Equity research on cement sector

A

PROJECT REPORT ON

“EQUITY RESEARCH ON CEMENT SECTOR”

done at

“EINZ CONSULTANCY, VASHI, NAVI MUMBAI”

SUMMER INTERNSHIP REPORT SUBMITTED TO

UNIVERSITY OF MUMBAI

IN

PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

MASTER OF MANAGEMENT STUDIES

SUBMITTED BY:

SUBODH UJJANKAR

ROLL NO. 36

BATCH: 2013-2015

Under the supervision of

PROF. ASMAT ARA KHAN

Bharati Vidyapeeth’s Institute of Management Studies & Research

Sector 8, CBD-Belapur, Navi Mumbai - 400 614.

DECLARATION

I Subodh Ujjankar student of Bharati Vidyapeeth’s Institute of Management Studies and Research hereby declare that the project work titled “EQUITY RESEARCH ON CEMENT SECTOR” submitted in partial fulfillment of the required for the award of the degree of “Masters of Management Studies (MMS)”. The results embodied in this report have not been submitted to any other university or institute for award of any degree or diploma.

SUBODH UJJANKAR

CERTIFICATE

This is to certify that this project report submitted in partial fulfillment of the MMS degree of University of Mumbai to Bharati Vidyapeeth’s Institute of Management Studies and Research is a result of bonafide research work carried out by Mr. Subodh Ujjankar under my supervision and guidance during the period from 03th May 2014 to 03th July 2014.

No part of this report has been submitted for award of any other degree, diploma or other similar titles or prizes. The work has also not been published in any Journals/Magazines.

Date:

Place:

(Dr. D.Y. Patil) (Prof. Asmat Ara Khan) Director Internal Guide BVIMSR BVIMSR

ACKNOWLEDGMENT

I would like to thank our Director Dr. D.Y. Patil. It gives me a great pleasure in presenting the Project Report on “EQUITY RESEARCH ON CEMENT SECTOR”. I would like to thanks Prof. Deep Kapadia, my guide at the EINZ Consultancy, Vashi, Navi Mumbai, for his valuable guidance and motivation and also, his assistance in the project work and his valuable feedback. I would also like to thank my faculty mentor, Prof. Asmat Ara Khan, BVIMSR for allowing me to take up this project at EINZ and his valuable inputs before the start of the SIP and through the periodic electronic interactions during the period of the project.

It is the matter of utmost pleasure to express my bliss and deep sense of gratitude to various persons who extended their maximum help to supply the necessary information for the project, which became available on account of the most selfless and honest co-operation. I am also grateful to many EINZ employees for their sincere helping hands and providing supporting aids.

I owe the reality of this report to Prof. Deep Kapadia whose analytical skills and phenomenal thought process helped me in completing the project successfully. Evidences of his vision and expertise are sprinkled throughout the report.

Even if I put all my efforts to the concise, the word of acknowledgement itself will require more space then rest of the project. Though it is impossible to put my token of thanks towards every person individually within the limited apace available, I have tried to subsume everybody’s name that has made the project a successful one.

I would also like to thank my family and friends for their constant support throughout the project. I also want to thank all the respondents who helped me gather information and their view about the Cement Sector.

TABLE OF CONTENTS

Chapter No.

SUBJECTS COVERED PAGE NO.

i. DECLARATIONii. CERTIFICATE

iii. ACKNOWLEDGMENT

1 INTRODUCTION TO THE PROJECT1.1 TITLE OF THE PROJECT1.2 INTRODUCTION TO THE TOPIC1.3 OBJECTIVES OS THE STUDY1.4 LITRATURE REVIEW

2 INTRODUCTION TO THE COMPANY2.1 COMPANY PROFILE 2.2 AN OVERVIEW OF EINZ 2.3 ORGANISATION STRUCTURE2.4 COMPANY’S PERFORMANCE 2.5 GROWTH

3 INTRODUCTION TO THE INDUSTRY 3.1 OVERVIEW OF THE INDUSRTY3.2 MAJOR PLYER IN THE INDUSRTY 3.3 THE INDIAN MARKET PREDICTION

