Part 1 Use fundamental analysis for equity research

1. Macroeconomic overview of the country

a. Economic Overview stating monitory policy
Macroeconomic indicators are statistics that indicate the current status of the economy of a
state depending on a particular area of the economy (industry, labor market, trade, etc.). They
are published regularly at a certain time by governmental agencies and the private sector.

Government Fiscal and Monetary policy

Stabilization of the economy (e.g., full employment, control of inflation, and an equitable
balance of payments) is one of the goals that governments attempt to achieve through
manipulation of fiscal and monetary policies. Fiscal policy relates to taxes and
expenditures, monetary policy to financial markets and the supply of credit, money, and
other financial assets.

Interest Rates Announcement

Interest rates play the most important role in moving the prices of currencies in the foreign
exchange market. As the institutions that set interest rates, central banks are therefore the
most influential actors. Interest rates dictate flows of investment. Since currencies are the
representations of a countrys economy, differences in interest rates affect the relative worth
of currencies in relation to one another.

b. Economic indicators
Equity Research Assignment 2
Page 1

Gross Domestic Product (GDP)

The GDP is the broadest measure of a country's economy, and it represents the total market
value of all goods and services produced in a country during a given year. Since the GDP
figure itself is often considered a lagging indicator, most traders focus on the two reports that
are issued in the months before the final GDP figures: the advance report and the preliminary
report. Significant revisions between these reports can cause considerable volatility.

Consumer Price Index

The Consumer Price Index (CPI) is probably the most crucial indicator of inflation. It
represents changes in the level of retail prices for the basic consumer basket. Inflation is tied
directly to the purchasing power of a currency within its borders and affects its standing on
the international markets. If the economy develops in normal conditions, the increase in CPI
can lead to an increase in basic interest rates. This, in turn, leads to an increase in the
attractiveness of a currency.

Equity Research Assignment 2

Page 2

Historically, the wholesale price index (WPI) has been the main measure of inflation in India.
However, in 2013, the governor of The Reserve Bank of India Raghuram Rajan had
announced that the consumer price index is a better measure of inflation. In India, the most
important category in the consumer price index is Food, beverages and tobacco (49.7 percent
of total weight). Fuel and light accounts for 9.5 percent; Housing for 9.8 percent; Transport
and communication for 7.6 percent; Medical care for 5.7 percent; Clothing, bedding and
footwear for 4.7 percent and education for 3.4 percent.

Wholesale Price Index

In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures
the price of a representative basket of wholesale goods. In India, wholesale price index is
divided into three groups: Primary Articles (20.1 percent of total weight), Fuel and Power
(14.9 percent) and Manufactured Products (65 percent). Food Articles from the Primary
Articles Group account for 14.3 percent of the total weight. The most important components
of the Manufactured Products Group are Chemicals and Chemical products (12 percent of the
total weight); Basic Metals, Alloys and Metal Products (10.8 percent); Machinery and
Machine Tools (8.9 percent); Textiles (7.3 percent) and Transport, Equipment and Parts (5.2
percent).

Equity Research Assignment 2

Page 3

Balance of Payments

The Balance of Payments represents the ratio between the amount of payments received from
abroad and the amount of payments going abroad. In other words, it shows the total foreign
trade operations, trade balance, and balance between export and import, transfer payments. If
coming payment exceeds payments to other countries and international organizations the
balance of payments is positive. The surplus is a favorable factor for growth of the national
currency.
India recorded a trade deficit of 14247.42 USD Million in September of 2014. The country's
trade gap widened 132.7 percent over the same month of the previous year, reaching the
highest deficit in sixteen months. Imports increased 26 percent year-on-year driven by a
449.7 percent surge in gold purchases and exports rose 2.73 percent. Balance of Trade in
India averaged -1893.76 USD Million from 1957 until 2014, reaching an all time high of
258.90 USD Million in March of 1977 and a record low of -20210.90 USD Million in
October of 2012. Balance of Trade in India is reported by the Ministry of Commerce and
Industry, India.

