Security Analysis & Portfolio Management Automobiles and Energy / Power Sector

Presenter:- ITM EEC Finance: Group No. - 4 Prameela Roll No: 07 Rekha Roll No: 08 Bhakti Roll No: 12 Chetan Roll No: 20 Hemanta Roll No: 25

Top Down Approach

Overall Industry Sectorwise picture Review of major players in the respective Sector Analysis of Promising Players in that Sector
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Indian Economy Scenario

 India GDP Growth Rate slows to 6.9 percent in the third quarter  Average quarterly GDP Growth was 7.45 percent reaching an historical high of 11.80 percent in December of 2003 and a record low of 1.60 percent in December  Indian economy expanded at its slowest pace in more than two years in the July-September quarter, hurt by high local borrowing costs and a deepening euro-zone crisis.  The growth in manufacturing output eased sharply to 2.7 percent from 7.2 percent in the previous three months

Indian Economy Scenario

 Farm output rose 3.2 percent for the same period, down from the previous quarter's 3.9 per cent growth  Economic activities relating to electricity, gas and water supply increased 9.8 percent, while the construction sector grew at an improved rate of 4.3 percent  Investment climbed 30.5 percent from a year earlier, while consumer spending grew at a weaker pace of 59.5 percent. Government spending rose 10.7 percent, almost steady compared to the prior quarter  Aggressive rate increases by the Reserve Bank of India over the past 20 months to cool inflation have crimped industrial expansion, adding to pressure from a gloomy global economy that has hurt demand for exports 4

Indian Economy Scenario

Indian Economy Scenario

Challenges to Indian Economy

Raw Material Price Cost Innovation

Taxes & Duties

Demographics & Infrastructure Exchange Rate Affordability

Indian Automobile Industry

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Automobile Industry in India

 Automotive industry in India is one of the largest in the world and one of the fastest growing globally  India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world  According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020  By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads  The majority of India's car manufacturing industry is based around three clusters in the south, west and north
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Auto Industry Overview -India

Domestic Market Share for 2010-11
Two Wheelers, 76.00 , 76% Passenger Vehicles, 16.25 , 16% Commercial Vehicles, 4.36 , 4%

Three Wheelers, 3.39 , 4%

Major Market Segmentation - Automobile

Industry 9%

Household 91%

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Automobile Exports Sales Trends

1,800,000 1,600,000 1,400,000 (Number of Vehicles) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

2006-07 198,452 49,537 143,896 619,644

2007-08 218,401 58,994 141,225 819,713

2008-09 335,729 42,625 148,066 1,004,174

2009-10 446,145 45,009 173,214 1,140,058

2010-11 453,479 76,297 269,967 1,539,590 11

Automobile Domestic Sales Trends

14,000,000 12,000,000 (Number of Vehicles)

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

2006-07 1,379,979 467,765 403,910 7,872,334

2007-08 1,549,882 490,494 364,781 7,249,278

2008-09 1,552,703 384,194 349,727 7,437,619

2009-10 1,951,333 532,721 440,392 9,370,951

2010-11 2,520,421 676,408 526,022 11,790,305 12

Automobile Sector in India- Growth Drivers

 Emerged as Sunrise Sector after liberalization  Automotive Mission Plan 2006-2016 Vision  To emerge as the destination of choice in the world for Design & Manufacturing of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016  BRIC report says Indias per capita disposable income will rise by 106% in 2015 from current year.
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Auto Industry Cost Analysis-India

 Issues:  Fluctuations in metal prices and fuel prices, as well as changes in legislation and assistance packages  FDI removing foreign currency neutralization and export obligations 14

Automobile Industry- Global

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Passenger vehicles in India

Passenger Vehicles Maruti Suzuki India
Others 23% Maruti Suzuki India 46%

Market Share (%) 46.07% 16.45% 14.15% 6.50% 4.44% 3.72% 3.03% 2.82% 0.99% 0.90% 0.62% 0.16% 0.15% 16

Tata Motors Hyundai Motors India Mahindra & Mahindra Honda Siel Cars India Toyota Kirloskar Motor Ford India General Motors

Hyundai Motors India 14% Tata Motors 17%

Hindustan Motors Skoda Auto India Force Motors Fiat India Automobiles Diamler Chrysler

