Executive Summary:
Valuation is the first step towards the intelligent investing. An analysts evaluates the stocks based on different parameter like fundamentals of the company i.e earnings of the company, P/E dividend yield etc. and also by finding the future value of the stock by applying the models of equity valuation. Equity valuation is the most needed so as to know whether the stock is good to hold or to sell.
This report starts with a brief introduction of stock market and a profile of Kotak Mahindra Group and Kotak Securities Ltd. a subsidiary company of that group.
Then follows Industry Analysis of Infrastructure: Construction Industry Analysis. Here the evaluation of the performances of the Infrastructure industry and particularly Construction Sector is done. Its contribution towards the economy and its recent developments are chalked out.
The next part is introduction to Equity Valuation where the different approaches are briefly explained with their equations. The fundamental ratios needed to valuate the performance of the company over past years and with competitors are discussed.
The last part of the report includes deriving the fundamental ratios and application of the models for the three stocks of Infrastructure Company. This is done to find its intrinsic value and the future prices of the stock using the Dividend Discount Model and Two Stage Growth Rate.
In the comparison and analysis part of the report analyzes the prices and the dividend growth for the next year and the real value of the three stocks. The findings parts shows the interpretation on the performance and real value of the stock and finds the best dtock to invest into or which stock to sell or to buy.
Methodology:
The project is on equity valuation where the equity share prices of the companies are analyzed. The study is based on the past prices of the three years. The nature of data collection is highly based on the information available through Secondary Data.
Secondary Data:
The main source of information is taken from annual reports of the companies and through related websites which has enabled in analyzing the equities. Internet sources Annual Reports Text Books
Primary Data:
The primary sources of information collection were through discussion with the faculties and the advisors in the company.
Some believe that it isnt possible to predict how stocks will change in price while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we do know, as a certainty is that stocks are volatile and can change in price extremely rapidly. The important things to consider about stocks are the following: 1. At the most fundamental level, supply and demand in the market determines stock price. 2. Price times the number of shares outstanding (market capitalization) is the value of a company.
Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in india. Since the success of the NSE, existent market and new market structures have followed the "NSE" model.
Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in india. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India.
Co-promoting and setting up of National Securities Depository Limited, first depository in india.
NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community.
Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in india. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives three days after the BSE.
Being the first exchange to trade ETFs (exchange traded funds) in india.
Company Profile
Of
The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people in its various businesses and has a distribution network of branches, franchisees, representative offices and satellite offices across 344 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore. The Group services around 3.6 million customer accounts.
Kotak Securities Ltd. 100 % subsidiary of Kotak Mahindra Bank is one of the oldest and largest broking firms in the Industry with a market share of 8.5 % (as on 30th September).
Kotak Securities offerings include stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service. Its Accolades include: y y y y Best Performing Equity Broker in India CNBC Financial Advisor Awards 2008. Avaya Customer Responsiveness Awards (2007) in Financial Services Sector. Best Brokerage Firm in India by Asiamoney in 2007. The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007. y Euromoney Award (2006 and 2007) - Best Provider of Portfolio Management: Equities. y y y y y y Avaya Customer Responsiveness Awards (2006) in Financial Institution Sector. Asiamoney Award (2006) - Best Broker in India. Euromoney Award (2005) - Best Equities House in India. Finance Asia Award (2005) - Best Broker in India. Finance Asia Award (2004) - India's best Equity House. Prime Ranking Award (2003-04) - Largest Distributor of IPO's.
SERVICE: Kotak Securities believe in high standards of service and that's precisely what they offer. It's an honor to be awarded the most customer responsive company award in the Financial Institution sector by AVAYA Global Connect Award both in 2006 and 2007. ROBUST TECHNOLOGY: Kotak securities developed proprietary trading platform which is robust and among the best in the industry. It has more than 150 technology professionals constantly working on upgrading and speeding up all systems.