Equity Research Assignment 2

Page 4

India Trade

Last

Previous

Balance of Trade

-14247.42 -10838.56 258.90

-20210.90 USD Million

Exports

28903.28

26958.22

30541.44

59.01

USD Million

Imports

43150.70

37796.82

45281.90

117.40

USD Million

Current Account

-7.80

-1.20

7.36

-31.86

USD Billion

Current Account to GDP

-1.70

-4.70

1.50

-4.70

Percent

External Debt

440614.00 390048.00 440614.00 75858.00

USD Million

Terms of Trade

60.20

61.90

100.00

60.20

Index Points

Foreign Direct Investment

2135.00

3562.00

5670.00

-60.00

USD Million

Remittances

8812.42

9574.31

10010.16

5999.10

USD Million

Tourist Arrivals

495000.00 569000.00 800000.00 129286.00

Gold Reserves

557.75

557.75

557.75

357.75

Tonnes

Crude Oil Production

778.00

761.00

813.00

526.00

BBL/D/1K

India Foreign Exchange Reserves

Equity Research Assignment 2

Page 5

Highest

Lowest

Unit

Foreign Exchange Reserves in India increased to 314177.9 USD Million in the week ended
October 24th 2014 from 313682 USD Million in the previous week. Foreign Exchange
Reserves in India averaged 178393.18 USD Million from 1998 until 2014, reaching an all
time high of 383643 USD Million in the week ended December 18th, 2009 and a record low
of 29048 USD Million in the week ended September 11th, 1998. Foreign Exchange Reserves
in India is reported by the Reserve Bank of India.

Growth
Growth refers to a positive change in size, often over a period of time. It is conventionally
measured as the percent rate of increase in real gross domestic product, or real GDP.[1] Of
more importance is the growth of the ratio of GDP to population (GDP per capita), which is
also called per capita income. An increase in growth caused by more efficient use of inputs is
referred to as intensive growth. GDP growth caused only by increases in inputs such as
capital, population or territory is called extensive growth.
Growth is usually calculated in real terms i.e., inflation-adjusted terms to eliminate the
distorting effect of inflation on the price of goods produced.
Saving & Investment.

Equity Research Assignment 2

Page 6

Savings is whatever is left over after income is spent on consumption of goods and services,
investment is what is spent on goods and services that are not 'consumed', but are durable.
Since Income = Output, Savings = Investment for the total world's economy (or for a
hypothetical 'closed' economy with zero foreign trade).
Saving is what households (i.e. participants in the consumption account) do. The level of
saving in the economy depends on a number of factors (incomplete list):
A higher real interest rate will give a greater return on saving as banks offer more favourable
rates. Poor returns on risky forms of saving, e.g. stocks and bonds, make it more
advantageous to hold money savings (in contention between Keynesian and Monetarist views
here, mostly because of differences in definitions). Poor expectation for future economic
growth, increase households' savings as a precaution for a grim future.
Investment is made into capital (ie. plant and machinery, also 'human capital' - training and
education), with intent to increase productivity, efficiency and output of goods and services
In monetary terms, the relationship between savings and investment is modeled, rather than
being an accounting identity. Mutual funds, CDs, BICs, GICs, pension obligations, insurance
annuities, and other forms of savings marketed by financial intermediaries, all consist of
stocks, bonds, and cash balances, which in turn pay for the capital that increases productivity,
efficiency and output of goods and services.
Price Level and Inflation
Price level is the average of current prices across the entire area of goods and services
produced in the economy. The most common price level index is the Consumer Price Index,
(CPI).
In economics, inflation is a sustained increase in the general price level of goods and services
in an economy over a period of time.[1] When the general price level rises, each unit of
currency buys fewer goods and services. Consequently, inflation reflects a reduction in the
purchasing power per unit of money a loss of real value in the medium of exchange and
unit of account within the economy. A chief measure of price inflation is the inflation rate, the
annualized percentage change in a general price index (normally the consumer price index)
over time.
Equity Research Assignment 2
Page 7

Interest Rates
The amount charged, expressed as a percentage of principal, by a lender to a borrower for the
use of assets. Interest rates are typically noted on an annual basis, known as the annual
percentage rate (APR). The assets borrowed could include, cash, consumer goods, large
assets, such as a vehicle or building. Interest is essentially a rental, or leasing charge to the
borrower, for the asset's use. In the case of a large asset, like a vehicle or building, the interest
rate is sometimes known as the "lease rate". When the borrower is a low-risk party, they will
usually be charged a low interest rate; if the borrower is considered high risk, the interest rate
that they are charged will be higher.