4 CURRENT STATUS OF THE COMPANY4.1 SWOT ANALYSIS 4.2 INTRODUCTION TO DATA ANALYSIS AND INTERPRETATION TECHNIQUES

5 ANALYSIS OF CEMENT INDUSTRY5.1 EQUITY RESEARCH TECHNIQUES

PE RATIO5.2 INTRODUCTION TO CEMENT SECTOR5.3 ANALYSIS OF CEMENT SECTOR

6 CONCLUSION & LIMITATION6.1 Outlook 6.2 Limitation6.3 Conclusion6.4 Bibliography

CHAPTER 1

INTRODUCTION TO THE PROJECT

1.1 Title of the Project:

“EQUITY RESEARCH ON CEMENT SECTOR”

The main aim of this project is to do equity research on Cement sector and to find out the opportunities of investment in this sector where returns can be maximized. This report starts with Sector Analysis of Cement sector followed by the fundamental analysis of the companies. Analysis of the sector has been done. Economy of India, cement industry is analyzed on the basis of various factors and indicators. After analyzing these companies, stock price is estimated by Relative Valuation Method and the stocks were purchased by creating a portfolio. Ratios are calculated and then the growth and value of the stocks were estimated.

Technical analysis is used to study stock chart patterns of these companies. The observed patterns are tested with various oscillators and decision about particular stock is made. Based on these factors, trend of a particular stock is observed.

This report will help the investors to know about the current growth prospects of Indian Economy in relation with Cement sector. They will get to understand various factors affecting this sector and their impact on the growth of the sector. This report will help them in comparing the stocks and their estimated future share prices, so that they can invest in better options and get maximum returns.

This report will help Wealth Management on their investment decisions of the wealth management team.

1.2 Introduction of project -

To study the cement sector stock in the market and the factors that affect the share prices of the stocks of the sector. The growth of the Indian economy has slowed down in recent times on account of the rising inflation, high interest rates, high prices of commodities and fuels.

Cement is the main binding agent in concrete and, thus, the most common building and construction material in the world. A key feature of the cement industry is the strong direct relationship between economic growth and cement consumption. It has been a very good sector in terms of growth. The Indian cement industry is the 2nd largest market after China accounting for about 7-8% of the total global production. It had a total capacity of about 330 m tons (MT) as of financial year ended 2011-12. Cement is a cyclical commodity with a high correlation with GDP, growing at around 1.2x of GDP growth rate. The housing sector is the biggest demand driver of cement, accounting for about 64% of the total consumption. The other major consumers of cement include infrastructure, commercial & institutional and industrial segment.

1.3 Objective -

To provide an overview of Indian Cement Industry.

To study about some of the major players in Indian Cement Industry which has good investment prospects.

To identify the growth drivers of the sector.

To identify the top-line and bottom-line of the companies selected under the sector and the factors that affect them.

The analysis of various stocks of the Cement sector by calculating the various ratios, the price targets and the technical analysis which would help us know which stock is outperforming and which stock is underperforming. Apart from this the price target will help us know that by how much our shares would rise or fall when the market fluctuates in future.

1.4 Literature Review –

NAIR N.K. (1991) has studied the productivity aspect of Indian Cement Industry. This study emphasized that cement, being a construction material, occupied a strategic place in the Indian economy. This study has revealed that, in 1990-91, the industry had an installed capacity of 60 million tones with a production of 48 million tones. In this study, the cement industry was forecasted to have a capacity growth of about 100 million tons by the year 2000. This study has also analyzed the productivity and performance ratios of the cement industry with a view to identifying the major problem areas and the prospects for solving them.

SUBIR COKAVN AND REJENDRA VAIDHA (1993) have made and attempt to evaluate the performance of cement industry after decontrol. He found that the performance of the cement industry after decontrol was characterized by outcomes that were generally competitive and welfare enhancing. This study has revealed that the structure of the industry changed significantly with large magnitude of relative technologically and superior capacity being created by many new entrants into the industry. It was noticed in this study that there were significant real price increase and an associated increase in profitability. The performance of firms across the strategic group was different with firms operating relatively new and large plants appeared to have an advantage. Further, the study has dealt with the nature and effect of inter-firm heterogeneities in the cement industry.

CHANDRASEKARAN N (1993) has made an attempt to examine determinants of profitability in cement industry. He identified that profitability was determined by structural, as well as, behavioral variables. He also identified that the other variables which influenced profitability were growth of the firm, capital turnover ratio, management of working capital, inventory turnover ratio etc. Some of the main changes in the cement industry environment during 1980’s identified this study were: from complete control to decontrol, number of new entrants and substantial additions of capacity, changing technology from inefficient wet process to efficient dry process and from conditions of scarcity of cement to near gloat in the market.

