EQUITY RESEARCH OF AUTOMOBILE SECTOR FOR RETAIL INVESTOR

DES’S IMDR Pune P a g e | 1
Summer Internship Report
CHAPTER 1
INTRODUCTION
1.1 Introduction to Subject
Equity
Equity in the share market is broadly defined as a part of the company’s capital that is
held closely by a singular or group of people comprising of investors, promoters. Any
investor looking to invest in equity is free to do so by means of IPO, mutual funds or
direct trading in stock markets. The holders of equity are the real owners of the
company. They have a control over the working of the company. Equity shareholders
are paid dividends after paying it to the preference shareholders. Equity market where
both shares are issued as well as exchanged.
What is Equity Research?
Equity research is the study of equities or stocks for the purpose of investments. Equity
research is what an equity research analyst does. In simpler terms, equity research is
the act of gathering information:
 information that helps investors to decide where to put in their money;
 information that traders require to understand whether to enter or exit a market
position;
 Information that financiers (bankers and firms) need to evaluate companies.
Equities or common stock comprises a big chunk in any company’s capital and
shareholders need to know whether to stay invested in the company or sell the shares
and come out. Both the buy-side and the sell-side companies invest in maintaining an
equity research division. This research may also include bonds and commodities.
The function of the equity researcher is to present a detailed analysis of a company,
enabling investors to make an informed decision.

Investment banks and private equity firms to evaluate the company for IPO, mergers
and others, use the research report.
For an investment bank, the equity research segment produces revenue as buy-side
firms pay the equity research team to reach into its records and analyse information.
As an individual, it is time-consuming to do equity research, that is, to study
the company, its financial statements, products, management and take a decision about
investment. Exactly for the same reason, there are people working in research
companies whose job is to do equity research and recommend companies for
investment.
The application of equity research varies. Primarily, equity research is used in
the mutual funds industry, investment evaluation, merger and acquisition deals,
financial publications and charitable endowments.
Figure no. 1.1

Purpose of Equity Research
As stated before, the purpose of equity research is to study companies,
analyse financials and look at quantitative and qualitative aspects, helping investors
of varying degrees to make an informed decision. As the name suggests, ‘research’
plays the most important role here. Over the years, research methods have changed
but the sole intention of research remains the same.
The number of investors is booming and so is the need for exploring the
nature of investments. Investors wish to take calculated and informed decisions,
and this is where the role of equity research begins. The purpose of equity research
and the researcher is manifold. To begin with, one gathers and analyses industry
data and financial models of a specific company or an industry.
It also involves understanding current market trends, both from the
perspectives of macro economy and micro economy, and report findings. Since the
equity research targets a specific audience, it is necessary to tailor the findings to
the audience demand.
Further, adequate stress is laid on the accuracy of information. If investors
take actions based on any kind of misinformation or misrepresentation, losses are
tremendous and harmful to both the investor and the company. Therefore, equity
analysts spend a considerable amount of time analysing stocks and valuating
estimates.

Scope of Equity research:
 Financial analysis: Calculate the various ratios associated with a company's
financial statements and compare them on a trend line to determine the financial
condition, financial results, and cash flows of the business. These results can also
be compared to industry averages.
 Disclosures: Examine the disclosures that accompany the financial statements to
see if there are any issues that could impact the future value of the company's
equity.
 Industry analysis: Review the key leading indicators that may predict future
conditions within the industry where the target company operates, as well as the
impacts of changes in the legal, regulatory, and competitive environment on that
industry.
 Projections: Combine the information in the company's financial statements with
the projections and information gleaned from the industry analysis to arrive at
projections for the next few years. Include in these projections the likely impact on
the firm's equity.
Fundamental Analysis
Fundamental analysis is a method that attempts to predict the intrinsic value of an
investment. It is based on the theory that the market price of an asset tends to move
towards its 'real value' or 'intrinsic value'.
The goal of this tutorial is to provide a foundation for understanding fundamental
analysis. It is geared primarily at new investors who do not know a balance
sheet from an income statement.
The biggest part of fundamental analysis involves reaching into the financial
statements. Also known as quantitative analysis, this involves looking at revenue,

expenses, assets, liabilities and all the other financial aspects of a company.
Fundamental analysts look at this information to gain insight on a company's future
performance. However, there is more than just number crunching when it comes to
analysing a company. This is where qualitative analysis comes in - the breakdown
of all the intangible, difficult-to-measure aspects of a company.
Fundamental analysis is performed on historical and present data, but with the goal
of making financial forecasts. There are several possible objectives:
 To conduct a company stock valuation and predict its probable price
evolution.
 To make a projection on its business performance,
 To evaluate its management and make internal business decisions,
 To calculate its credit risk.
Fundamental analysis includes:
1) Economic analysis
2) Industry analysis
3) Company analysis
On the basis of this three analysis the intrinsic value of the shares are determined.
This is considered as the true value of the share. If the intrinsic value is, higher than
the market price, it is recommended to buy the share but if it is equal to market price
hold the share and if it is less than the market price sell the shares.

Technical Analysis
Technical Analysis is a research technique to identify trading opportunities in the
market based on the collective actions of market participations. The actions of
markets participants can be visualized by means of stock chart. Over time, patterns
are formed within these charts and each patterns conveys a certain message. The
job of a research analyst is to identify these patterns and develop a point of view.
Technical analysis is a security analysis methodology for forecasting the direction
of prices through the study of past market data, primarily price and volume.
Despite all the fancy and exotic tools it employs, technical analysis just
studies supply and demand in a market in an attempt to determine what direction,
or trend, will continue in the future. In other words, technical analysis attempts to
understand the emotions in the market by studying the market itself, as opposed to
its components. If you understand the benefits and limitations of technical analysis,
it can give you a new set of tools or skills that will enable you to be a better trader
or investor.
The Psychology of Technical Analysis, Tony Plummer paraphrases Oscar Wilde
by stating, “A technical analyst knows the price of everything, but the value
of nothing”.