Infrastructure developments
Infrastructure investment as being investment in assets that provide sustainable services that
are essential for a functioning economy. The services provided are typically monopolistic or
quasi-monopolistic in nature as a result of geography or regulation. Demand for these
services is often inelastic to price changes and these investments can therefore provide
predictable and sustainable cash flows.
Sentiments
A view or opinion that is held or expressed.

2. Industry overview of selected companies

A. Sensitivity of the business cycle
Inflation: High food inflation has an adverse effect on the FMCG industry. People will spend
less money on discretionary items which will hit the FMCG industry. The food inflation is
very high around 12%, and the raw material cost has increased up to 15 to 20 per cent
compared to last year. The operating margins which are typically about 20 per cent in the last
few years have seen a drop to almost 16 percent. FMCG is also dependent on the monsoons.
A good monsoon will not give any inflation worries and also increases the consumption
power creating demand for hair oil, biscuits, soaps, shampoos, laundry, and toilet soaps.

Equity Research Assignment 2

Page 8

Interest Rates: As many companies are taking debt for their daily operations, thus increase in
interest rate will have adverse effect on the profitability of FMCG companies

Consumer sentiments: Slowing global economy together with an overall moderating

consumer sentiment might lead to a slow volume growth of FMCG segment.
B. Industry Life Cycle

Introduction:
It takes time of a new product to begin selling in volume. There may be manufacturing or
logistics issues to contend with. The marketplace may be unfamiliar with the product and
creating awareness takes time. Consequently product sales show a slow growth during the
introduction phase The FMCG adjust price, place (where the product is sold) and promotion
to meet his marketing objectives. For example, in markets that are large with high potential
competition it would make sense to invest heavily in promotion and to start with low prices.
This strategy would also apply for a product for which production cost would decline quickly
with economies of scale. Using this strategy, the FMCG penetrates quickly before
competitors have a chance to introduce competing products.
Growth
The growth space is characterized by a rapid increase in sales volume. This is created by
increased product demand. The FMCG and logistics issues are likely resolved and the market
is far more aware of the product. Since economies of scale have started to take effect the
Equity Research Assignment 2
Page 9

marketer should be able to increase promotional activities. At the same time competition will
begin to stiffen and so the marketer should make necessary adjustments to the 4 Ps of
marketing. For example, it may be appropriate to tweak the products by adding new features.
In this way the
Competition may be fended off. It may also make sense to reduce prices a little to bring in
more price sensitive consumers.
Maturity
The maturity phase is characterized by sales volumes leveling off. At this point competition is
strong and margins may begin to suffer. Signs of getting to this stage are that competitors
may start advertising more strongly or using other promotional means to increase sales.
Decline
Finally product sales begin to decrease and it is at this point that some serious marketing
Decisions need to be made. It may be possible to extend the life of a product by changing
some of its product attributes, repositioning it or by packaging it with other products. On the
other hand it may make sense to delete the product from your portfolio.
C. Structure and Characteristic of FMCG Industry
Competition: The market of FMCG is very competitive and manufacturers are coming
forward with the latest ideas and techniques to beat the competition and remain on the top. .
There are top business giants taking lead and several hundred emerging companies trying
hard to come forward and stand with leading FMCG producers. The easing of the trade
barriers encouraged the MNCs to invest in the Indian market to cater to the needs of the
consumers. The living standards rose in the urban sector due to high disposable income along
with the rise in the purchasing power of the rural families which increased the sales volume
of various manufacturers of the FMCG products in India.
Branding: Creating strong brands is important for FMCG companies and they devote
considerable money and effort in developing bands. With differentiation on functional
attributes being difficult to achieve in this competitive market, branding results in consumer
loyalty and sales growth. Which account for almost 70 per cent of FMCG revenues in the
country spend almost 10per cent of their turnover on advertising and brand promotion. The
promotion strategy includes tying up with top actors and other celebrity brand ambassadors,
besides going in for high-profile launches at leading retail mall and outlets.
Equity Research Assignment 2
Page 10