CHAPTER 2

INTRODUCTION TO THE COMPANY

2.1 COMPANY PROFILE -

An investment strategy is a crucial element of wealth management. It is a combination of expertise and perception, complex market dynamics and innate planning. With the variety and complexity of the investment options available in today's marketplace, it is important to have disciplined, experienced professionals to provide advice at every stage in your life. And this is where they come in. Wealth Management offers unique services: so personalized, that the customers get the best of both the worlds. Its focus and dedication is towards the success of its clients and client’s aspirations regarding his finances.

That is why; more than a plan, a customer need a partner with the financial expertise and cutting-edge tools and processes to maximize their hard-earned wealth. Wealth Management works with its customers to help ensure their goals are not just met - but exceed their expectations at every step.

Wealth Management is a trusted advisor and partner in helping customers achieve the pinnacle of financial success.

2.2 An Overview of Einz Consultancy Wealth Management

MISSION:

To consistently pursue investor's wealth optimization by:

Achieving superior and consistent investment results. Creating a conducive environment to hone and retain talent. Providing customer delight. Institutionalizing system-approach in all aspects of functioning Upholding highest standards of ethical values at all times.

VISION:

To be leader and role model in a broad based and integrated financial services business.

2.3 COMPANY PERFORMANCE

Company achieved gross revenue of Rs. 53.84 lakh during the year under review as against the gross revenue of 64.51 lakh during the previous year, a decrease of 19%. Total expenditure reduced marginally to 69.12 lakh as compared to 69.52 lakh during the previous year. As a result, the total loss before depreciation and tax was 15.28 lakh as against a loss of 5.01 lakh in the previous year. This increase in loss was primarily due to continuous downside witnessed in domestic equities participation which resulted in the growth of AUM of Mutual Funds, thus impacting overall revenue. The Company however continues to expand its distribution channel across various asset classes of financial products and range of product offering for its clients. During the year, Company mobilized aggregate funds under different asset classes.

2.4 GROWTH –

These regulatory changes remain dynamic and may change the overall structure for investment management as well as the distribution industry. The state of equity market will be the key for growth. Though the MF industry continues to be under pressure and the revenue is at the decline, the Company has plans to strengthen its wealth management segment, streamline its retail distribution network, focus on client acquisition and engagement through its product offering across all segments, improved

processes to increase the revenue stream and at the same time work on cost optimizations measures.

CHAPTER 3

INTRODUCTION TO THE INDUSTRY

3.1 OVERVIEW OF THE CEMENT SECTOR

The Indian cement industry is the 2nd largest market, responsible for 7-8 percent of global cements production, and is also an exporter to 30 countries. The cement industry in India is divided into five geographical segments, wherein the North and South regions are the leading suppliers of cement. The East, West and Central regions face deficit of cement, thereby relying on purchases from the North and South. According to the Cement Manufacturers’ Association (CMA), there are 139 large cement plants and 365 mini and white cement plants in the country. The Cement industry in India had a total capacity of about 330 m tonnes (MT) as of financial year ended 2011-12. According to the Cement Manufacturers Association (CMA), cement sales for May 2012 were registered at 16.26 million tonnes (MT), which signifies a 14 percent growth over the same period in 2011. Cement is a cyclical commodity with a high correlation with GDP, growing at around 1.2x of GDP growth rate. The housing sector is the biggest demand driver of cement, accounting for about 64% of the total consumption. The other major consumers of cement include infrastructure (17%), commercial & institutional (13%) and industrial segment (6%).

Though cement is the most preferred construction material in both housing and industrial works, its demand is directly linked to the development and growth of others industry domains, such as construction, infrastructure, finance, etc. The housing segment that accounts for a major portion of domestic demand for cement in India is expected to witness a demand of 4.3 million housing units between 2010 and 2014. Government initiatives to boost infrastructure development and ease transportation costs should keep the demand for cement on a consistent rise. Furthermore, there are unexplored markets in the country, like the under-supplied North-east region, that are currently experiencing increasing demand for cement.

Despite the fact that the Indian cement industry has grown at a commendable rate in the last decade, registering a compounded growth of about 8%, the per capita consumption still remains substantially poor when compared with the world average. Its per capita consumption is only around 170 kg, much lower than the global average consumption of about 430 kg. According to the latest report from the working group on the industry for the 12th five-year Plan (2012-17), India would require overall cement capacity of around 480 million tonnes. This would mean the industry will have to add another 150 million tonnes of capacity during the period and our country has tremendous scope for growth in the Indian cement industry in the long term.