EXCEPTIONAL RESEARCH: Unlike most other competitors Kotak Securities has their own in house research team. Their in house research team is among the best in the industry and they have years of experience in the financial markets. They scan through the plethora of stocks and find the scrips that have a high potential of providing you good returns. Our investors get research Technical, Fundamental, Derivatives, Macro-economic and mutual fund research. LARGE PRESENCE: Kotak Securities is present in 309 cities with 867 offices all over the country. Its employee strength extends beyond 5000.
About Financial Planning Group: The financial planning and distribution arm of Kotak Securities is involved in defining financial goals, identifying investment vehicles and achieving them. The group commenced its operations in the year 2003. Present over 30 locations with a large team of relationship managers, has always endeavored in servicing clients; closely understanding their needs, financial goals and advising ethically.
Portfolio Management Service: Kotak Securities brings with it years of experience, expertise, research and the backing of India's leading stock broking house. The portfolio managers have over 10 years of understanding diverse investment instruments and needs. Kotak Securities is one of India's oldest portfolio management companies. It is also one of the largest with an AUM worth Rs.2500 crore. And for those who wish to grow their wealth exponentially-it is also one of the best. The Portfolio Management Service combines competent fund management, dedicated research and technology to ensure a rewarding experience for its clients. Every investment portfolio is carefully engineered for clients in a phased manner. Relationship managers help clients monitor, assess and tweak their portfolio at every level. Relationship Managers dispense personalized advice and ensure clients receive quarterly research reports, account performance statements and MIS at their doorstep. A dedicated website and a customer service desk allow clients to keep a constant tab on their portfolio's performance. All in all, it translates into zero paperwork.
KOTAK MAHINDRA CAPITAL COMPANY LTD Kotak Investment Banking* (KIB) is India's premier Investment Bank. Kotak Investment Banking (KIB) and Kotak Institutional Equities represent the securities business of the Kotak Mahindra Group **(KI), Kotak Investment Bank is a full service Investment Bank bringing to its clients the global reach and the local knowledge and skills of Kotak Mahindra. As a full service Investment Bank, Kotak Investment Banking's core business areas include Equity Issuances, Mergers & Acquisitions, Advisory Services and Fixed Income Securities and Principal Business. Its strength lies in understanding the clients' businesses backed by a strong research team and an extensive distribution network, which spans a wide variety of investors across the country. It is also the first Indian Investment Bank to be registered with the Securities & Futures Authority in the UK (through our wholly owned subsidiary) and the National Association of Securities and Dealers in the USA.
INTERNATIONAL SUBSIDIARIES Kotak Mahindra International Limited (KMIL) is the international arm of the Kotak Mahindra Group and was incorporated in 1994 in Mauritius, with a branch in Dubai. Today the international operations also cover the United Kingdom, through Kotak Mahindra U.K. Limited and in the USA through Kotak Mahindra Inc. USA. These companies are subsidiaries of Kotak Mahindra Capital Company (KMCC) the Investment Banking Division of the Group. Services offered include GDR and ADR trading and broking, debt syndication, placement of Indian securities and advisory services.
KOTAK MAHINDRA PRIME LTD Kotak Mahindra Prime Limited (KMPL) is a 100% subsidiary of Kotak Mahindra Group (Kotak Group) formed to finance all passenger vehicles. The company is dedicated to financing and supporting automotive and automotive related manufacturers, dealers and retail customers. The Company offers car financing in the form of loans for the entire range of passenger cars and multi utility vehicles. The Company also offers Inventory funding to car dealers and has entered into strategic arrangement with various car manufacturers in India for being their preferred financier.
Different approaches for the valuation of the equity shares can be analyzed as follows: a) Valuation based on dividends. b) Valuation based on earnings.
acquisition/purchase. 3 Sale of equity share if any, occurs only at the end of a year and at the exdividend terms.
Po = D1 + 1+r
P1 1+r
Po= Current selling price P1= Selling price at the end of one year period D1= The dividend received during the one year holding period r = Investors required rate of return With the help of above mentioned formula, investor can find out weather the price he has to offer is suitable to his required rate of return.
