Category Archive : Sector Analysis

India Auto Sector (Stock) Analysis

Let’s study some auto sector companies, we have selected the following companies for study and analysis: –

  1. Maruti Suzuki
  2. M&M
  3. Bajaj Auto
  4. Hero MotoCorp
  5. Eicher Motors
  6. Tata Motors
  7. Ashok Leyland
  8. TVS Motors

The companies here are a combination of 2-wheeler and 4-wheeler companies. These companies have been chosen on the basis of market capitalization.

Sr. No.Company NameMarket Cap (Rs. Crore)
1Maruti Suzuki2,35,892
2M&M98,878
3Bajaj Auto83,460
4Hero MotoCorp67,122
5Eicher Motors65,861
6Tata Motors50,803
7Ashok Leyland31,131
8TVS Motors27,553

The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.

All the 8 companies here are large cap-oriented companies.

The analysis of these companies is going to be based on 4 parameters. They are as follows: –

  1. Price-to-Earnings (PE) Ratio
  2. Return On Capital Employed (ROCE)
  3. Return On Equity (ROE)
  4. Debt-to-Equity (DE) Ratio

These 4 parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these 4 parameters are crucial for initial screening.

Every parameter has been equal importance (25%). And the companies are scored from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)

PE Ratio

Sr. No.Company NamePE RatioScore
1Maruti Suzuki29.864
2M&M17.267
3Bajaj Auto18.625
4Hero MotoCorp18.356
5Eicher Motors31.193
6Tata Motors35.452
7Ashok Leyland15.798
8TVS Motors40.641

PE ratio is nothing what price an investor is paying for 1 rupee of earning.

The company which has the highest PE ratio has been scored 1 and the company with the lowest PE ratio has been a score of 8.

The PE ratio of TVS Motors is the highest and has gotten the score of 1 and Ashok Leyland has the lowest PE ratio and that is why it’s has been scored 8.

This does not mean that Ashok Leyland is the best and TVS Motors is the worst stock. A company gets premium valuations when the company’s business prospects are looking good.

ROCE

Sr. No.Company NameROCEScore
1Maruti Suzuki23.77%3
2M&M13.64%2
3Bajaj Auto30.96%6
4Hero MotoCorp46.1%7
5Eicher Motors49.4%8
6Tata Motors8.55%1
7Ashok Leyland28.4%5
8TVS Motors24.09%4

Eicher Motors has scored 8 for having the highest ROCE and Tata Motors scored 1 for having the lowest ROCE.

Eicher Motors has a ROCE of 49.4%. This mean that it has capacity of 49.4% to generate returns on the capital. This is a very good number.

ROE

Sr. No.Company NameROEScore
1Maruti Suzuki16.37%2
2M&M17.23%3
3Bajaj Auto22.15%4
4Hero MotoCorp32.46%8
5Eicher Motors31.68%7
6Tata Motors10.04%1
7Ashok Leyland23.22%5
8TVS Motors24.44%6

Here too, Tata Motors scored 1 by having the lowest ROE and Here MotoCorp has the highest ROE and has thus scored 8.

DE Ratio

Sr. No.Company NameDE RatioScore
1Maruti Suzuki08
2M&M1.521
3Bajaj Auto0.016
4Hero MotoCorp08
5Eicher Motors0.025
6Tata Motors0.932
7Ashok Leyland0.144
8TVS Motors0.413

If a company’s ROE is less than its ROCE, then it means that the company is not able to mange its debt efficiently. And whenever, the ROE decreases than the ROCE, the chances of increasing debt increases. If the company is mt able to generate returns and is also not able to service its debt, then that is not good.

Maruti Suzuki and Hero MotoCorp being 0-debt companies have scored 8. M&M has the highest DE ratio and has thus scored 1.

Final Standings

RankCompany NameFinal Score1 Year Returns
1Hero MotoCorp29-12.5
2Eicher Motors23-23
3Ashok Leyland22-10.8
4Bajaj Auto21-14.5
5Maruti Suzuki17-22
6TVS Motors15-26.4
7M&M135
8Tata Motors6-58

Hero MotoCorp is on the 1st position with 29 points, Eicher Motors on 2nd with 23 points, Ashok Leyland on 3rd with 22 points and tata Motors is on the last position, that is 8th with 6 points.