Leading players in this sector (by market share) are Shree Cement, Ultratech Cement, Ambuja Cement, Binani Cement, ACC Cement, India Cement, Dalmia Cement, Madras Cement, Lafarge, and OCL India. Given the high potential for growth, quite a few foreign transnational companies have ventured into the Indian markets. Already, while companies like Lafarge, Heidelberg and Italicementi have made a couple of acquisitions, Holcim has increased its stake in domestic companies Ambuja Cements and ACC to over 50% to gain full control. Consolidation has taken place with the top two cement groups controlling nearly one-third of the total domestic capacity. However, the balance capacity still remains quite fragmented.

3.2 MAJOR PLAYERS IN THE INDUSRTY

ACC Limited (Formerly The Associated Cement Companies Limited) one of the largest producers of cement in India. It's registered office is called Cement House. It is located on Maharishi Karve Road, Mumbai. The stock price of company contributes in calculating BSESensex.

The management control of company was taken over by Swiss cement major Holcim in 2004. On 1 September 2006 the name of The Associated Cement Companies Limited was changed to ACC Limited. The company is only cement company to get Superbrand status in India

ACC Limited is India’s foremost manufacturer of cement and ready mix concrete with a countrywide network of factories and marketing offices.Established in 1936, ACC has been a pioneer and trend-setter in cement and concrete technology. ACC’s brand name is synonymous with cement and enjoys a high level of equity in the Indian market. Among the first companies in India to include commitment to environment protection as a corporate objective, ACC has won several prizes and accolades for environment friendly measures taken at its plants and mines. The company has also been felicitated for its acts of good corporate citizenship.

PRICE CHART

INCOME STATEMENT EVOLUTION

Annual Income Statement Data

Actuals in M INR Estimates in M INR

Fiscal Period December 2011 2012 2013 2014 2015 2016

Sales 94 387 111 305 109 084 121898 136174 156401

Operating income (EBITDA) 21 126 21 956 16 300 17 925 22 027 28 078

Operating profit (EBIT) 16 373 16 367 10 462 17 454 21 380 20 906

Pre-Tax Profit (EBT) 15 404 14 515 12 136 15 412 18 647 23 134

Net income 13 253 10 612 10 947 11 382 13 416 15 880

EPS ( INR) 70,4 56,4 56,3 61,0 72,2 86,0

Dividend per Share ( INR) - 30,0 - 30,1 33,7 39,6

Yield - 2,07% - 2,07% 2,33% 2,73%

Announcement Date02/09/2012 02/07/2013 02/06/2014

- - -

Ambuja Cement Limited (“Ambuja” or the “Company”) is one of the leading cement manufacturing companies in India. The Company was set up in the year 1983 and commenced cement production in 1986. Global cement major Holcim acquired management control of Ambuja in 2006. Holcim today holds a little over 46% equity in Ambuja. The Company was initially called as Gujarat Ambuja Cements Ltd and was founded by Narotam Sekhsaria in 1983 in partnership with Suresh Neotia. Ambuja Cement is an established brand in India for Ordinary Portland Cement (OPC) and Pozzolana Portland Cement, with significant presence across western, eastern and northern markets of India. The Company's customers range from individuals house builders to governments to global construction firms. In FY 2012, the Company grew from 0.7 million tonne Cement Grinding capacity to 27.35 million tonnes. The Company has five integrated cement manufacturing plants and eight cement grinding units across the country. Ambuja has a captive port with three terminals along the country’s western coastline to facilitate timely, cost effective and environmentally cleaner shipments of bulk cement to its customers. The Company’s subsidiaries include Kakinada Cements Ltd., M.G.T. Cements Private Ltd., Chemical Limes Mundwa Private Ltd., Dang Cement Industries Private Ltd. and Dirk India Private Ltd. In June 2011, the Company acquired Dang Cement Industries Pvt. Ltd. In September 2011, ACL acquired 60% interest in Dirk India Pvt. Ltd.

The Equity Research Report presented below is based on a Fundamental Analysis

of Ambuja Cement.