Maruti Suzuki
 Maruti Suzuki India Limited (NSE: MARUTI, SE: 532500) is a subsidiary company of Japanese automobile and motorcycle manufacturer Suzuki  The company offers a complete range of cars
Industry Type Public BSE: 532500 Traded as NSE: MARUTI Automotive 1981(as Maruti Udyog Limited) New Delhi, India[1] Automobiles 37,522.4 crore (US$7.61 billion) (2010-11) 2,288.6 crore (US$464.13 million) (2010-11) 6,903 Suzuki Motor Corporation
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 It was the first company in India to mass-produce and sell more than a million cars.  It is largely credited for having brought in an automobile revolution to India.  It is the market leader in India  The company's headquarters are located in New Delhi

Founded Headquarters Products Revenue Net income Employees Parent

TATA Motors
 Tata Motors (NSE: TATAMOTORS, BSE: 500570, NYSE: TTM) is an Indian multinational automotive corporation headquartered in Mumbai, India  Is South Asias largest automobile company; it is the leader in commercial vehicles and among the top three in passenger vehicles  Worldwide it is the world's fourthlargest truck manufacturer and second-largest bus manufacturer.  Tata Motors is a dual-listed company traded on both the Bombay Stock Exchange and New York Stock Exchange
Type Public company NSE: TATAMOTORS BSE: 500570 Traded as Industry Founded Founder(s) Headquarters Area served Products NYSE: TTM Automotive 1945 JRD Tata Mumbai, Maharashtra, India[1] Worldwide Automobiles Automotive parts Services Revenue Profit Employees Parent Website Vehicle leasing Vehicle service US$ 27.629 billion (2011) US$ 1.653 billion (2011) 53,151 (2011) Tata Group 18 www.tatamotors.com

Mahindra & Mahindra

 Mahindra & Mahindra Limited (BSE: 500520) is the flagship company of the Mahindra Group, a multinational conglomerate based in Mumbai, India  Mahindra & Mahindra was set up as a steel trading company in 1945. The company changed its name to Mahindra & Mahindra in 1948  It soon expanded into manufacturing general-purpose utility vehicles, starting with assembly under licence of the iconic Willys Jeep in India  They entered into the two-wheeler segment by taking over Kinetic Motors in India.
Type Traded as Industry Founded Headquarters Products Revenue Net income Employees Parent Website Public BSE: 500520 INE101A01026 Automotive 1945 Mumbai, Maharashtra, India Automobiles 23,803.24 Rs crore (2011) 2,871.49 Rs crore (2010) 119,900 Mahindra Group http://www.mahindra.com/ 19

Automobiles Financial Highlights

Financials as on 31/03/2011 (Amt. in Rs.) Net Sales PAT PAT/ Net sales (%) Proposed Dividend Shareholders Fund Loan Funds Fixed Asset Investments Current Assets Current Liabilities Maruti Suzuki 2010 289,585.00 24,976.00 8.6% 1,733.00 118,351.00 8,214.00 54,123.00 71,766.00 37,724.00 35,678.00 2011 % 2010 35,593.05 2,240.08 6.3% 859.05 14,965.47 16,594.54 16,436.04 22,336.90 11,506.61 17,372.59 Tata Motors 2011 % Mahindra & Mahindra 2010 18,038.05 2,087.75 11.6% 549.50 7,826.77 2,880.15 3,702.72 6,398.02 6,046.51 5,196.54 2011 %

361,282.00 25% 22,886.00 -8% 6.3% 2,167.00 25% 138,675.00 17% 3,093.00 -62% 69,580.00 29% 51,067.00 -29% 63,563.00 68% 40,798.00 14%

48,040.46 35% 1,811.82 -19% 3.8% 1,274.23 48% 20,013.30 34% 15,898.75 -4% 17,475.63 22,624.21 6% 1%

22,757.51 26% 2,662.00 28% 11.7% 706.00 28% 10,313.39 32% 2,405.29 -16% 4,371.85 18% 9,325.29 46% 6,143.48 2%