When the period approaches to infinity the equation takes the form Po = D1 r-g Po= Present value of the stock r = Required rate of the return g = The growth rate D1=The next year dividend This model is based on the assumption: a) The firms dividend policy will be stable. b) The firm will earn the stable return over the time. This model is applicable when the analyst is able to predict all the three variable in the equation namely (1) next years dividend, (2) the firm long term growth rate and, (3) the required rate of return of the investor. Once the three values are known to the analyst, the theoretical value or the present value of the stock can be computed and compared with the driveling price, if
Theoretical value > Actual price - >buy Theoretical value < Actual price - >sell
Another advantage of this is that with the present selling price, next years dividend and the growth rate, rate of return of the stock can be estimated. Present rate of return > Required rate of return - > buy Present rate of return < Required rate of return - < sell
Po = D1
1-[1+g1 1+r]n r - g1
D1 (1+g1)n-1(1 + g2) r g2
1 (1 + r)n
Po = Current selling price D1 = Required rate of the return g1 = Extraordinary growth rate applicable for n years g2 = Normal growth rate applicable after n years
Thus to start with this the equity analyst should with a historical analysis of earnings, dividends, growth, risk and valuation and use of this as a foundation for developing the forecast required for estimating the intrinsic value.
The key ratios considered are: y Return on Equity: This is the most important indicator of financial performance, this can be defined as:
Book Value per share: the book value per share is equal to:
Equity Dividends =
Equity Earnings
y Dividend Per Share: The dividend per share is simply the dividend declared per
share. The dividend is stated as a percentage of the paid up value per share.
y Price Earning ratio: the Price Earning Ratio reflects the price investor are
willing to pay for every rupee of earnings per share. The PE ratio can be calculated in a retrospective or prospective manner. The retrospective PE ratio is defined as:
PE ratio = price per share at the end of the year earning per share for the year
y Growth Performance:
To measure the historical growth of the firm, Compound Annual Growth Rate (CAGR) in variables like sales, net profit, earnings per share and dividend per share should be calculated
O Sustainable Growth Rate: The sustainable growth rate is defined as: Sustainable growth rate = Retention ratio Return on equity.
Range of return on equity over year 2003 to 2007 Average return on equity over n years
Required Rate of return: The investors required rate of return is calculated by applying Constant Dividend Growth Model of Gordan
INDUSTRY PROFILE
Reports on Construction industry in Infrastructure Industry: The section of the construction industry of Infrastructure Industry in India reported an estimated growth of 6.78% year-on-year in 2006. The industry in India is highly fragmented and has about 300,000 construction companies operating nationwide. The government has allowed 100% foreign equity in the construction industry.
The share of construction sector in gross domestic product (GDP), which was 5.4 per cent in 1970-71, came down to 4.4 per cent in 1990-91. Subsequently it picked up and stood at 5.1 per cent in 1999-2000.
In the next 10 years we must invest at least $150 Billion to modernize and to expand India's infrastructure....we need a new experimentation with public-private participation because the public sector may have a role, but by itself it cannot meet all the requirements. I see an expanding and very profitable role of foreign direct investment in meeting the challenge of modernizing India's infrastructure..." -from speech of Prime Minister of India
FDI in Infrastructure Investments into India is permitted upto 100% in various sectors viz. Roads and Highways, Ports and Harbours, Electricity Generation, Transmission and Distribution, Mass Rapid Transport System, Industrial Parks/SEZs, Integrated Townships over 100 Acres, Hotels & Tourism, LNG Projects, Greenfield Airport Ventures etc
Future demand for the Construction Projects: Real estate investments account for about 60% of the total construction investments. Demand-supply gap for residential housing, favorable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. In addition to this, demand for office space from IT/BPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction. According to industry estimates, the Indian real estate industry is expected to grow at a compounded rate of 33% between FY05 to FY10, mainly driven by the residential segment. Demand for residential properties tends to be highly price-sensitive. Though the underlying demand for housing is huge, increasing property prices and higher interest rates lead to postponement of purchasing decisions and thereby result in slower off-take. Furthermore, most of the real estate companies have lined-up huge development plans going forward. The total area to be developed over the next few years by them is nearly 20 to 30 times the size of projects executed so far and hence, there are likely to delays.