PRICE CHART




Fiscal Period December 2011 2012 2013 2014 2015 2016

Sales 85 145 96 749 90 868 104 904 117 646 127 408




Net income 12 289 12 971 12 946 13 742 16 651 20 510

EPS ( INR) 8,00 8,41 8,37 8,55 10,4 13,1

Dividend per Share ( INR) 3,20 3,60 - 3,70 4,13 4,92

Yield 1,43% 1,61% - 1,66% 1,85% 2,20%


- - -

UltraTech Cement Limited (“UltraTech” or the “Company”) was set up in the year 1945 and has emerged as India's largest and world’s 10th largest manufacturer of cement with an installed capacity of 52 Million Tonnes Per Annum. The Company is part of the US$ 40 billion Aditya Birla Group. UltraTech provides a range of products including ordinary portland cement, portland blast furnace slag cement, white cement, ready mix concrete, building products and a host of other building solutions. White cement is manufactured under the brand name of ‘Birla White’ , ready mix concretes under ‘UltraTech Concrete’ and new age building products under the name of ‘UltraTech Building Products Division’. UltraTech operates through 11 integrated plants, 15 grinding units, 6 bulk terminals and 101 RMC plants – spanning India, UAE, Bahrain, Bangladesh and Sri Lanka. The Company is also India's largest exporter of cement and clinker in countries around the Indian Ocean, Africa, Europe and the Middle East.

The Equity Research Report presented below is based on a Fundamental Analysis

of UltraTech Cement.

PRICE CHART




Fiscal Period March 2012 2013 2014 2015 2016 2017

Sales 181 664 200 179 200 779 233 691 265 625 313 861




Net income 24 462 26 554 21 445 25 022 30 475 40 722

EPS ( INR) 89,2 96,9 78,2 91,6 111 149

Dividend per Share ( INR) 8,00 9,00 9,00 10,4 11,9 14,5

Yield 0,31% 0,35% 0,35% 0,40% 0,46% 0,56%

Announcement Date 04/23/2012 04/22/2013 04/23/2014 - - -

Shree Cements Limited ("Shree Cements" or the "Company") is engaged in the manufacture and sale of cement in India. The Company offers cement under brands like Shree Ultra, Bangur Cement, and Rockstrong Cement. The Company's cement plants are located at Beawar, Ras, Khushkhera, Jobner (Jaipur) and Suratgarh in Rajasthan and Laksar (Roorkee) in Uttarakhand. Shree Cement sells majority of the cement it produces in North India.

The Company has a cement production capacity of 13.5 Million Tons Per Annum (MTPA). Shree Cement plans to increase its existing capacity by setting up two new clinker manufacturing units of 2 MTPA capacities. The Company has also planned a new grinding unit in the state of Bihar and an integrated unit in the state of Chattisgarh. Shree Cement has a power generation capacity of 560 MW with plants located at Beawar and Ras in Rajasthan. The Company's heat recovery power plants have a total capacity of 46MW which is the largest such capacity in the global cement industry (excluding China).

For FY 2013, the Company’s total income from operations went down by 5.22 % to Rs. 5,590.25 Cr. as against Rs. 5,898.12 Cr. in FY 2012. For the same period, net profit went up by 62.32 % to Rs. 1,003.97 Cr. as against Rs. 618.50 Cr. in FY 2012.

The Equity Research Report presented below is based on a Fundamental Analysis of Shree Cements.

PRICE CHART




Fiscal Period June 2011 2012 2013 2014 2015 2016

Sales 35 119 46 251 55 671 57 559 67 589 79 194




Net income 2 097 2 670 10 039 7 151 9 429 12 230

EPS ( INR) 60,2 76,6 288 203 272 349

Dividend per Share ( INR) 14,0 - 20,0 19,4 21,7 24,8

Yield 0,19% - 0,27% 0,27% 0,30% 0,34%


- - -

In the year-1982 a remote area in the zero-industry district of Sirohi in Rajasthan.the story of JK Lakshmi Cement Limited thus began. And today as it completes 25 yearsof existence, it is a company that’s renowned for its strength, quality and performance.

One of the established names in the cement industry, JK Lakshmi Cement Ltd has state of the art plants at Jaykaypuram, distt. Sirohi, Rajasthan having a capacity of more than 3.5million tonnes. With use of the latest technology from M/s Blue Circle Industries andModern equipments from M/s Fuller International of USA, we are going from strength to strength.

It is also the first grey cement producer of northern India to be awarded an ISO 9002certificate and be accredited by NABL (Department of Science & Technology,Government of India) for its Lab Quality Management systems.