Distribution Network: Given the fragmented nature of the Indian retailing industry and the
problems of infrastructure, FMCG companies need to develop extensive distribution
networks to achieve a high level of penetration in both the urban and rural markets. Once
they are able to create a strong distribution network, it gives them significant advantages over
their competitors.
Contract manufacturing: As FMCG companies concentrate on brand building, product
development and creating distribution networks, they are at the same time outsourcing their
production requirements to third party manufacturers. Moreover, with several items reserved
for the small scale industry and with these SSI units enjoying tax incentives, the contract
manufacturing route has grown in importance and popularity.
Large unorganized sector: The unorganized sector has a presence in most product categories
of the FMCG sector. Small companies from this sector have used their geographical
advantages and regional presence to reach out to remote areas where large consumer products
have only limited presence. Their low cost structure also gives them an advantage.
D. Profit Potential of the industry : Porter Model
Rivalry among Competing Firms: In the FMCG Industry, rivalry among competitors is
very fierce. Players from unorganized and organized sectors continue to grab each others
market shares. Low brand awareness enables local players to market their spurious look-alike
brands. Organized retailers are competing for a limited density of population in a crowded
market and the competitors try to snatch their share of market. Market Players use all sorts of
tactics and activities from intensive advertisement campaigns to promotional stuff and price
wars etc. Hence the intensity of rivalry is very high which can control the entry of new firms.
The resistance is very low and the structure of the industry is so complex that new firms can
easily enter and also offer tough competition due to cost effectiveness. Huge investments in
promoting brands, setting up distribution networks and intense competition, but the sector is
not capital intensive. Existing large players have competitive advantage on others because of
their large scale of operation, brand attachment, deeply entrenched distribution network and
the experience curve.
Equity Research Assignment 2
Page 11

Potential Development of Substitute Product: There are complex and never ending
consumer needs and no firm can satisfy all sorts of needs alone. There are plenty of substitute
goods available in the market that can be re-placed if consumers are not satisfied with one.
The wide range of choices and needs give a sufficient room for new product development that
can replace existing goods. This leads to higher consumers expectation

Equity Research Assignment 2

Page 12

Barriers to
Entry
>Strong
distribution network
required>Geograph
ic factors limit
competition >High
capital
requirements>Stro
ng brand names
are important
>Patents limit
newcompetition

Supplier Power
Diverse
distribution
channelLarge
number of
substitute inputs
Low cost of
switching
suppliers Inputs
have little impact
oncostsVolume is
critical to supplier

Rivalry
Government
limitscompetitionLo
w storage
costsLarge industry
size Relatively few
competitors Exit
barriers are low

Substitutes
Limited number
of substitutes
(Fmcg)Substanti
al product
differentiation
(Fmcg)
Equity Research Assignment 2
Page 13

Buyer Power
High price
sensitivityLow
buyer
pricesensitivity.
Product is
important
tocustomerLarge
number
ofcustomers.
Limited buyer
choice

Bargaining Power of Suppliers: The bargaining power of suppliers of raw materials and
intermediate goods is not very high. There is ample number of substitute suppliers available
and the raw materials are also readily available and most of the raw materials are
homogeneous. There is no monopoly situation in the supplier side because the suppliers are
also competing among themselves.
Bargaining Power of Consumers: Bargaining power of consumers is also very high. This is
because in FMCG industry the switching costs of most of the goods is very low and there is
no threat of buying one product over other. Customers are never reluctant to buy or try new
things off the shelf.

3. Company Analysis of the non financial and financial parameters.

a. For non Financial statements
i.

Company core competency

VISION
"Dedicated to the health and well being of every household"
PASSION FOR WINNING
We all are leaders in our area of responsibility, with a deep commitment to deliver results. We
are determined to be the best at doing what matters most.
PEOPLE DEVELOPMENT
People are our most important asset. We add value through result driven training, and we
encourage & reward excellence.
CONSUMER FOCUS
We have superior understanding of consumer needs and develop products to fulfill them
better.
TEAM WORK
We work together on the principle of mutual trust & transparency in a boundary-less
organization. We are intellectually honest in advocating proposals, including recognizing
risks.
INNOVATION
Continuous innovation in products & processes is the basis of our success.
INTEGRITY

Equity Research Assignment 2

Page 14

We are committed to the achievement of business success with integrity. We are honest with
consumers, with business partners and with each other.
ii.