1.2 Introduction to the Project
Equity Research of Automobile Sector for Retail Investor
The main aim of the project is to study the listed stocks of Automobile
Sector. This objective can be attained through fundamental and technical analysis.
Each investment has its own pros and cons. Some options give higher returns
corresponding with higher risks and vice versa.
In order to achieve this objective an in depth analysis has to be performed
by understanding and comparing the financial statements of the leading Automobile
companies.
For this purpose, analysis of 10 companies i.e. Bajaj Auto Ltd, TVS Motor
Company Ltd, Motherson Sumi Systems Ltd, Tata Motors Ltd, Mahindra &
Mahindra Ltd, Apollo Tyres Ltd, Ashok Leyland Ltd, Bharat Forge Ltd, Exide
Industries Ltd and Hero MotorCorp Ltd have done. These this shall help the
prospective investors in making a fair judgment about his/her investment decision.

1.3 Introduction to Industry
The industry currently manufactures 25 mn vehicles, of which 3.5 mn are exported.
India holds a strong position in the international heavy vehicles arena as it is the
largest tractor manufacturer, second-largest bus manufacturer and third largest
heavy trucks manufacturer in the world.
Sale of passenger vehicles has increased by 2.7%, two-wheeler by 4.86% and three-
wheeler by 10.27% during 2018-19 viz-a-viz 2017-18. In April-March 2019,
overall automobile exports grew by 14.5%. The overall Commercial Vehicles
segment registered a growth of 17.6% in April- March 2019.
The sector attracted $ 21.4 bn FDI during April 2000 - March 2019; accounting for
5.1% of the total FDI inflows. Hundred percent FDI allowed under automatic route
Industry Scenario
India's annual production has been 29.08 mn vehicles in 2018 as against 25.33 mn
in 2017, registering a healthy growth of 14.8%. The industry is expected to reach
135 bn by 2020 and 300 bn by 2026 at a CAGR of 15%.
The sub-sectors contribution to the overall market in 2017-18:
 Two-Wheeler: 81%
 Passenger vehicles: 13%
 Three-Wheeler: 3%
 Commercial vehicles: 3%
India's rapidly growing five auto hubs have a significant potential to be used as a
base for export to South East Asia (SEA) and the Middle East and North African
(MENA) regions.

In April-March 2018, overall automobile exports increased by 16.12%. Two and
Three Wheeler Segments registered a growth of 20.29% and 40.13% respectively.
Growth Drivers (Research by Govt of India: InvestIndia)
 Growing income
3X increase in average household income from $ 6,393 in 2010 to $ 18,448
in 2020
 'Youngest Nation' by 2025
India to become the youngest nation by 2025 with an average age of 25
years
 Vehicle penetration
Expected to reach 72 vehicles per 1000 people by 2025
 Expanding R&D hub
India accounts for 40% of total $ 31 bn of global engineering and R&D
spend.
Fact:
Figure no. 1.2

Figure no. 1.3
Automobile Industry manufacturing industry is spread all over India. Below is the map
which shows Automobile cluster.
Figure no. 1.4

Below is the comprehensive study of automobile industry in India.
Supply
The Indian automobile market has some amount of excess
capacity.
Demand
Largely cyclical in nature and dependent upon economic
growth and per capita income. Seasonality is also a vital
factor.
Barriers to entry
High capital costs, technology, distribution Network, and
availability of auto components.
Bargaining power of
suppliers Low, due to stiff competition.
Bargaining power of
customers Very high, due to availability of options.
Competition High. Expected to increase even further.
Table no. 1.1

1.3 Company Overview
Future Generali India Insurance Company Limited is a joint venture between Future
Group – the game changers in Retail Trade in India and Generali – a 187 years old
global insurance group featuring among the world’s 60 largest companies*.
The company was incorporated in September 2007 with the objective of providing
retail, commercial, personal and rural insurance solutions to individuals and
corporates to help them manage and mitigate risks.
Future Generali India has been serving the customers by leveraging upon its global
Insurance expertise in diverse classes of products of Generali Group and the Indian
retail game changers Future Group.
Having firmly established its credentials in this segment and effectively leveraging
on the skill set of both its JV partners, Future Generali India has evolved to become
a Total Insurance Solutions Company.
Figure no. 1.5

Vision, Mission & Values of Company:
Figure no. 1.6
1. Actively: We play a proactive and leading role in improving people lives
through insurance.
2. Protect: We are dedicated towards managing and mitigating risks of
individuals and institutions.
3. Enhance: Generali is also committed to creating value.
4. People: We deeply care about our customer and our employee lives and their
future.
5. Lives: Ultimately, we have an impact on the quality of people lives-wealth;
safety, advice and service are instrumental in improving a person chosen
way of life in the long term.

Figure no. 1.7
 First choice: Logical and natural action that acknowledges the best offer in
the market based on clear advantages and benefits.
 Delivering: We ensure achievement striving towards better performance.
 Relevant: Anticipating or fulfilling a real life need or opportunity, tailored
to local and personal needs and habits, perceived as valuable.
 Accessible: Simple and easy to find, understand and use; always available,
at a competitive value for money.
 Insurance solutions: We aim to offer and tailor a combination of protection,
advice and service.

Figure no. 1.8
Deliver on the promise
 We tie a long-term contract of mutual trust with our people, customers and
stakeholders; all of our work is about improving the lives of our customers.
 We commit with discipline and integrity to bringing this promise to life and
making an impact within a long lasting relationship.
Value our people
 We value our people, encourage diversity and invest in continuous learning
and growth by creating a transparent, cohesive and accessible working
environment. Developing our people will ensure our Company's long-term
future.
Live the community
 We are proud to belong to a global Group with strong, sustainable and long
lasting relationships in every market in which we operate. Our markets are
our homes.
Be open
 We are curious, approachable and empowered people with open and diverse
mindsets who want to look at things from a different perspective.