M&M is the only company which is showing positive returns in the last 1 year.

The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them

And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.

Note:

  • We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
  • All the data used is of Trailing Twelve Month (TTM)

Consumer Durable Sector Analysis

Let’s study some consumer durable companies, we have selected the following companies for study and analysis: –

  1. Havells India
  2. Voltas
  3. Whirlpool
  4. Symphony
  5. Blue Star
  6. Bajaj Electrical
  7. Johnson Hitachi
  8. IFB Industries

All the companies selected above are the major companies which are involved in Air conditioning and air-cooling segment, which is the most popular segment in the consumer durable sector. There may be arguments that one can also include Titan or TTK Prestige or Hawkins Cooker. But in this analysis, we are focusing on the air conditioning and air-cooling market.

Company NameMarket Cap (Rs. Crore)
Havells India44,099
Voltas18,966
Whirlpool17,821
Symphony8,497
Blue Star6,192
Bajaj Electricals5,229
Johnson Hitachi4,916
IFB Industries3,397

The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.

Out of all the companies, listed above, Havells India is the only large cap company. Voltas and Whirlpool are the mid cap companies. And Symphony, Blue Star, Bajaj Electricals, Johnson Hitachi and IFB Industries are the small cap companies.

The analysis of these companies is going to be based on 4 parameters. They are as follows: –

  1. Price-to-Earnings (PE) Ratio
  2. Return On Capital Employed (ROCE)
  3. Return On Equity (ROE)
  4. Debt-to-Equity (DE) Ratio

These 4 parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these 4 parameters are crucial for initial screening.

Every parameter has been equal importance (25%). And the companies are scored from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)
PE Ratio

Sr. No.Company NamePE RatioScore
1Havells India55.118
2Voltas32.671
3Whirlpool46.075
4Symphony53.846
5Blue Star41.793
6Bajaj Electricals32.682
7Johnson Hitachi54.677
8IFB Industries45.964

PE ratio is nothing what price an investor is paying for 1 rupee of earning.

The PE ratio of Havells is the highest and has gotten the score of 1 and Voltas has the lowest PE ratio and that is why its has been scored 8.

ROCE

Sr. No.Company NameROCEScore
1Havells India27.61%5
2Voltas21.69%3
3Whirlpool33.29%7
4Symphony46.29%8
5Blue Star21.05%2
6Bajaj Electricals19.55%1
7Johnson Hitachi29.31%6
8IFB Industries22.04%4

Symphony has scored 8 for having the highest ROCE and Bajaj Electrics scored 1 for having the lowest ROCE.

ROE

Sr. No.Company NameROEScore
1Havells India19.795
2Voltas15.863
3Whirlpool21.417
4Symphony34.778
5Blue Star18.364
6Bajaj Electricals12.971
7Johnson Hitachi20.566
8IFB Industries15.372

Here too, Symphony scored 8 by having the highest ROE and Bajaj Electricals scored 1 by having the lowest ROE.

D/E Ratio

Sr. No.Company NameD/E RatioScore
1Havells India0.036
2Voltas0.045
3Whirlpool08
4Symphony0.045
5Blue Star0.452
6Bajaj Electricals0.771
7Johnson Hitachi0.027
8IFB Industries0.045

Whirlpool being a 0-debt company has scored 8. Bajaj Electricals has the highest DE ratio and has thus scored 1.

Final Standings

RankCompany NameFinal Score1 Year Returns
1Whirlpool26-10.5%
2Symphony24-32.5%
3Johnson Hitachi21-30.7%
4Voltas19-10%
5Havells India1726.3%
6IFB Industries16-38.5%
7Blue Star14-20%
8Bajaj Electricals106.3%

Whirlpool is on the 1st position with 26 points, Symphony on 2nd with 24 points, Johnson Hitachi on 3rd with 21 points and Bajaj Electricals is on the last position, that is 8th with 10 points.

We have also mentioned the 1 year returns of these companies. One should not think that the company has scored good but still has negative returns. Last year has been a very turbulent year. For example, a company like Symphony who has even given returns of 300% now has negative returns. But these falls are justified because they have had a corresponding run.

The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them

And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.

Note:

  • We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
  • All the data used is of Trailing Twelve Month (TTM)

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