Strategy

They intend to significantly accelerate profitable growth. To do this,

Focus on growing our core brands across categories, reaching out to new geographies,
within and outside India, and improve operational efficiencies by leveraging technology

Be the preferred company to meet the health and personal grooming needs of our
target consumers with safe, efficacious, natural solutions by synthesizing our deep
knowledge of ayurveda and herbs with modern science

Provide our consumers with innovative products within easy reach

Build a platform to enable Dabur to become a global ayurvedic leader

Be a professionally managed employer of choice, attracting, developing and retaining

quality personnel

Be responsible citizens with a commitment to environmental protection

Provide superior returns, relative to our peer group, to our shareholders

iii.

Management Quality

Dabur India Limited was set up in the year 1884 in Kolkata by Dr. S. K. Burman and was
renamed Dabur India Ltd. in 1936. It is now one of the largest commercial undertakings
in India. With an experience of more than 100 years Dabur India is now the 4th largest
company pertaining to the FMCG sector. The main products include food products, health
care, and personal care products. Dabur India Limited is known for its legendary quality
standards and has a present annual turnover of ` 2233.72 crore. Some of the powerful
brands of Dabur are Dabur Chyawanprash, Hajmola, Dabur Amla, Vatika, Real.

Equity Research Assignment 2

Page 15

For Financial

ii). Ratio
I.

Debt Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by

stockholders' equity. It indicates what proportion of equity and debt the company is using to
finance its assets. The acceptable Debt Equity Ratio needs to be 2:1
The ratio of Dabur India is 0.02, its good position of the company.
II.

Current Ratio : 1.08

Equity Research Assignment 2

Page 16

A liquidity ratio that measures a company's ability to pay short-term obligations.

The ratio is mainly used to give an idea of the company's ability to pay back its short-term
liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The
higher the current ratio, the more capable the company is of paying its obligations. A ratio
under 1 suggests that the company would be unable to pay off its obligations if they came due
at that point. While this shows the company is not in good financial health, it does not
necessarily mean that it will go bankrupt - as there are many ways to access financing - but it
is definitely not a good sign.
III.

Inventory Ratio: 8.72

A ratio showing how many times a company's inventory is sold and replaced over a period.
The days in the period can then be divided by the inventory turnover formula to calculate the
days it takes to sell the inventory on hand or "inventory turnover days." This ratio should be
compared against industry averages. A low turnover implies poor sales and, therefore, excess
inventory. A high ratio implies either strong sales or ineffective buying.
IV.

Debtors Turnover Ratio: 16.83

This ratio should be compared against industry averages. A low turnover implies poor sales
and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.
Lower debtor turnover ratio is not good because it tells us that we have not manage debtors
better ways. Money from debtors are not collected fastly.

V.

Interest Coverage Ratio: 45.55

A ratio used to determine how easily a company can pay interest on outstanding debt. The
interest coverage ratio is calculated by dividing a company's earnings before interest and
taxes (EBIT) of one period by the company's interest expenses of the same period. The lower
the ratio, the more the company is burdened by debt expense. When a company's interest
coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An
interest coverage ratio below 1 indicates the company is not generating sufficient revenues to
satisfy interest expenses.
Equity Research Assignment 2
Page 17

VI.

EBIDTA: 1,287.9 2014, YoY- 17.4 %

Earnings Before Interest, Taxes, Depreciation and Amortization. An approximate

measure

of a company's operating cash flow based on data from the company's income statement.
Calculated by looking at earnings before the deduction of interest expenses, taxes,
depreciation, and amortization. This earnings measure is of particular interest in cases where
companies have large amounts of fixed assets which are subject to heavy depreciation
charges or in the case where a company has a large amount of acquired intangible assets on
its books and is thus subject to large amortization.
VII.

EBDT: 1136.2 (2014), Yoy- 19.2%

A profitability measure that looks at a company's profits before the company has to pay
corporate income tax. This measure deducts all expenses from revenue including interest
expenses and operating expenses, but it leaves out the payment of tax.

VIII.

Return On Capital Employed:

Improvement in capital efficiency and margin profile of the business translated into
improvement in return ratios with Return on Invested Capital (ROIC) increasing to 43.6% in
fiscal 2013-14 as compared to 38.3% in fiscal 2012-13.
IX.

Return on net worth: 35.33

The net worth ratio states the return that shareholders could receive on their investment in a
company, if all of the profit earned were to be passed through directly to them. Thus, the ratio
is developed from the perspective of the shareholder, not the company, and is used to analyze
investor returns.
X.
XI.
XII.