Future Generali India Insurance Company achievement in short duration of time.
Figure no. 1.9

SWOT Analysis of Company:
Figure no. 1.10
Strengths:
Wide range of policies.
International expertise and
reputation of Generali group
Generali group is present in over
68 countries with over 85,000
employees
Future group operates over 12
million square feet of retail
space in 71 cities and towns
Weakness:
Small branch base
Low Marketing
Insurance companies have a
poor image when it comes to
payment of dues.
Opportunities:
Growing rural market
Earning Urban Youth
Cross selling through financial
services such as banking
Threats:
Stringent Economic measures by
Government and RBI
Entry of new NBFCs in the
sector.

CHAPTER 2
PROJECT DETAILS
2.1 Objective of the Study
 To understand industry dynamics of automobile sector and identify
undervalued stocks.
 Analysis of the key ratios of the ten companies.
 Analysis of shareholding pattern of the company.
 To offer valid suggestions for the investors in the automobile industry in order
to take a rational decision.
2.2 Limitations of the study
 The study is restricted only to Automobile sector.
 The time period for the equity research is one of the limitations of the study.
The research and the maintenance of the result is for a small period and it
cannot fully justify the sector.
 The performance of the stock is particular as on that date.
 Limited resource for the data collection.
 The trend change is based on assumptions.

CHAPTER 3
METHODOLOGY
3.1 Research Design
A Research design is an overall framework of project that indicates what
information to be collected from which sources and by which procedures. Research
design is the plan, structure and strategy, if investigation conceived so as to obtain
answer to research questions.
Based on research requirement formalized studies is more pertinent i.e. Descriptive
study have been used, as I had try to describe the situation of the selected
COMPANY whether they are fundamentally strong or not.
3.2 Data collection
Data collected here is secondary data for research and the data is being collected
data from company's annual report and use of various search engines.
3.3 Sample Design
Sample design used in the report is the selection of the AUTOMOBILE
companies from NIFTY AUTO Index. Companies that have stock price near to
Rupees 2,500 are selected.
3.4 Sample Size
Sample size used is 10 companies for analysis based on current market price of the
stock
.

3.5 Introduction to Research Companies
1. Bajaj Auto Ltd.
Bajaj Auto is a $2.3 billion company founded in 1926. It is world’s fourth largest
two- and three-wheeler manufacturer.
The company is into manufacturing of motorcycles, scooters and three-wheelers.
In India, Bajaj Auto has a distribution network of 485 dealers and over 1,600
authorised services centres. It has 171 exclusive dealers for the three-wheeler
segment .It has total 3750 rural outlets in rural areas.
The Bajaj brand has presence in several countries in Latin America, Africa,
Middle East, South and South East Asia. It has a distribution network in 50
countries with a dominant presence in Sri Lanka, Colombia, Bangladesh, Mexico,
Central America, Peru and Egypt.
Bajaj Auto has launched brands like Boxer, Caliber, Pulsar, Dominar and many
more. It has also launched India's first real cruiser bike, Kawasaki Bajaj
Eliminator.
Bajaj Auto's has in all three plants, two at Waluj and Chakan in Maharashtra and
one plant at Pant Nagar in Uttranchal, western India.
Industry: Auto - 2 & 3 Wheel
House: Bajaj
Inception: 30-Apr-07
Market Cap: Rs. 73,063.73 Cr
Company Management
Chairman: Rahul Bajaj
Vice Chairman: Madhur Bajaj
Managing Director: Rajiv Bajaj
Director: Sanjiv Bajaj, Shekhar Bajaj
Table no. 3.1

2. TVS Motor Company Ltd:
TVS Motor Company is the third largest two-wheeler manufacturer in India and one
among the top ten in the world, with annual turnover of more than $1 billion in 2008-
2009.
The company has four plants located at Hosur and Mysore in south India, in
Himachal Pradesh, North India and one in Indonesia. The company has a production
capacity of 2.5 million units a year.
TVS has been at the forefront in bringing a revolution in the way personal
commutation was happening, back in the 1980s. Beginning with launching a simple,
easy-to-use moped for the middle class in India in the 1980s to launching seven new
bikes in a single day (first time in the history of the automotive industry in the
world), TVS has often taken the unbeaten path to innovation.
The TVS brand includes Apache, Centra, Scooty, Jupiter, Victor, etc.
Industry: Auto - 2 & 3 Wheel
House: TVS Iyengar
Inception: 10-Jun-92
Company Management
Chairman: Venu Srinivasan
Director: Venu Srinivasan
Director: H Lakshmanan
Company Secretary: K S Sirinivasan
Independent Director: T Kannan
Independent Director: C R Dua
Table no. 3.2

3. Motherson Sumi Systems Ltd:
Motherson Sumi Systems (MSSL), a flagship of Sumi Motherson Group, is a joint
venture between Sumitomo Wiring Systems (Japan), Sojitz Corporation (Japan) and
the Motherson Group. The group has four divisions namely the wiring harness
group, polymer group, tooling group and the strategic business group (manufacturer
of automotive mirrors, machined metal components and assemblies). Of these, the
wiring harness group is the market leader in India with a 65% market share of
passenger car wiring and also contributes 70% to the company`s sales. The
company`s automotive segment is a supplier of wiring harness, high-tension cords,
wire plastic and rubber components whereas the non-automotive segment
manufactures cooling parts for computers and other assemblies.
Industry: Auto Anc
House: Sumi Motherson
Inception: 19-Dec-86
Company Management
Chairman: Vivek Chaand Sehgal
Director: Laksh Vaaman Sehgal
Whole Time Director and
COO: Pankaj K Mital
Independent Director: Arjun Puri
Independent Director: Sushil Chandra Tripathi
Table no. 3.3

4. Tata Motors Ltd:
Tata Motors was established in 1945 as Tata Engineering and Locomotive Co. Ltd.
to manufacture locomotives and other engineering products. It is the leader in
commercial vehicles in each segment, and among the top three in passenger vehicles
with winning products in the compact, midsize car and utility vehicle segments. The
company is the world's fourth largest truck manufacturer, and the world's second
largest bus manufacturer.
Industry: Auto- Cars
House: Tata
Inception: 01-Sep-45
Market Cap: Rs. 44,725.03Cr
Company Management
Chairman Emeritus: Ratan N Tata
Chairman: N Chandrasekaran
Director: Ralf Speth
Independent Director: Nasser Munjee
Independent Director: Vinesh K Jairath
Table no. 3.4