Primarily a cement focused company, we have now diversified into a variety of productsincluding Cement (OPC & PPC), Power Mix (RMC) and Plaster of Paris to meet thestated needs of our customers. We are also in the midst of finalising certain customercentric services to provide a much better cement purchasing experience.

Products

Upholding the tradition of JK Organisation for maintaining the highest standards inquality, JK Lakshmi Cement today is one of the most preferred brands in its marketingarea with a network of about 1500 dealers spread in the states of Rajasthan, Gujarat,Delhi, Haryana, U.P., Uttaranchal, Punjab, J&K, H. P. and Mumbai. Our endeavor isalways to give our best and maintain the highest standards of customer satisfaction.

No wonder the discernible buyers prefer this cement over other brands owing to itsconsistency, higher level of quality and impeccable customer service

PRICE CHART




Fiscal Period March 2012 2013 2014 2015 2016 2017

Sales 25 378 29 040 27 815 33 940 42 291 48 556




Net income 1 773 2 335 970 1 415 2 216 3 830

EPS ( INR) 25,4 33,4 13,9 19,1 30,6 54,8

Dividend per Share ( INR) 5,00 6,50 3,00 4,91 6,93 6,00

Yield 1,26% 1,64% 0,76% 1,24% 1,75% 1,52%


- - -

3.3 The Indian Prediction

Cement is one of the core industries and plays a vital role in the growth and development of a nation. The cement industry of India is the second largest producer in the world. The production of cement has increased at a compound annual growth rate (CAGR) of 9.7 per cent to reach 272 million tonnes (MT) during FY 06–13. The production capacity is expected to grow to 550 MT by FY 20.India's potential in infrastructure is huge. The country is expected to become the world's third largest construction market by 2025, adding 11.5 million homes a year to become a US$ 1 trillion a year market, according to a study by Global Construction Perspectives and Oxford Economics.Notwithstanding its current position as one of the leaders in cement production, India’s riches in the sector remain somewhat untapped. “Lafarge's India business has been very successful and the country is among the top 10 markets globally for Lafarge. But going forward, we should rank higher because of the potential of the Indian market,” says Mr Martin Kriegner, CEO of the Indian branch of the world’s largest cement manufacturer, Lafarge.

CHAPTER - 4CURRENT STATUS OF THE COMPANY

4.1 SWOT ANANLYSIS

Strength:-

1.) Emphasis on Customer Satisfaction through Transparent Functioning2.) Strong Capital Base

Weakness:-

1.) Low Presence in Rural Market2.) Lesser advertising as compared to competitors

Opportunity:-

1.) Growing potential in the Rural Market2.) Alignment with Government Schemes3.) Better awareness amongst people for getting insurance

Threats:-

1.) Economic crisis and economic instability.

4.2 DATA ANALYSIS AND INTERPRETATION

RESEARCH TECHNIQUE

The project is on equity research analysis of the Cement sectors. Hence study has to be done on the basis of information and news available about the Cement sectors i.e. secondary data by various modes. This research had to be completed by doing Fundamental analysis and Technical analysis of the companies.

Secondary data was collected from the internet, company’s websites, magazines and various articles. However the main source of information is Annual Report issued by the companies and also quarterly reports of the current year showing their performances in current market scenario.

Firstly data was analyzed on the basis of the industry. Both the industry i.e. banking and cement were focused on and its performance and relation with the Indian economy was monitored and then specific stocks were chosen to be invested in depending upon the fundamentals of the company stocks. These stocks were individually analyzed and then measured whether it would give maximum returns if invested in.

FUNDAMENTAL ANALYSIS

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis.

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 projected decisions,

Fundamental analysis includes:

1. Economic analysis 2. Industry analysis 3. Company analysis

On the basis of these three analyses 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. If it is equal to market price then hold the share and if it is less than the market price then sell the shares.

TECHNICAL ANALYSIS

Technical analysis is a financial term used to denote a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioural economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands in contradiction to much of modern portfolio theory.

Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns. Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis analyzes price, volume and other market information, whereas fundamental analysis looks at the actual facts of the company, market, currency or commodity.

Most large brokerage, trading group, or financial institutions will typically have both a technical analysis and fundamental analysis team.

Concepts

Resistance — a price level that may prompt a net increase of selling activity

Support — a price level that may prompt a net increase of buying activity

Breakout — the concept whereby prices forcefully penetrate an area of prior support or resistance, usually, but not always, accompanied by an increase in volume.

