EQUITY RESEARCH ON AUTOMOBILE SETOR

Abstract

As companies grow their shareholders are benefitted with capital appreciation and good dividend on investment in equity shares of such companies. Number of companies listed in the stock exchange (BSE & NSE) has been increasing every year with new IPos coming in the market. The main aim of this project is to do equity research in the Automobile sector of India and to find out the opportunities for investment in the researched stocks where correct valuation of stocks can be found by doing fundamental analysis and supplemented by technical analysis. Indian Economy is one of the fastest developing economies in the world with 7.1% GDP growth and overall domestic automobiles sales increased at 7.o1 per cent CAGR between FY13-18 with 24.97 million vehicles getting sold in FY18. In India people are realizing that equity has potential to give the highest return as compared to other investment alternatives however people are not aware how to do equity research, they just invest in shares based on tips given by brokers, friends or family members. The investors can either develop the skills required to make and manage their investments or find someone with the qualification who they can trust to do so like Investment/Financial advisor or Research analysts. Equity valuation begins with the analysis of the sector in which you want to make an investment; if the sector analysis shows promising growth and profitability by comparing the estimated supply and demand then we analyze various companies in the sector. A Company is analyzed fundamentally to check its financial strength and historic performance. The report starts from the fundamental analysis where EIC (Economy, Industry, Company) analysis of the Automobile companies (Ashok Leyland and Maruti Suzuki India Limited) is done. The economy of India and Automobile industry are analyzed on the basis of various factors and indicators. Above mentioned three companies were analyzed based on the various qualitative and quantitative factors. After analyzing these auto companies, the stock price is estimated using DCF and Multiples valuation method. Financial Modeling is used to project the forecasted Balance sheet, Income sheet and Cash Flow statement. After the target price was calculated with the help of forward P/E and EPS, EV/EBITDA models and finally the difference was taken between the target price and market price to arrive at the implied upside. Finally, the conclusion and recommendations are given with respect to derived results of each company.