5. Mahindra & Mahindra Ltd:
Mahindra & Mahindra Limited operates in nine segments. The automotive
segment includes sales of automobiles, spare parts and related services. Farm
equipment segment includes sales of tractors, spare parts and related services;
information technology (IT) services, which consists of services rendered for IT
and telecom; financial services includes services relating to financing, leasing and
hire purchase of automobiles and tractors; steel trading and processing includes
trading.
Industry: Auto- Cars
House: Mahindra & Mahindra
Inception: 02-Oct-45
Company Management
Chairman Emeritus: Keshub Mahindra
Executive Chairman: Anand Mahindra
Independent Director: R K Kulkarni
Independent Director: N B Godrej
Independent Director: M M Murugappan
Table no. 3.5

6. Apollo Tyres Ltd:
Apollo Tyres Ltd is a high-performance company leading Indian tyre
manufacturer. The company currently produces the entire range of automotive
tyres for ultra and high-speed passenger cars, truck and bus, farm, Off-The-Road,
industrial and specialty applications like mining, retreated tyres and retreating
material. Product portfolio of the company comprises of Passenger Car Tyres,
Alloy Wheels, Sports Utility Tyres, Van Tyres, Passenger Winter Tyres, Heavy
Commercial Tyres, and Light Commercial Tyres.
Industry: Tyres
House: Raunaq Singh
Inception: 28-Sep-72
Company Management
Chairman: Onkar S Kanwar
Managing Director: Onkar S Kanwar
Vice Chairman And M.D.: Neeraj Kanwar
Director: Robert Steinmetz
Independent Director: S Narayan
Independent Director: A K Purwar
Table no. 3.6

7. Ashok Leyland Ltd:
Ashok Leyland has been a major presence in India's commercial vehicle industry
.The company offers a wide range of products like buses, trucks, engines, and
defence & special vehicles. In the populous Indian metros, four cut of the five
State Transport Undertaking (STU) buses come from Ashok Leyland. Some of -
them like the double-decker and vestibule buses are unique models from Ashok
Leyland, tailor-made for high-density routes.
Industry: Auto – trucks
House: Hinduja
Inception: 7-Sep-48
Company Management
Executive Chairman: D G Hinduja
Company Secretary: N Ramanathan
Director: Robert Steinmetz
Independent Director: Jean Brunol
Independent Director: Sanjay K Asher
Table no. 3.7

8. Bharat Forge Ltd:
Bharat Forge Limited (BFL), the Pune based Indian multinational is a technology-
driven global leader in metal forming having trans-continental presence across a
dozen manufacturing locations, serving several sectors including automobile,
power, oil and gas, rail & marine, aerospace, construction & mining, etc. The
company manufactures a wide range of safety and critical components for the
automotive & non-automotive sector. They are the country's largest manufacturer
and exporter of automotive components.
Industry: Auto - trucks
House: Hinduja
Inception: 7-Sep-48
Company Management
Executive Chairman: B N Kalyani
Managing Director B N Kalyani
Deputy Managing Director G K Agarwal
Deputy Managing Director Amit B Kalyani
Director: P C Bhalerao
Independent Director: S M Thakore
Table no. 3.8

9. Exide Industries Ltd:
Exide Industries Ltd manufactures the widest range of storage batteries in the
world covering the broadest spectrum of applications. The company's product
range includes Automotive Batteries-In India the company markets the products
under Exide, SE Sonic and Standard Furukawa brands and supplies to all car and
two-wheeler manufacturers. In international market, they sell products under
Dynex, Index & Sonic brands. Industrial Batteries-In India they sell products
under Exide, Index, SE CEIL.
Industry: Batteries
House: Raheja Rajan
Inception: 31-Jan-47
Company Management
Vice Chairman & Non executive: R B Raheja
Managing Director And CEO: G Chatterjee
Director (Finance) And CFO: A K Mukherjee
Independent Director: Vijay Aggarwal
Independent Director: Mona N Desai
Table no. 3.9

10. Hero MotorCorp Ltd:
Hero MotoCorp is the World's single largest two-wheeler motorcycle company.
Hero Honda became the first company in the country to introduce four-stroke
motorcycles and set the standards for fuel efficiency, pollution control and quality.
They have an excellent distribution and service network spread throughout the
country. The company's product range includes CD Dawn, CD Deluxe, Pleasure,
Splendor, Passion Plus, Super Splendor, Glamour, CBZ Extreme, Karizma,
Impulse and many more.
Industry: Auto - 2&3 Wheel
House: Hero
Inception: 19-Jan-84
Company Management
CMD And CEO: Pawan Munjal
Non-Executive Director: Pradeep Dinodia
Independent Director: Anand C Burman
Independent Director: Meleveetil Damodaran
Independent Director: Ravi Nath
Table no. 3.10

CHAPTER 4
LITERATURE REVIEW
1. Gopalakrishnan M. Muthu, P. K Akarsh (2017); International Journal of
Advance Research and Development on the topic of Equity Analysis of
Automobile Industry in Indian Stock Market. Using this paper I come to know
that how to carry out my research. This research became my basis guide for me
to carry out my research.
2. The Indian Automotive Industry Evolving Dynamics (2010); KPMG India.
This research paper gave me a lot of data which helped me to understand the
Indian Automobile Industry.
3. Dr. Anubha Srivastava (2014) conducted a comprehensive study of
Performance of Indian Automobile Industry. In that study the Researcher
analyses 3 major automobile companies in India that are Maruti, Mahindra,
and Tata. The study found that the performance of the auto sector is directly
related to the country’s economic trend. It is also found that Mahindra and
Mahindra are the most correlated to the auto index than the other two
companies. The increasing demands and sales numbers of Indian auto bring
many opportunities for these players.

