18 1230.08

BALANCE SHEET
Report Date Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Equity Share Capital 39.94 39.94 39.94 39.94 39.94 39.94
Reserves 2946.3 3760.81 3425.08 2916.12 4249.89 4966.3
Borrowings 132 78.49 66.03 693.35 719.44 641.58
Other Liabilities 1955.33 2205.9 4992.04 7082.8 4886.14 4001.16
Total 5073.57 6085.14 8523.09 10732.21 9895.41 9648.98
Net Block 1156.26 1573.71 1658.78 4080.28 3785.51 3070.98
Capital Work in Progress 408.49 120.54 48.14 49.96 38.84 62.09
Investments 2566.82 3368.75 3925.71 5128.75 3964.26 3623.83
Other Assets 942 1022.14 2890.46 1473.22 2106.8 2892.08
Total 5073.57 6085.14 8523.09 10732.21 9895.41 9648.98
Receivables 297.44 149.94 108.39 130.59 272.31 665
Inventory 317.1 326.83 436.4 524.93 675.57 636.76
Cash & Bank 131.09 219.57 1907.21 71.52 76.82 181.04
No. of Equity Shares 199687500 199687500 199687500 199687500 199687500 199687500
New Bonus Shares
Face value 2 2 2 2 2 2

CASH FLOW:
Report Date Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Cash from Operating Activity 1211.87 1359.03 2686.64 2254.16 2359.78 1890.43
Cash from Investing Activity -781.01 -861.19 -528.17 -1322.31 92.79 -732.94
Cash from Financing Activity -432.33 -499.93 -2109.31 -955.23 -2458.16 -1056.27
Net Cash Flow -1.47 -2.09 49.16 -23.38 -5.59 101.22

PRICE: 762.09 1093.99 1941.4 1720.87 2107.28 1517.15

DERIVED:
Adjusted Equity Shares in Cr 19.97 19.97 19.97 19.97 19.97 19.97
DO NOT MAKE ANY CHANGES TO THIS SHEET

Mar-14 Mar-15 Mar-16 Mar-17


25275.47 27585.3 28442.7 28474.99
18221.53 19783.88 19321.72 18948.64
-8.36 29.97 11.88 -63.17
137.46 158.47 122.13 112.62
232.61 245.4 209.85 204.61
930.04 1172.87 1315.93 1396.01
1591.85 1933 2071.56 2162.44
613.56 934.51 958.42 952.69
446.38 492.74 422.43 522.43
1107.37 539.97 437.64 492.73
11.82 11.09 4.89 6.05
2867.25 3328.82 4434.87 4658.46
758.17 943.18 1274.68 1281.34
2109.08 2385.64 3160.19 3377.12
1299.13 1198.12 599.06 639.01

Sep-16 Dec-16 Mar-17 Jun-17


7796.28 6364.6 6915.2 7971.58
6427.41 5285.3 5957.64 6675.67
152.36 131.88 118.23 131.7
119.25 124.36 135.3 132.95
1.55 1.52 1.48 1.58
1400.43 1085.3 939.01 1293.08
396.21 313.25 221.26 379.04
1004.22 772.05 717.75 914.04
1368.87 1079.3 957.56 1295.91

Mar-14 Mar-15 Mar-16 Mar-17


39.94 39.94 39.94 39.94
5559.93 6501.39 8794.47 10071.35
284.26
4217.97 3986.68 3796.17 4645.42
10102.1 10528.01 12630.58 14756.71
2243.25 2912.69 3584.35 4395.59
854.11 712.55 605.4 465.05
4088.77 3154.11 4581.02 5889.85
2915.97 3748.66 3859.81 4006.22
10102.1 10528.01 12630.58 14756.71
920.58 1389.59 1282.8 1561.87
669.55 815.49 672.98 656.31
117.5 159.25 131.36 136.73
199687500 199687500 199690088 199696838

2 2 2 2

Mar-14 Mar-15 Mar-16 Mar-17


2963.41 2250 3849.14 4028.02
-1617.02 12.08 -2206.19 -1943.94
-1414.93 -2230.52 -1686.69 -2095.63
-68.54 31.56 -43.74 -11.55

2218.71 2466.88 2982.43 3231.52

19.97 19.97 19.97 19.97


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