Trending — the phenomenon by which price movement tends to persist in one direction for an extended period of time

Average true range — averaged daily trading range, adjusted for price gaps

Chart patterns— distinctive pattern created by the movement of security prices on a chart

Momentum — the rate of price change

Chart Types:

There are three main types of charts that are used by investors and traders depending on the information that they are seeking and their individual skill levels. The chart types are: the line chart, the bar chart, the candlestick chart.

i. Line Chart

The most basic of the three charts is the line charts because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

ii. Bar Chart

The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash.

The opening price on a bar chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right. Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded black, representing an up period for the stock, which means it has gained value. A bar that is colored red signals that the stock has gone down in value over that period. When this is the case, the dash on the right (close) is lower than the dash on the left (open).

iii. Candlestick Charts

The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has happened during the trading period. There are two color constructs for days up and one for days that the price falls. When the price of the stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the stock has traded down for the period, then the candlestick will usually be red or black, depending on the site. If the stock's price has closed above the previous day’s close but below the day's open, the candlestick will be black or filled with the color that is used to indicate an up day.

Chart Patterns

Head and Shoulder

This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend Head and shoulders top is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders is the lesser known of the two, but is used to signal a reversal in a downtrend.

Cup and Handle

A cup with handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. This price pattern forms what looks like a cup, which is preceded by an upward trend. The handle follows the cup formation and is formed by a generally downward/sideways movement in the security's price. Once the price movement pushes above the resistance lines formed in the handle, the upward trend can continue. There is a wide ranging time frame for this type of pattern, with the span ranging from several months to more than a year.

Double Tops and Bottoms

This chart pattern is another well-known pattern that signals a trend reversal - it is considered to be one of the most reliable and is commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. This pattern is often used to signal intermediate and long-term trend reversals.

Triangles

Triangles are some of the most well-known chart patterns used in technical analysis. The three types of triangles, which vary in construct and implication, are the symmetrical triangle, ascending and descending triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months.

Flag and Pennant

These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. This pattern is then completed upon another sharp price movement in the same direction as the move that started the trend. The patterns are generally thought to last from one to three weeks.

Wedge

The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a symmetrical triangle except that the wedge pattern slants in an upward or downward direction, while the symmetrical triangle generally shows a sideways movement. The other difference is that wedges tend to form over longer periods, usually between three and six months.

Triple Tops and Bottoms

Triple tops and triple bottoms are another type of reversal chart pattern in chart analysis. These are not as prevalent in charts as head and shoulders and double tops and bottoms, but they act in a similar fashion. These two chart patterns are formed when the price movement tests a level of support or resistance three times and is unable to break through; this signals a reversal of the prior trend.

Rounding Bottom

A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that signals a shift from a downward trend to an upward trend. This pattern is traditionally thought to last anywhere from several months to several years.

CHAPTER-5

ANALYSIS OF CEMENT INDUSTRY

5.1 EQUITY RESEARCH TECHNIQUE

Sector Analysis -

Sector Analysis was done on the basis of research and understanding various companies of the sector i.e. Cement sector, which had strong Fundamentals over other companies of the same sector. Companies’ growth and past performance was taken into account along with its top-line (Revenue) and Bottom-line (Profits) for that period.

Companies with strong fundamentals were preferred.

The Ratios that were taken into consideration were:

P/E Ratio

Formula: PE Ratio= Market Value per Share / Earnings per Share

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per rupee of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay Rs.20 for Re.1 of current earnings.

It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.

Generally a high P/E ratio means that investors are anticipating higher growth in the future.

The average market P/E ratio is 20-25 times earnings.

The p/e ratio can use estimated earnings to get the forward looking P/E ratio.

5.2 CEMENT SECTOR ANALYSIS

5.3 CEMENT COMPANY ANALYSES

COMPANIES PRICE P/E EPS

ACC 1452.40 25.83 56.23

AMBUJA 223.70 26.10 8.57

ULTRATECH 2604.30 33.32 78.16

SHREE 7276.00 31.90 228.07

RAIN 43.00 100.00 0.43

PRISM 73.00 NIL NIL

RAMCO 303.60 52.44 5.79

JK 390.00 28.42 13.88

SECTOR P/E 37.25

SELECTED COMPANIES

COMPANIES PRICEAS ON

05/07/2014

PRICEAS ON

01/07/2014

PROFITAS ON

05/07/2014

VOLUME AMT P/E

ACC 1481.00 1452.40 28.60 6,752 1 cr 25.83

AMBUJA 225.00 223.70 1.3 33,333 75 lakhs

26.10

ULTRATECH 2631.00 2604.30 26.7 950 25 lakhs

33.32

SHREE 7417.10 7276.00 141.1 674 50lakhs

31.90

JK 394.45 390.00 4.45 12,676 50lakhs

28.42

TOTAL 3crs

INTERPRETATION The main aim of this project which was to do equity research in Cement sector and it

also shows the opportunities of investment where returns can be maximized.