14,090.61 22% 16,255.24 -6%

6,767.56 30% 20

Automobiles Stock Highlights

As on 09-Dec-11 (Amt. in Rs.) Current Price Open Price High Price Low Price Prev. Close 52 Wk High 52 wk Low Maruti suzuki BSE 985.70 968.00 995.00 956.45 975.15 1,454.90 910.00 NSE 985.80 963.50 994.50 956.35 975.90 1,454.80 907.05 BSE 182.95 183.90 185.80 180.70 188.75 274.40 137.65 Tata Motors NSE 183.00 183.70 185.70 180.10 188.55 274.90 137.55 Mahindra & Mahindra BSE 703.75 718.00 720.00 698.00 730.15 874.75 585.10 NSE 703.25 715.20 719.85 697.20 729.90 877.30 585.00

Volume

107,047.00

634,649.00

2,429,843.00

14,871,345.00

391,175.00

2,447,462.00
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Automobiles Ratio Analysis

Particulars Market Share % ROCE Valuation Earnings Per Share P/E Dividend Payout Ratio Net Profit Profitability Gross Profit Margin(%) Operating Profit Margin(%) Net Profit Margin(%) Solvency Interest Cover Debt Equity Ratio Liquidity Ratio Current Ratio Quick Ratio Activity Ratio Inventory Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Maruti Suzuki 46.07 21.69 69.73 13.73 11.00 6.37 9.14 6.13 126.04 0.02 1.47 1.14 33.33 3.13 2.59 Tata Motors 16.50 10.19 28.55 37.90 80.96 6.97 9.81 3.74 2.64 0.80 0.53 0.54 13.86 2.22 1.35 Mahindra & Mahindra 6.50 26.96 45.33 16.59 30.15 12.89 14.65 11.14 48.36 0.23 0.86 0.61 15.64 4.08 1.86
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Auto Industry- Comments & Analysis

Maruti Suzuki Invest TATA Motors Hold Mahindra & Mahindra - Buy

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Indian Energy / Power Industry

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Power / Energy Industry in India

 The government aims to provide "power to all" by 2012. To achieve that promise, it will have to add as much as 0.1 million MW of generation capacity
Renewable 5% Gas 10% Nuclear 3% Diesel 1%

Hydro 26%

Coal 55%

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Power / Energy Industry in India

 Economic growth, capacity additions to fuel power demand  Country-wide deficit to reduce to 3.9 per cent by 2015-16  Investments of Rs 10.3 trillion expected over the next 5 years, margins to be under pressure  Equity returns are moderately attractive of power generation projects  CRISIL Research expects a 18-20 percent y-o-y rise in Q3 201112 net sales of power generation companies due to capacity additions and higher fuel prices.  Operating margins of generation companies to decline to 24-26 per cent due to lower PLFs
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Power / Energy Industry - Forecast

 The 11th 5 Year Plan will add 78,700 MW in 2007-2012 as against 10,766 MW, only 6,250 MW (about 58%) was achieved by December 31 2009  Out of the 13 Ultra Mega Power Projects (UMPPs) envisaged up to 2017, the MoP has allocated 4 UMPPs till date  GoIs recently launched Jawaharlal Nehru National Solar Mission aims to feed 20,000 MW of power to the national grid by 2022.  The main objective is to put India in solar energy Global Leader map  Indias Electricity is set to see a huge boom as the 8-9% economic growth rates, plans to treble its capacity to 450 GW by 2020 from 160 GW
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NTPC (National Thermal Power Corporation)

 NTPC Limited is the largest Indian state-owned energy service provider based in New Delhi, India. It was founded on November 7, 1975  It is listed in Forbes Global 2000 for 2010 ranked it 341st in the world.  It is an Indian public sector company listed on the Bombay Stock Exchange although at present the Government of India holds 84.5% of its equity.  NTPC has embarked on plans to become a 75,000 MW company by 2017  As at 31 Mar 2011 NTPC's share of the country's total installed capacity is 17.75% and it generated 27.4% of the power generation of the country in 201011

Type

Public company BSE: 532555

Traded as NSE: NTPC Industry Founded Headquarters Utilities (energy) 1975 Delhi, India electrical power Products natural gas Services Electricity generation and distribution 28

NHPC (National Hydroelectric Power Corporation)

 NHPC Limited (Formerly National Hydroelectric Power Corporation), A Govt. of India Enterprise, was incorporated in the year 1975  Later on NHPC expanded its objects to include other sources of energy like Geothermal, Tidal, Wind etc  NHPC is among the TOP TEN companies in the country in terms of investment.  Baira Suil Power station in Salooni Tehsil of Chamba was the first project undertaken by NHPC.
Type