Enterprise Value/ PBIDT: 174.38 crore/

Closing Price on dated 3rd Nov 2014 : RS 230 Per share.
Latest PE: 10.9

A valuation ratio of a company's current share price compared to its per-

share earnings.

Higher PE ratio is good for the company, it gives indication to investor whether to invest in
that company or not. Also returns are expected much more then lower EPS.
Equity Research Assignment 2
Page 18

XIII.

High Low in 52 Weeks: High/ Low in 52 weeks: 229 , 218.60, Volume : 1,386,400

XIV. Important Notations:

a. Growth Rate:
b. Bonus Details
c. Other Income: Income for a company that comes from anything other than its
ordinary operations. Other income includes items such as interest from the companys
bank accounts, profit from the sale of a fixed assets etc.
d. PBIDT: PBITDA is essentially net income with interest, taxes, depreciation, and
amortization added back to it, and can be used to analyze and compare profitability
between companies and industries because it eliminates the effects of financing and
accounting decisions.
For Dabur India Ltd PBIDT is: 934.57
e.

PBDT: Profit before Depreciation and tax: 915.22

f. PBT: A profitability measure that looks at a company's profits before the company
has to pay corporate income tax. This measure deducts all expenses from revenue
including interest expenses and operating expenses, but it leaves out the payment of
tax.
For Dabur India Ltd PBT is: 861.33
g. PAT: The net amount earned by a business after all taxation related expenses have
been deducted. The profit after tax is often a better assessment of what a business is
really earning and hence can use in its operations than its total revenues.
For Dabur India Ltd PAT is: 672.10
h. EPAT: Profit after extraordinary gains or losses which are unusual or infrequent in nature:
For Dabur India Ltd EPAT is: 1465.62

iv.

Sensitivity Analysis: only one iteration for sales dropping 95%

Equity Research Assignment 2

Page 19

Sales
Other Income
Stock Adj
Total Income
Total Expenses
PBDIT
Interest
PBDT
Dep
PBT
Tax
PAT

v.

4870
108.85
12.32
4991.17
4056.68
934.49
19.35
915.14
53.89
861.25
189.23
672.02

Sales
Other Income
Stock Adj
Total Income
Total Expenses
PBDIT
Int
PBDT
Dep
PBT
Tax
PAt

243.5
5.4425
0.616
249.5585
202.834
46.7245
0.9675
45.757
2.6945
43.0625
9.4615
33.601

Z Score Formula: in crores

T1- Working Capital / Total Asset: 157.83/1946.63
= 0.081079
T2- Retained Earnings / Total Assets: 1727/1946.63
= 0.887174
T3 Earning befor Internet and Tax: 1096.6/1946.63
= 0.563333
T4- Market Value of Equity / Total Assets: 174.38/3380.01
= 0.051592
T5- Sales/ Total Assets: 7073.2/3380.01
= 2.092657
Z Score Bankruptcy Model

Z= 1.2*0.081079+1.4*0.887174+ 3.3*0.563333+ 0.6*0.051592+ 0.999*2.092657= 5.319857

Zone of Discrimination: 1.81< 5.319857< 2.99 Grey Zone.

vi.

Equity Analysis:
1. Book Value : 15.23, PE Ratio :

Equity Research Assignment 2

Page 20

2. Dividend Discount Model:

Po = 230
D1= 1.75
G= 8.7%
R= D1/Po+ g = 9%
3. Free Cash flow
2014
861.3
3
715.2
1

Net Profit Before Tax

Net Cash From Operating Activities
Net Cash (used in)/from Investing activity
Net Cash (used in)/from Financing Activities
Net (decrease)/increase In Cash and Cash
Equivalents
Opening Cash & Cash Equivalents

101.4
1
534.8
5
75.97
67.39
143.3
6

Closing Cash & Cash Equivalents

2013

2012

749.6
7
702.5
4
316.6
6
327.7
7

631.9
2
520.1
2
188.5
8
232.6
6

58.11
261.2
9
319.4
0

98.88
192.4
1
291.2
9

Rs in crore
Particulars
Equity
Debt
Total
We
Wd
Ke
Kd
WACC
WACC
FCF1
FCF2
FCF3
EV