CHAPTER 5
ANALYSIS & FINDINGS
Retail investors find difficulty in investing in equity market. Thus, the project
develops various tools based on various parameters to help retail investors invest
in best companies in Automobile Industry. Which will enable these investors to
earn profits at steady growth. Though the past performance alone can be
indicative of future performance, it is frankly, the only quantitative way to judge
how good a fund is at present. The methods used for analysing the data are:
 Fundamental Analysis
 Technical Analysis
 Shareholding Pattern Analysis
5.1 Fundamental Analysis
The following steps are to be followed to perform Fundamental Analysis for
companies in Automobile Sector in order to design a portfolio for investor so that
it would fetch him good return, as he/she would invest.
The Fundamental Analysis will be carried out by the following step:

Figure no. 5.1
Step 1: a) Ten Companies that is been selected to conduct the research process
are enumerated below.
These companies taken from Nifty Auto Index with the consideration of retail
investor. The face value of these companies is relatively low. This list has the
mixture of company’s sector. Below is the list of companies with their sub sector,
current market price.
Sr No. Company Sub Industry
1 Bajaj Auto Ltd Two-Wheeler
2 TVS Motor Company Ltd Two-Wheeler
3 Motherson Sumi Systems Ltd Auto Ancillaries
4 Tata Motors Ltd LMV, HMV
5 Mahindra & Mahindra Ltd LMV, HMV
6 Apollo Tyres Ltd Tyre
7 Ashok Leyland Ltd HMV
8 Bharat Forge Ltd Engineering
9 Exide Industries Ltd Auto Ancillaries
10 Hero MotorCorp Ltd Two-Wheeler
Table no. 5.1
Listing 10 Companies with Stock Data
Value Pick
Growth Pick
Shortlisted Companies
Ranking
Long Term Price Target (LTPT)StepsofFundamentalAnalysis

If we notice the CMP of these companies, their maximum value lies around rupees
2,500. As this project aimed to help retail investor, the companies are not taken
like MRF Ltd, Maruti Suzuki Ltd, and Bosch Ltd.
Step 1: b) The companies above are to be based on market capitalization
and we need to note down the Share Price, Market Capitalization, Price- Earnings
Ratio (P/E Ratio) , Earning Per Share (EPS) of the corresponding companies.
Sr
No. Company Name
Stock
Price
(In
Rupees)
Market
Capitalization
(In Rupees)
P/E
Ratio
(%)
Current
Year
EPS (In
Rupees)
Last
Year
EPS (In
Rupees)
Industry
P/E
1 Bajaj Auto Ltd 2,876.15 82,996.25 16.84 170.29 145.80 18.51
2 TVS Motor Company Ltd 430.85 20,469.13 29.05 14.83 13.73 18.51
3
Motherson Sumi Systems
Ltd 118.80 37,547.84 23.28 5.11 5.06 23.28
4 Tata Motors Ltd 161.10 46,515.19 23.21 6.94 26.47 20.34
5 Mahindra & Mahindra Ltd 643.50 79,969.44 15.04 42.76 69.14 22.38
6 Apollo Tyres Ltd 200.55 11,472.46 16.88 11.88 12.65 19.03
7 Ashok Leyland Ltd 85.70 25,142.79 12.10 7.08 6.01 20.34
8 Bharat Forge Ltd 448.60 20,893.29 20.24 22.17 16.38 22.10
9 Exide Industries Ltd 203.35 17,276.25 20.43 9.95 8.13 20.63
10 Hero MotorCorp Ltd 2,573.60 51,411.70 14.93 172.44 186.30 18.51
Table no. 5.2 Source: Stock Edge, CMP as on 26th
June 2019.
Step 2: a) Valuation of Stocks
We need to identify the industry P/E of cement industry and compare the
individual company’s P/E to determine if the stock is Undervalued or Overvalued.
P/E industry > P/E company (Undervalued)
P/E industry < P/E company (Overvalued)

Company Name
Stock
Price (In
Rupees)
Market
Capitalization
(In Rupees)
P/E
Ratio
(%)
Current
Year
EPS (In
Rupees)
Last
Year
EPS (In
Rupees) Valuation
Bajaj Auto Ltd 2,876.15 82,996.25 16.84 170.29 145.80 Undervalued
TVS Motor Company Ltd 430.85 20,469.13 29.05 14.83 13.73 Overvalued
Motherson Sumi Systems Ltd 118.80 37,547.84 23.28 5.11 5.06 Overvalued
Tata Motors Ltd 161.10 46,515.19 23.21 6.94 26.47 Overvalued
Mahindra & Mahindra Ltd 643.50 79,969.44 15.04 42.76 69.14 Undervalued
Apollo Tyres Ltd 200.55 11,472.46 16.88 11.88 12.65 Undervalued
Ashok Leyland Ltd 85.70 25,142.79 12.10 7.08 6.01 Undervalued
Bharat Forge Ltd 448.60 20,893.29 20.24 22.17 16.38 Undervalued
Exide Industries Ltd 203.35 17,276.25 20.43 9.95 8.13 Overvalued
Hero MotorCorp Ltd 2,573.60 51,411.70 14.93 172.44 186.30 Undervalued
Industry P/E Ratio 20.36
Table no. 5.3 Source: Stock Edge
Inference:
Industry P/E= 20.36
There are four companies which are overvalued namely TVS Motor, Motherson
Sumi, Tata Motors, Exide Industries and rest six companies are undervalued i.e.
their Company P/E Ratio is lesser than Industry P/E Ratio.
Step 2: b) Value Pick for Undervalued Stocks
Now we need to consider the undervalued companies from the previous table and
check the improvement in the EPS from the last year EPS. Calculate EPS change
i.e., if the current EPS is greater than previous year.