The construction industry has been consistently clocking a double digit annual
growth over the last three to four years. Since the benefit of investments in infrastructure creation has been well established at the political, social and economic level, it is unlikely that there will be a slacking of investment in this sector in near future. Five years from now the size of the industry is likely to be almost double its present size.
The growth drivers for the industry are the overall high growth of the economy
which is fuelling an already pent-up demand for infrastructure created by low infrastructure growth over the last few decades. Today, inadequacy of transportation and logistics systems and short supply of power are holding back an industrial growth which has not reached its full potential. Growth in the leisure, entertainment and hospitality industry is driving growth in other sectors of infrastructure as well
The challenges before the construction industry is to ramp up its ability to meet
the ever-increasing demand for creation of world-class infrastructure at a fast pace. The biggest constraints in capacity buildings are seen to be shortage of skilled manpower at all/most levels and with all players of the industry. We also need to improve the process of procuring construction contracts, provide for a more equitable distribution of risk in construction contracts, and have a more effective and speedy mechanism for dispute resolution.
Over the years a number of new technologies have been introduced in the Indian
infrastructure industry. The technological developments differ from sector to sector, to name a few, use of drill jumbo, tunnel boring machine, and road headers for tunneling works; use of high-speed slip form pavers for construction of road pavement (both rigid and flexible pavement); advances in concrete technology, that is, use of better quality of cement and latest fourth generation admixtures and additives like micro silica, flyash, GGBS; use of total stations and GPS for carrying out surveys; and use of custom formwork , and precast concrete technology. The list could go on and on. In all sectors the Indian construction industry has shown ability to absorb/implement latest technology.
The companies chosen from the NSE listed Infrastructure companies are:
Unitech Ltd. Jaiprakash Associates Ltd. IVRCL Infrastructure and Projects Ltd.
j When it comes to buying a home, no one gives you better service than Unitech. Not only do offer you a range of home purchase options to choose from, they'll also help you in getting widest range of home loans from financial institutions. These loans range from 5 to 20 years with different repayment options.
Projects On-hand:
The company is also setting up a ready-mix concrete and concrete blocks plant at Taloja. During 1995-96, the company launched its prestigious mini-township-SouthCity-II-on Sohna-Gurgaon Road.
The company successfully completed several projects including y y y y y y y y hydrocracker project of UP petro-chemical complex at Etawah, educational media facilities at IGNOU, New Delhi, 100 mtr chimney for captive power plant at Panipat, construction of 1048 flats & infrastructure for CIDCO, Bombay, modernization of air control services at Bombay airport, construction of August Kranti Bhavan, New Delhi, casting shop in SMS-2 of RSP, modernization at Rourkela and indoor sports stadium at Madras.
During 1995-96, Hyundai Unitech Electrical Transmission became a subsidiary of Unitech. The company signed a joint venture agreement with Haryana Urban Developement Authority (HUDA) and First Capital Property Ventures Pte Ltd, Singapore, to develop a technology park at Gurgaon which will house the high technology industries proposed to be set up by domestic and international companies of repute.
It is implementing large scale real estate and housing development projects on the DelhiGurgoan road and at Lucknow, multi-storeyed apartments at Connaught Place, New Delhi, a housing complex at Virar, Bombay and at various prime locations in Bangalore, Lucknow, Shimla, Indore, Goa, etc.
The company plans to set up amusement parks and urban entertainment centres and also plans to commence a B.Sc.(Honours) Degree Course in Information Technology duly validated by Oxford Brookes University, UK in 2001.
JAIPRA is an acknowledged leader in the construction of river valley and hydro power projects on turnkey basis and has been in business for more than three decades. It is the flagship company of the Jaypee group, which is a well diversified infrastructural industrial group of India with a turnover of over Rs 30,000 million (USD 650 million) that commenced its operations in 1972 as a partnership firm, then known as Jaiprakash Associates. Three decades later, the group has diversified itself into many sectors.