The major players in Indian Cement Industry which has good investment prospects are –

ACC

AMBUJA

ULTRATECH

SHREE

JK

The top-line (Revenue) and bottom-line (Profit) of the companies selected under cement sector are performing better than others in similar sector.

CHAPTER-6

OUTLOOK, LIMITATION,

CONCLUSION, BIBLIOGRAPHY

6.1 Indian Cement Industry Outlook

Cement is one of the core industries that plays a vital role in the growth and development of a nation. In India, which is second largest producer of cement worldwide, the cement industry has been expanding on back of increasing infrastructure activities and demand from housing sector

over the past many years.

In order to apprise our clients about the direction in which the cement industry is likely to progress in the coming years, our new report, “Indian Cement Industry Outlook 2016” has presented the forecasts for production, consumption, capacity utilization, and installed capacity. The sector is expected to witness positive growth in coming years, with demand set to increase at CAGR of more than 8% during 2013-14 to 2015-16.

The overall study also provides the regional analysis of cement consumption, production, capacity utilization, and installed capacity in the country. On analyzing the regional trend of cement consumption, we observed that the Southern region is creating maximum demand, which is expected to increase more in future. Besides, we have also provided the state-wise statistics for cement consumption, production, capacity utilization, and installed capacity.

For complete understanding of the market, we have studied government regulations, cement pricing and export & import scenario. Our comprehensive study has also included types of cement production by region and state. In addition, the report provides statistics on the plants by installed capacity and production, along with the cement dispatch by transportation modes to present clients valuable information of different aspects of the cement industry.

With a view to helping our clients in understanding the market dynamics and recent activities of key players, we have covered the competitive landscape. This section covers the major four cement manufacturers’ business description, strategic analysis and recent developments. Overall, the report is an optimum presentation of Indian cement industry, which caters to all those interested in construction/infrastructure domain.

6.2 Limitation of the Study

Shortage of capital-- The cement industry is capital-intensive in nature. On account of its record on declining profitability, it is unable to raise the required finance from the capital market.

Power shortage-- Power is an important infrastructure, which the cement industry needs. The cement industry is being adversely affected with the State Electricity Boards (SEBs), raising costs year after year accompanied by diminishing quality of power supplied, in terms of frequent voltage fluctuations, power cuts and interruptions.

By installing captive power plants-- The Indian cement Industry is today supplementing grid power supply as a result, capacity has crossed 700MW.

Location problems-- Cement industries are mainly situated in Western and Southern regions producing about 71 per cent of the total output, while the Northern and Eastern regions account for 29 per cent of the total output. The Southern and Western regions consume only 57 per cent of their total output, while the Northern and Eastern regions consume 43 per cent of their total production. There is excess production in the Southern and Western regions while there is excess demand from Northern and Eastern regions. These factors lead do heavy transport cost.

6.3 CONCLUSION

This project has given me broad aspect to gain knowledge of the financial activities. This project was a good exposure for us to get acquainted with the sector analysis as well as other financial

aspects i.e. equity markets, debt markets, mutual funds, derivatives, etc. and how the work in the real life.

From the project it can be concluded on the sector that,

Cement industry is a cyclical commodity industry where the profit and return on capital is dependent on the demand cycle picture. Given the high potential growth, quite a few foreign transnational’s have been eyeing the Indian Markets and are planning to acquire domestic companies. This could lead to higher prospects of growth to this sector in the coming years.

This Internship and project has not only exposed us to do this research but has also given us an opportunity to understand the corporate world, work culture and professionalism, which would help us to excel in our career

6.4 BIBLIOGRAPHY

i. REFERENCES NAIR N.K. SUBIR COKAVN AND REJENDRA VAIDHA CHANDRASEKARAN

ii. NEWSPAPER – Economic Times of India Business Standard

iii. WEBSITES

www.equimaster.com www.indiainfoline.com www.moneyworks4me.com

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