15%Value
174.38
44.29
218.67
80%
20%
17%
6%
15%
143.36
319.4
291.29
560.0525959

EV= (Free CF1)/ (1+WACC) + (Free CF2)/ (1+WACC) ^2+ (Free CF3)/ (1+WACC) ^3 =75422.58
4. CAPM model
Equity Research Assignment 2
Page 21

Date
01-1014
02-1014
03-1014
06-1014
07-1014
08-1014
09-1014
10-1014
13-1014
14-1014
15-1014
16-1014
17-1014
20-1014
21-1014
22-1014
23-1014
24-1014
27-1014
28-1014
29-1014
30-1014

Open
223.0
5

Close
220.4
5

221.1

221.1

0.29

0.44

221.1

221.1

0.00

0.14

221.1
222.0
5

221.1

0.00

0.14

214.8

-2.85

-2.71

216
216.3
5

215.3
216.3
5

0.23

0.38

0.49

0.63

215.3

-0.67

-0.53

-2.63

-2.49

211.5

214.9
209.2
5
209.5
5

0.14

0.29

210

210

0.21

0.36

209.5

207

-1.43

-1.29

208.2
207.8
5

205.2
205.5
5
206.2
5

-0.87

-0.73

0.17

0.31

0.34

0.48

210.3
214.8
5
214.8
5
196.5
5
205.6
5

1.96

2.11

2.16

2.31

-0.14

0.00

-0.15

-0.01

-0.18

-0.03

212

-0.19

-0.05

215.2

-0.20

-0.06

215.1

208.5
211
214.8
5
214.8
5
218
205.6
5
212
215.9
5

Ra

Ra-Ra'

0.14

Equity Research Assignment 2

Page 22

Open
26681.
47
26487.
51
26229.
67
26394.
37
26551.
74
26275.
07
26537.
42
26260.
35
25950
26434.
16
26552.
45
26782.
57
26889.
51
26959.
57
26788.
73
27017.
44
27098.
94
27098.
94
27098.
94
27098.
94
27098.
94
27098.
94

Close
26567.
99
26271.
97
26246.
79
26637.
28
26297.
38
26384.
07
26349.
33
25999.
34
26108.
53
26429.
85
26575.
65
26787.
23
26851.
05
26752.
9
26880.
82
27098.
17
27346.
33
27346.
33
27346.
33
27346.
33
27346.
33
27346.
33

Rm
-

RmRm'
-0.17

-111%

-1.29

-10%

-0.27

149%

1.31

-128%

-1.45

33%

0.16

-13%

-0.30

-133%

-1.50

42%

0.25

123%

1.06

55%

0.38

80%

0.62

24%

0.07

-37%

-0.54

48%

0.30

81%

0.64

92%

0.74

17%

0.00

25%

0.08

27%

0.10

20%

0.02

28%

0.11

(RmRm')^
2
0.030
01
1.657
50
0.072
41
1.727
97
2.100
39
0.024
46
0.092
97
2.254
53
0.060
88
1.118
24
0.143
19
0.388
01
0.004
23
0.290
28
0.092
97
0.403
64
0.551
37
0.000
00
0.005
74
0.009
22
0.000
59
0.012
33

Beta : 0.523616

Rf: 8.44 %

Expected Return is 13%

Conclusion:

FMCG major Dabur India has reported a 15.1 percent growth in net profit at Rs 287.5
crore in September quarter compared to Rs 249.74 crore in same quarter last year

supported by higher sales, other income and lower finance cost.

The company maintained its volume growth within the guidance of 8-10 percent.
Volume growth for September quarter was 8.7 percent compared to 8.3 percent in

previous quarter.
Operating profit (earnings before interest, tax, depreciation and amortisation)
increased by 6.7 percent year-on-year to Rs 351 crore but margin declined by 60 basis
points to 18.2 percent during the quarter, impacted by higher advertising and publicity

expenses.
Gross margin during the same period fell 70 basis points to 53.2 percent from 53.8
percent. Advertising spends as a percentage of sales rose by 10 basis points to 13.1

percent during the quarter.

At 15:10 hours IST, the stock was quoting at Rs 230.10, up Rs 4.20, or 1.86 percent
on the BSE.
One can buy Dabur India for a target price of Rs 215 and keep a stoploss at Rs
200.

Equity Research Assignment 2

Page 23

Equity Research Assignment 2

Page 24