Company Name
Current
Year EPS (In
Rupees)
Last Year
EPS (In
Rupees) Valuation Value Pick
Bajaj Auto Ltd 170.29 145.80 Undervalued Yes
Mahindra & Mahindra Ltd 42.76 69.14 Undervalued No
Apollo Tyres Ltd 11.88 12.65 Undervalued No
Ashok Leyland Ltd 7.08 6.01 Undervalued Yes
Bharat Forge Ltd 22.17 16.38 Undervalued Yes
Hero MotorCorp Ltd 172.44 186.30 Undervalued No
Table no. 5.4
Inference: The companies which were found undervalued in the previous step are
further calculated for value pick. Bajaj Auto, Ashok Leyland, Bharat Forge are
picked for value pick among UV companies.
Step 3: a) Growth Pick and PEG Ratio
Consider the Overvalued companies and compute the growth pick.
Growth Rate in EPS = Current year EPS -Previous year EPS
------------------------------------------ *100
Previous Year EPS
P/E Ratio
PEG Ratio = ------------------------
Growth rate in EPS
Condition for PEG Ratio:
PEG < 1, then Under Priced
PEG = 1, then Fair Priced
PEG >1, then Over Priced

Company Name
P/E
Ratio
(%)
Current
Year
EPS (In
Rupees)
Last
Year
EPS (In
Rupees) Valuation
Growth
in EPS
(%
Approx)
PEG
Ratio Growth Pick
TVS Motor Company Ltd 29.05 14.83 13.73 Overvalued 8.01 3.62 Overpriced
Motherson Sumi Systems Ltd 23.28 5.11 5.06 Overvalued 0.99 23.55 Overpriced
Tata Motors Ltd 23.21 6.94 26.47 Overvalued -73.78 -0.31 ---
Exide Industries Ltd 20.43 9.95 8.13 Overvalued 22.39 0.91 Underpriced
Table no. 5.5
Inference: There is only one company being shortlisted Exide Industries Ltd. The PEG
Ratio value is 0.91 and is less than 1 so can be considered for growth pick. The other
company TVS Motor and Motherson Sumi System has 3.62 and 23.55 respectively as
PEG ratio which is not within the range hence it could not be selected as it has already
reached the highest level of growth.
Step 4: Shortlisted Companies
Therefore, we have been left with four companies in which investment can be made.
Three Companies are been selected as undervalued company namely Bajaj Auto, Ashok
Leyland, Bharat Forge and one company been as an overvalued company i.e. Exide
Industries.
Now the further analysis will be done for those companies, which have been shortlisted
from the above process.

Figure no. 5.2
Step 5: Ranking Of Companies as per Corresponding Ratios
After selecting value pick and growth picks we need to rank them based on their
respective ratios which would give a clear picture about growth potential of selected
companies so that it would give a clear idea to the investors where to invest their
corpus majorly on the basis of shortlisted Companies.
a) Below is the table, which describes the ratio to be used for ranking purpose. As
Automobile Sector is manufacturing industry, so management efficiency towards
inventory, assets becomes very important.
Ratio Formula Units
Debt-to-Equity Ratio Total Debt / Shareholder’s Equity Times
Asset Turnover Ratio Net Sales / Total Assets %
Inventory Turnover
Ratio
Cost of Goods Sold/ Average
Inventory Times
Return on Equity Net Income / Shareholder’s Equity %
Return on Assets Net Profit / Total Assets %
Net Profit Margin Net Revenue / Net Sales %
Table no. 5.6
b) Now, the data is derived from the different sources like Money Control. Money Control is
a website, which helps the investors to gather different financial statement, charts, rates, etc.

Corresponding Ratios Units
Bajaj
Auto
Ashok
Leyland
Bharat
Forge
Exide
Industries
Debt-to-Equity Ratio Times 0.00 1.73 0.70 0.00
Asset Turnover Ratio % 110.48 84.85 87.14 129.56
Inventory Turnover Ratio Times 31.46 10.84 5.50 5.87
Return on Equity % 21.46 23.76 19.19 14.09
Return on Assets % 17.07 5.31 8.86 10.32
Net Profit Margin % 15.45 6.57 10.28 7.97
Table no. 5.7 Source: Money Control, Data are of March 2019
c) For ranking, we have to scale the ratio 4 to 1.
Highest Score per Ratio =4
Least Score per ratio =1
Corresponding Ratios Units
Bajaj
Auto
Ashok
Leyland
Bharat
Forge
Exide
Industries
Debt-to-Equity Ratio Times 4 1 2 4
Asset Turnover Ratio % 3 1 2 4
Inventory Turnover Ratio Times 4 3 1 2
Return on Equity % 3 4 2 1
Return on Assets % 4 1 2 3
Net Profit Margin % 4 1 3 2
Total Score 22 11 12 16
Table no. 5.8
Ranking
Portfolio Score Ranking
Bajaj Auto 22 1
Exide Industries 16 2
Bharat Forge 12 3
Ashok Leyland 11 4
Table no. 5.9

Step 6: Calculating Long Term Price Target
LTPT is the projected price level of a financial security stated by an investment
analyst or advisor. This is the price at which the trader or investor wants to exit
his existing position. Therefore, he/she can realize the most reward.
Formula for LTPT:
LTPT= Sector P/E ratio * Current Year EPS
Table no. 5.10
Company Name
Industry
P/E Ratio
Current Year EPS
(In Rupees)
Stock Price
(In Rupees)
LTPT
(In
Rupees)
Rank
Bajaj Auto Ltd 20.36 170.29 2,876.15 3,467.10 1
Ashok Leyland Ltd 20.36 7.08 85.70 144.15 4
Bharat Forge Ltd 20.36 22.17 448.60 451.38 3
Exide Industries Ltd 20.36 9.95 203.35 202.58 2

5.2 Technical Analysis
1. Relative Strength Index (RSI)
The Relative Strength Index (RSI) is one of the most popular and widely used
momentum oscillators. It was originally developed by the famed mechanical
engineer turned technical analyst, J. Welles Wilder. The RSI measures both the
speed and rate of change in price movements within the market.
Figure no. 5.3
The values of the RSI oscillator, typically measured over a 14-day period,
fluctuate between zero and 100. The Relative Strength Index indicates oversold
market conditions when below 30 and overbought market conditions when above
70. It is frequently used by swing traders. They look for signals of waning or
strengthening momentum in short to intermediate term price movements within a
market. Overbought or oversold conditions often immediately precede short-term
trend changes that present trading opportunities.