The company has executed simultaneously 13 hydro power projects spread over six states and the neighboring country of Bhutan for the generation of 10,290 MW of power. It has set up a 300 MW power station in Baspa, Himachal Pradesh, which is already in operation producing more than 1,200 million units of clean & green energy annually. It has also set up the 400 MW Vishnuprayag power project in Uttaranchal. The cement division of the company produces ordinary Portland cement and Pozzolana Portland cement under the brand names Buland and Buniyad.
It has three modern cement plants; namely Jaypee Rewa Cement Plant, Jaypee Bela with an aggregate capacity of 7 MTPA. Some of the other subsidiaries are Jaiprakash Hydropower, Jaiprakash Ventures and Jaiprakash Hotels.
Total income rose 9.24% to Rs 10,050 million for the quarter ended June 2007 from Rs 9,200 million for the quarter ended June 2006.
The earnings per share (EPS) of the company stood at Rs 6.38 for the quarter ended June 2007.
Future Plans:
y The company has undertaken the 1,000 MW Karcham hydro power project in Himachal Pradesh which will be completed by 2010. It will produce 4,560 million units of energy.
It has decided to set up a 500-megawatt power plant in Uttar Pradesh. The company is planning to add more capacities in different regions of the country and is poised to be a 20 MTPA cement producer by the year 2009.
In the near future, the group plans to expand its cement capacities through acquisition and greenfield additions to maximize economies of scale. The cement division of the company is planning to set up a factory in Kutch, Gujarat.
Jaiprakash Associates is the only engineering company in India to be assigned CR1 grade by ICRA indicating very strong contract execution capacity for hydro power (EPC) contracts with average values of upto Rs 20,000 million. The company has now made its foray into highway construction.
Milestones in the making of a giant y y Commercial operations since 1990 Established itself as a premier EPC & LSTK Service Provider with front-end engineering capabilities in 1990 y With the Initial Public Offering in 1995, became a Listed Company and has been maintaining a consistent dividend payment record y y Foray into BOT/BOOT/DBOOT projects since 2001 Achieved a Turnover of around Rs. 24000million/USD 600million and a Net worth of Rs.14000million / USD350million within just a decade and a half of our operations. Mission & Objectives... Core values At IVRCL, we have dedicated ourselves to affecting continual improvement in all fields of our business. Quality forms an integral part of all our deliverables and is the primary driving force. Mission To become a leader in infrastructure business by providing total solutions Quality practices at IVRCL effectively blend people's skills with process tools at every stage of the project life cycle to provide state-of-the-art solutions.
Health, Safety & Environmental Management... Quality Policy j Commitment to customer satisfaction, quality awareness, desire for excellence and continual improvement is our motto. j Committed to build a safe and sustainable world j Since inception, IVRCL has put in place stringent policies to create a safe and healthy environment at the project sites. The Company's policy in the area of Health, Safety & Environment has been consistent towards achieving a ZERO Lost Time Injury. Landmarks in Quality y y y ISO : 9001 - 2000 - Quality Management System Recertification ISO : 14001 - 2004 - EMS for Water, Buildings, Transportation Divisions ISO : 18001 - 1999 - OHSAS for Water, Buildings, Transportation Divisions
Design services... y y y y y y y y y y y y y y Front-end Engineering and Design Aerial Surveys, Satellite Imagery Geological, Geophysical Surveys Soil, Hydrological Surveys Topographical, Climatological Surveys Architectural, Engineering, Industrial Design Soil Mechanics & Foundation Engineering Quantity Surveying, Costing Estimation, Preparation of Contract Structural Engineering Process Engineering Civil Works Rehabilitation Project Monitoring & Evaluation Institutional Strengthening/Restructuring
RECENT DEVELOPMENTS
Equity Valuation
using Fundamentals of companies and models
Current Ratio
0.94
0.47
0.42
0.43
0.41
Debt To Equity
3.11
3.06
1.86
0.87
0.95
Return on Equity
84.59
31.01
17.20
9.33
7.67
Book Value per Share Earning Per Share (EPS) Dividend Per Share Dividend pay out ratio Retention Ratio
14.30
179.77
139.23
120.64
8.50
Rs.11.00
Rs. 55.7
Rs. 23.59
Rs. 11.26
Rs. 4.88
Rs. 0.50*
Rs. 1.00*
Rs. 4.00
Rs. 3.00
Rs. 2.00
4.53%
23.32%
16.96%
23.46%
23.49%
95.47%
76.68%
83.04%
76.54%
76.51%
30.7
41.08
14.22
23.64
12.5
2.41
CAGR of EPS :
- 1
CAGR of DPS
- 1
DPS for year 2007 is Rs.0.5 for a face value of Rs.2. Convert it for the face Value of Rs.10. Rs.05 * 5 = Rs.2.5/share = (2 .50 2) - 1 = 0.25 or 25%
Expected Growth Rate (g) = Average Retention Ratio X Average Return on Equity. = 0.8506 X 0.4426 = 0.37 OR 37 %
Interpretation:
date
Index Prices Unitech Ltd prices
r = D1 + g Po
r = 37.24 The investors required rate of return would be r =37.24 Single Period Valuation Model: Applying the single period valuation model and finding out share prices for neat year.