State-owned enterprise

Public company

Traded as

533098

NHPC

Industry

Electric Utilities

Headquarters

Faridabad, India

Website

nhpcindia.com 29

Lanco Infratech
 Lanco Infratech Limited is a large Indian business conglomerate involved in construction, power, real estate, and several other segments.  Founded in 1986 by the politician Lagadapati Rajagopal  In March 2011, Lanco commissioned the Anpara-1 unit and became India's largest independent power producer with a generation capacity of 3.3 GW, which overtakes Tata Power's capacity of 3GW
Type Conglomerate 532778 Traded LITL Industry Founded Founder(s) Headquarters Infrastructure 1986 Rajagopal Lagadapati Gurgaon, NCR, India pan-India presence, Australia, China, Indonesia, London, Nepal, Singapore, United States of America Over 6500 www.lancogroup.com 30

Number of locations

Employees Website

Power / Energy Financial Highlights

Financials as on 31/03/2011 (Amt. in Rs.) NTPC NHPC Lanco 2010 2011 % 2010 2011 % 2010 2011 %

Net Sales PAT PAT/ Net sales (%) Proposed Dividend Shareholders Fund Loan Funds Fixed Asset Investments Current Assets Current Liabilities

46,322.59 8,728.20 19% 659.63 62,437.42 37,797.02 66,865.60 14,807.09 30,815.80 10,758.16

54,874.00 9,102.59 17% 659.63 67,892.25 43,188.24 77,506.59

18% 4%

4,153.21 2,090.50 50%

4,046.59 2,166.67 54% 738.04 24,583.89 14,569.26 34,223.33 5,399.50

-3% 4%

5,941.25 486.38 8%

5,872.31

-1%

278.31 -43% 5% 3,439.00 3,797.07 668.25 2,768.51 9,703.13 0% 9% 39% 55% 59% 74%

0% 9% 14% 16%

676.54 23,273.19 13,868.22 30,419.95 4,394.05 8,319.17 3,903.95

9% 6% 5% 13% 23%

3,160.60 2,733.75 432.32 1,738.80 5,581.75 3,405.74

12,344.84 -17% 35,396.79 13,072.91 15% 22%

6,861.00 -18% 5,762.80 48%

8,540.72 151% 31

Power / Energy Stock Highlights

NTPC As on 09-Dec-11 (Amt. in Rs.) NHPC Lanco Infratech

BSE

NSE

BSE

NSE

BSE

NSE

Current Price

166.15

166.10

22.00

21.95

11.48

11.45

Open Price

164.00

163.25

22.05

22.05

11.90

11.75

High Price

167.90

167.80

22.20

22.15

11.90

11.90

Low Price

163.00

162.65

21.90

21.80

11.35

11.30

Prev. Close

166.35

166.30

22.15

22.15

11.94

11.95

52 Wk High

203.15

203.80

29.35

29.35

66.40

66.35

52 wk Low

152.00

152.05

21.90

21.80

11.35

11.30

Volume

118,609.00

1,953,522.00

645,334.00

3,033,803.00

1,842,092.00

32 8,121,805.00

Power / Energy Ratio Analysis

Particulars ROCE Valuation Earnings Per Share P/E Dividend Payout Ratio Net Profit Profitability Gross Profit Margin(%) Operating Profit Margin(%) Net Profit Margin(%) Solvency Interest Cover Debt Equity Ratio Liquidity Ratio Current Ratio Quick Ratio Activity Ratio Inventory Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio 29.18 0.76 0.49 187.04 0.19 0.11 7.75 10.43 0.82 33 2.59 2.32 0.93 0.93 1.14 1.05 10.65 0.63 5.38 0.59 2.24 1.12 18.49 23.01 15.85 43.78 65.48 43.92 12.64 13.86 4.70 11.04 13.51 40.07 1.76 10.41 39.58 -1.17 11.30 NTPC 11.32 NHPC 6.75 Lanco Infratech 10.47

Power / Energy - Comments & Analysis NTPC Buy NHPC Hold Lanco Infratech - Hold

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Thank You..

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