2. Volume Indicator:
Volume is an important indicator in technical analysis as it is used to measure the
relative worth of a market move. If the markets make a strong price movement,
then the strength of that movement depends on the volume for that period. The
higher the volume during the price move, the more significant the move.
Figure no. 5.4
Analyzing the bar charts quickly determine the level of volume. Bars also provide
easier identification of trends in volume. When bars are higher than average, it is a
sign of high volume or strength at a particular market price. In this way, analysts
use volume as a way to confirm a price movement. If volume increases when the
price moves up or down, it is considered a price movement with strength.
The red circle shows the selling pressure in the market and green circle shows the
buying activity of traders.

3. Exponential Moving Average (EMA):
EMA is one of the essential technical indicator used widely by traders and
investors. Exponential Moving Average (EMA) gives more weighting to recent
price data compared to Simple Moving Average (SMA). EMA is quite similar to
SMA as it helps traders to measure trend direction of any security thus helps in
predicting the future trend. Essentially it’s a trend direction indicator.
(EMA) is used to know long-term trends. EMA gives more accurate recent price
action compare to SMA. This is because EMA uses the latest data point and the
oldest data point gets the least observation. If you do not know about SMA and its
calculation read our article on same. This will help you to clear fundamentals of
(MA) Moving Averages.
Figure no. 5.5

The blue line is the exponential moving average in the chart.
1. Bajaj Auto Ltd.
Figure no. 5.6
 The above chart shows Bajaj Auto price movement since November 2018.
 In the chart the pattern, RSI shows that stock is oversold. This can be the
correct time to invest in.
 In addition, EMA can make rounding bottom, which is a positive sign.
 While observing the MACD blue line is about to cross the red line from
bottom which is again a positive sign.

2. Exide Industries:
Figure no. 5.7
 The above chart shows Exide Industries price movement since November
2018.
 In the chart the pattern, RSI shows the price moving around the bottom line
of 30% lower circuit. So wait and watch can be a better option here.
 In addition, EMA is currently unpredictable the slope shows the price can
further go down may make rounding bottom.
 While observing the MACD blue line is diverting from the red line. So
again, I can say that better to wait and watch.

3. Bharat Forge:
Figure no. 5.8
 The above chart shows Bharat Forge price movement since October 2018.
This chart shows the stock price is dropping since Oct 18 from 690 to 422.
 The price is 52 week low. If the fundamental is correct then this can become
great investment in Automobile Sector.
 In the chart the pattern, RSI is just above the oversold line. I find this as
risky but can give a lot of return.
 In addition, EMA is currently unpredictable the slope shows the price can
further go down.

4. Ashok Leyland:
Figure no. 5.9
 The above chart shows Ashok Leyland price movement since July 2018.
This chart shows the stock price is dropping since Sep 18 from 134 to 69.
 The price is 52 week low. If the fundamental is correct then this can become
great investment in Automobile Sector. Ashok Leyland confirmed that they
are going to launch EV in Light Motor Vehicle.
 In the chart the pattern, RSI shows that the stock has oversold which shows
the chances of bouncing back of the stock.
 *The common observation shows that the value of stock price of the companies are
down because slowdown in automobile industry which is again a macro economic
factor.

5.3 Shareholding Pattern Analysis
Shareholding pattern shows how the total number of shares equity outstanding in
the company is divided between various owners (individuals and institutions). It
shows how the ownership is split among the entities that make up its owners.
Shareholding pattern of listed companies is required to be disclosed to the stock
exchanges every quarter.
Shareholding Pattern t consists of the following broad divisions, which are further
divided into various categories:
1. Promotor Shareholding (responsible
for floating of company)
2. Public Shareholding
A) Domestic Promoters
 Individuals
 Government
 Corporate Bodies
 Financial
Institutions/Banks
B) Foreign Promoters
 Individuals
(NRI/Foreigners)
 Institutions
 Qualified Foreign Investors
A) Institutions
 Mutual Funds
 Financial Institution/
Banks
 Government
 Venture Capital Funds
 Insurance Companies
B) Non-Institutions
 Individuals
 Others (Trusts,
Clearing Members,
NRIs, etc.)
 Custodians
Table no. 5.11

Holdings in various categories provide insight into control in the company. So, it
becomes very crucial to know are the players of the company. Some of the points can
be noted from the shareholding pattern.
 A higher promoter stake usually means that the promoters have belief that the
company has potential for growth in the future. If a promoter raises his stake, it
is comprehended that he has high confidence in the business and may get
positive results and vice versa.
 A more diversified holding and a good presence of institutional investors
indicates that promoters have little room to carry out random decisions that
benefit them without gauging how it would affect earnings and other
shareholders.
 Holding by FIIs is an indicator on how favoured a stock is among institutional
investors. A sizeable amount of FII holdings indicate higher confidence in the
company. However, it can be disadvantageous when FIIs sell their stake in a
chunk resulting in share fall in share price.
 Domestic mutual fund and insurance company holding in a company is a good
sign as it asks for more clarity and transparency in the company operations.
Now we will have a look on the shareholding pattern of the above selected four
companies i.e. Bajaj Auto Ltd, Ashok Leyland Ltd, Bharat Forge Ltd, Exide
Industries Ltd. I will analyse the shareholding pattern and look if any red flag does
not exist.