Po =
Where, Po= Present selling price = Rs. 276
D1 + 1+r
P1 1+r
P1= Selling price at the end of one year period D1= the dividend received during the one year holding period, D1= Do (1+g) Do = Current year dividend r = Investors Required rate of return = 37.24 D1= Do (1+g) = 0.5 (1 + 0.37) = 0.658ps/share P1 = 378.09/share
1 (1 + g)n
Po = Current selling price. r = Required rate of the return = 0.3724 g1 = Extraordinary growth rate applicable for n years = 0.37 g2 = Normal growth rate applicable after n years = 0.365 n = 5 years
By substituting the above stated values the calculated current stock price is: Po = Rs.93.70/share
Ratios
2006-07
2005-06
2004-05
2003-04
2002-03
Current Ratio
1.48(times)
1.84
1.46
1.01
1.10
Debt to Equity
1.96(times)
1.71
2.61
1.61
1.48
Return on Equity
16.18%
29.82%
16.94%
15.89%
12.10%
Book Value per Share Earning Per Share (EPS) Dividend Per Share Dividend pay out ratio Retention Ratio
116.97
99.75
69.53
60.49
52.61
Rs.18.92*
Rs.29.51
Rs.11.78
Rs.9.61
Rs.6.63
Rs.3.60
Rs.2.70
Rs.2.40
Rs.1.50
Rs.1.50
19%
9.06%
20.3%
15.60%
81%
90.94%
79.7%
84.4%
28.71(times)
15.86
17.80
4.61
4.73
3.00
CAGR of EPS :
= (EPS of 2007 EPS of 2003) ) 1/5 - 1 = ( 18.92 6.36 ) )1/5 -1 = 0.2436 OR 24.36 %
CAGR of DPS
= ( DPS of year 2007 DPS of year 2003) )1/5 - 1 = ( 3.60 1.50) 1/5 1 = 0.190 OR 19 %
Expected Growth Rate (g) = Average Retention Ratio X Average Return on Equity. = 0.8388 X 0.2098 = 0.1759 OR 17.59 %
The earnings and the dividends the company has been of JP Associates Ltd has an increasing trend and has increased shareholders value.
prices
The prices of the JP Associates Ltd. have been having an impact of the fluctuations in the market movements. The prices have suddenly decreased with a fall in market prices.
r = D1 + g Po
r = 19.46% The investors required rate of return would be r = 19.46%
Single Period Valuation Model: Applying the single period valuation model and finding out share prices for neat year.