1. Bajaj Auto Ltd:
Shareholders Shares (Cr.) Holdings (%)
Promoters 14.81 51.18
(Pledged Shares) 0.00 0.00
FIIs 4.53 15.64
Mutual Funds 0.63 2.17
Insurance Companies 1.47 5.08
Other DIIs 0.04 0.13
Non-Institutional Investors 7.47 25.8
Others 0.00 0.00
Figure no. 5.10
Analysis: The shareholding pattern of Bajaj Auto Ltd is ideal. The majority
shareholding is with Bajaj Holdings and Investment Ltd i.e. 33.4%. Also, the
promoters have not pledged any shares. FIIs, DIIs, Mutual Funds and Insurance
Companies have holding of 23.02%, which means the different fund manager and
equity research houses like this stock.
Promoters
51.18%
FIIs
15.64%
Mutual Funds
2.17%
Insurance
Companies
5.08%
Other DIIs
0.13%
Non Instituitional
Investors
25.80%
Others
Shareholdings(%)

2. Ashok Leyland Ltd.
FIIs 55.05 18.75
Others 0.00 0.00
Figure no. 5.11
Analysis: The shareholding pattern of Ashok Leyland Ltd is satisfactory. The
majority shareholding is with promoters however the company has not disclosed
the name of the promoters. One point should also be considered that company has
pledged the promoters shares i.e. 9.26% which is acceptable, but investors should
keep eye on this. FIIs, DIIs, Mutual Funds and Insurance Companies have holding
of 29.75% which means this stock is liked by the different fund manager and equity
research houses. In top public shareholding we can see famous companies like
Promoters
51.12%
FIIs
18.75%
Mutual Funds
6.33%
Insurance
Companies
1.73%
Other DIIs
2.94%
Non Institutional
Investors
19.13%
Others
0.00%
Shareholdings(%)

Reliance Capital (3.1%), ICICI Prudential (1.7%), Life Insurance
Corporation of India (1.4%), Government Pension Fund Global (1.5%).
3. Bharat Forge Ltd:
FIIs 8.85 19.00
Others 0.00 0.00
Figure no. 5.12
Promoters
45.76%
FIIs
19.00%
Mutual Funds
7.51%
Insurance
Companies
1.60%
Other DIIs
4.42%
Non Institutional
Investors
21.71%
Others
0.00%
Shareholdings (%)

Analysis: The shareholding pattern of Bharat Forge Ltd is without fault. The
majority shareholding is with Kalyani Investment Company Limited i.e. 13.16%.
Also, the promoters have not pledged any shares. This stock is favourite within
FIIs, DIIs, Mutual Funds and Insurance Companies with the holding of 32.53%.
4. Exide Industries Ltd.
FIIs 8.44 9.93
Other DIIs` 0.85 0.99
Others 0.00 0.00
Figure no. 5.13
Promoters
45.99%
FIIs
9.93%
Mutual Funds
18.12%
Insurance
Companies
4.73%
Other DIIs
0.99%
Non Institutional
Investors
20.23% Others
0.00%
Shareholdings (%)

Analysis: The shareholding pattern of Exide Industries Ltd.is ideal. The majority
shareholding is with Chloride Eastern Ltd. i.e. 45.99%. Also, the promoters have
not pledged any shares. This stock is favourite within FIIs, DIIs, Mutual Funds and
Insurance Companies with the holding of 39.77%. The investors should be aware
that there is only one promoter involved.

CHAPTER 6
CONCLUSION
It is very well known that no one can time and predict the stock market and prices
of the stocks, but time and study of fundamental tools and technical charts has
reasonably paid off. An attempt has been made to study the same in case of
automobile sector.
As we know that automobile industry is the backbone of the employment and one
of the biggest contributor of the GDP of India. A study of 10 out performer auto
companies were undertaken out of which 4 were shortlisted as per the value pick
and the growth pick. In order to get a clear picture again the shareholding pattern
was analysed because many times promoters pledge their share, which can be
negative indicator.
The ranking is given in the analysis based on fundamental analysis. Then it was
backed by the technical analysis. Technical Analysis showed that most of the
stocks are trading on their 52 week low. This is because the economical and
government policies.
Many investor forget the shareholding pattern analysis of the company which also
becomes crucial for long term investment.

CHAPTER 7
LEARNINGS
7.1 The project has helped me on an individual level to understand –
 Working of Industry- A full-fledged equity research has helped in determining
and understanding how does an industry operate/work in an economy. How does a
particular action by the government or announcement by Board of Directors
affects the share price of the stock which would have impact on company as well.
 An extensive learning of Ratios – Fundamental analysis has helped in
understanding the ways and the importance of the financial or non-financial ratios
that are used while conducting the research. A broader understanding of various
fundamental ratios was established through the research.
 Avenues of Investment- A detail knowledge about the various investing avenues
available for an individual was provided during the initial days so that an intern
can judiciously choose his investing portfolio.
 Mutual Fund Basics- Mutual funds have become the instrument of the modern
investment. Less risky, and full of returns as the risk is diversified among different
portfolios. Various types of mutual funds were also discussed to see where lies the
highest return or the lowest risk in order to make investment.

7.2 Additional Learnings
As management trainees of the organisation we were not only trained about our
main project but also about various significant activities. The internship has been a
full-fledged learning experience for us. Learnings apart from the main projects have
been quite revealing and eye opening for us as it was a totally new experience for
us. Some of the additional learnings were-
 Introduction to trading technologies- We are provided with our own Share khan
Account to perform daily intraday trading activities on. From the basics of what
equity is to how to Short sell, buy stock, from a normal daily price chart to a complex
Candle Stick Chart we are trained at everything.
 Increased knowledge of the field- While practically working at it, we have realised
and learned a lot about the real time working of the markets, industry and the
organisation. Q&A sessions and doubt solving sessions have been abundantly useful
for us as young souls in the Finance field.
 Skill Development- There is an overall development of skills of a candidate during
the tenure of internship. For example, Public speaking skills helped me a lot to face
an audience as a whole. We were also use to work in team while doing live trading
which enables me to upgrade my teamwork skills which is a positive sign for me in
order to work in corporate world.
 Personal Learnings- I was intern in Mumbai “the financial capital of India”. Being
in Mumbai was new learning for me. The kind of pace and market in Mumbai was
tough and learning. As a wholesome experience, the internship has taught us a lot
about internal and external factors of corporate jobs.

CHAPTER 8
BIBLIOGRAPHY
WEBSITES
1. www.bseindia.com
2. www.nseindia.com
3. www.stockchart.com
4. www.cfi.com
5. www.investopedia.com
6. www.equitymaster.com
7. www.moneycontrol.com
8. www.investing.com
9. www.general.futuregenerali.in

EQUITY RESEARCH OF AUTOMOBILE SECTOR FOR RETAIL INVESTOR

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