Po =
D1 + 1+r
P1 1+r
Po= Present selling price = Rs. 226 P1= Selling price at the end of one year period = ? D1= The dividend received during the one year holding period, D1= Do (1+g) Do = Current year dividend r = Investors Required rate of return = 19.46% D1 = 3.60 (1 + 0.1759) = Rs. 4.23/share P1 = 265.75
Po = D1
D1 (1+g1)n-1(1 + g2) r g2
1 (1 + g)n
Po = Current selling price. r = Required rate of the return = 19.46% g1 = Extraordinary growth rate applicable for n years = 17.59% g2 = Normal growth rate applicable after n years = 15.8% n = 5 years
By substituting the above stated values the calculated current stock price is: Po = Rs 122.23/sahre
Current Ratio
2.02
2.31
1.48
2.22
1.89
0.42
1.43
0.97
1.42
1.30
10.72%
19.60%
22.25%
29.56%
15.66%
Book Value per Share Earning Per Share (EPS) Dividend Per Share Dividend pay out ratio Retention Ratio
101.68
44.35
149.87
125.03
94.29
Rs.10.91
Rs.8.69
Rs.33.35
Rs.36.96
Rs.14.77
Rs.1.00
Rs.1.00
Rs.3.70
Rs.3.00
Rs.3.00
9.16 %
11.83 %
11.10%
14.29%
20.3%
90.84%
88.17%
88.9%
85.71%
79.7%
27.87
31.9
13.73
2.79
6.26
3.05
CAGR of EPS :
CAGR of DPS
Expected Growth Rate (g) = Average Retention Ratio X Average Return on Equity. = 0.8930 X 0.1752 = 0.15.64 %
d nd P r S ar
Rup
The earnings for the2005-06 and 2006-07 have decreased with having the same impact on the dividends paid.
Ind x pric s and IVRCL Infra Ltd. pric s 7000 6000 5000 Pric s 4000 3000 2000 1000 0 10/2/2007 11/2/2007 12/2/2007 4/2/2007 5/2/2007 6/2/2007 7/2/2007 8/2/2007 9/2/2007 1/2/2008 2/2/2008 3/2/2008
The prices of IVRCL have not fluctuated a lot with the fluctuation in the market prices or movements.
E S
D S
Po =
r = Required rate of the return = ?
D1 r-g
Po= Present value of the stock = Rs. 405 g = The growth rate D1=The next year dividend = 15.64% = Do(1+g) = Rs.1.1564/share
r = D1 + g Po
r = 16.02% The investors required rate of return would be r = 16.02%
Applying the single period valuation model and finding out share prices for neat year.
Po =
D1 + 1+r
P1 1+r
Where, P1= Selling price at the end of one year period = ? Po= Present selling price = Rs. 405 D1= The dividend received during the one year holding period, D1= Do (1+g) Do = Current year dividend r = Investors Required rate of return = 16.02% D1= Do (1+g) = 1.00 (1 + 0.1564) = Rs.1.1564 /Share
P1 = Rs.468.72
Po = D1
D1 (1+g1)n-1(1 + g2) r g2
1 (1 + g)n
Po = Current selling price. D1 = Current year dividend = Rs.1.1564 /share r = Required rate of the return = 16.02% g1 = Extraordinary growth rate applicable for n years = 15.64% g2 = Normal growth rate applicable after n years = 15.02% n = 5 years
By substituting the above stated values the calculated current stock price is: Po = Rs.162.25/ share.
JP Associates
Kotak Securities Ltd, Hubl i Beta, Standard Deviation and Covariance of the Stocks with market:
BETA Unitech JP Associates IVRCL Infra Ltd 1.5075 1.8237 1.0999 STD DEV 5.5084 6.7518 3.477 COVAR 5.9902 7.2464 4.3704
STD DE
STD DE
3 2 1 U i h P i I 0
Interpretation:
y With less Beta and Standard Deviation value IVRCL Infrastructure and Projects Ltd is a best stock to invest into for those who are risk averse investor. y The above graph shows that Jaiprakash Associates Ltd has a high Beta and Standard Deviation. Any investor with High Risk appetite would invest to make high capital gains in short period.
STD DE
CO
#" ! "
C I fr
5 4
CO
$ &%
!
CO
8 7
STD DE
CO
Websites:
j j j j j j j j www.nseindia.com www.unitechgroup.com www.ivrcl.com www.jaypeegroup.com www.rediffmoneywiz.com www.moneypore.com www.icicidirect.com www.specialinvestor.com
Reports:
Annual reports of the company.
Annexure