Report of GP

8/8/2019 Report of GP

http://slidepdf.com/reader/full/report-of-gp 1/17

Financial Analysis of

Sidhee Cement

&

Ambuja Cement

Prepared By:-Mihir Baliya(9)

Bhartendu Khatri (11)

Khilav Joshi(26)

Siddharth Manani(32)

Naveen Kumar Jain (40)

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GSCL's range of products (i.e. various grades of cements) are with long lasting strength and

suited for all applications that are requiring high compressive strengths. Following table

indicates compressive strength chart for GSCL 53 Grade cement.

Ratio Analysis:

Financial ratios are meaningful links between different entries of financial statements, as by

themselves the financial entries offer little to examine a company. In addition to providing

information about the financial health and prospects of a company, financial ratios also allow a

company to be viewed, in a relative sense, in comparison with its own historical performance,

others in its sector of the economy, or between any two companies in general. Major financial

ratios are discussed as below:

Measures of Profitability: RoA, RoE

Return on Assets (RoA) in its simplest form denotes the firm’s ability to generate profits given

its assets :

RoA = (Net Income + Interest Expenses)*(1- Tax Rate) / Average Total Assets

Return on Equity (RoE) is the return to the equity investor :

RoE = Net Income / Shareholder Funds

Sometimes this ratio is also calculated as RoAE, to account for recent capital raising by

the firm

Return on Average Equity = Net Income / Average Shareholder Funds

Return on Total Capital = Net Income + Gross Interest Expense / Average total capital

Measures of Liquidity

Short-term liquidity is imperative for a company to remain solvent. The ratios below get

increasingly conservative in terms of the demands on a firm to meet near-term payables.

Current ratio = Current Assets / Current Liabilities

Quick Ratio = (Cash + Marketable Securities + Receivables) / Current Liabilities

Acid test ratio = (Cash + Marketable Securities) / Current Liabilities

Cash Ratio = (Cash + Marketable Securities) / Current Liabilities

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Capital Structure and Solvency Ratios

Total debt to total capital = (Current Liabilities + Long-term Liabilities) /

(Equity + Total Liabilities)

Long-term Debt-Equity = Long-term Liabilities / Equity

Operating Performance

Gross Profit Margin = Gross Profit / Net Sales

Operating Profit Margin = Operating Income / Net Sales

Net Profit Margin = Net Income / Net Sales

Asset Utilization

These ratios look at the effectiveness of a firm to utilize its assets, especially its fixed assets. A

high turnover implies optimal use of assets. In addition to the two below there are others like

Sales to inventories and Sales to Working capital.

Total Asset Turnover = Net Sales / Average Total Assets

Fixed Asset Turnover = Net Sales / Average Net Fixed Assets

Ratio Analysis of Gujarat Ambuja Cement

InvestmentValuation Ratios Jun '05 Dec '06 Dec '07 Dec '08 Dec '09

Face Value 2 2 2 2 2Dividend Per Share 1.8 3.3 3.5 2.2 2.4

Operating ProfitPer Share (Rs) 5.4 14.25 13.49 11.72 12.58

Earnings Per Share 3.46 9.91 11.62 9.21 8Net OperatingProfit Per Share(Rs) 19.21 41.05 37.25 40.6 46.49

Free Reserves Per Share (Rs) 12.08 19.66 27.48 34.13 39.35

Bonus in EquityCapital 71.98 64.15 63.92 63.91 63.86

Profitability Ratios

Operating ProfitMargin(%) 28.12 34.71 36.2 28.85 27.07

Profit BeforeInterest And Tax

20.39 29.13 31.35 24.04 22.32

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Margin(%)

Gross ProfitMargin(%) 25.44 33.74 36.26 24.65 22.87

Cash Profit

Margin(%) 25.29 29.04 34.61 21.17 20.46

Adjusted CashMargin(%) 23.41 28.29 23.44 21.17 20.46

Net ProfitMargin(%) 17.85 23.86 30.53 22.11 16.78

Adjusted Net ProfitMargin(%) 15.93 23.09 19.35 22.11 16.78

Return On CapitalEmployed(%) 16.94 43.76 38.84 28.19 27.04

Return On NetWorth(%) 21.5 43.05 37.95 24.73 18.83

Adjusted Return onNet Worth(%) 19.24 41.77 24.09 19.07 18.35

Return on AssetsExcludingRevaluations 11.45 27.56 30.58 37.23 42.45

Return on AssetsIncludingRevaluations 11.45 27.56 30.58 37.23 42.45

Return on LongTerm Funds (%) 16.94 43.77 38.84 28.19 27.04

Liquidity And SolvencyRatios

Current Ratio 0.76 1.08 1.03 1.26 0.89

Quick Ratio 0.35 0.7 0.64 0.74 0.57

Debt Equity Ratio 0.52 0.25 0.07 0.05 0.03

Long Term DebtEquity Ratio 0.52 0.25 0.07 0.05 0.03

Debt Coverage Ratios

Interest Cover 6.28 17.61 26.02 52.66 80.15

Total Debt toOwners Fund 0.52 0.25 0.07 0.05 0.03

Financial ChargesCoverage Ratio 8.24 19.73 28.68 60.58 93.32

Financial ChargesCoverage RatioPost Tax 8.24 17.17 27.45 52.89 68.63

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Management EfficiencyRatios

Inventory Turnover Ratio 8.28 15.41 9.96 7.54 11.36

Debtors Turnover

Ratio 58.66 91.7 48.14 33.39 37.6InvestmentsTurnover Ratio 9.55 17.19 11.13 7.54 11.36

Fixed AssetsTurnover Ratio 1.07 2.28 1.68 1.1 1.15

Total AssetsTurnover Ratio 0.79 1.43 1.14 1.05 1.08

Asset Turnover Ratio 0.7 1.37 1.09 1.1 1.15

Cash Flow Indicator Ratios

Dividend PayoutRatio Net Profit 46.06 34.98 35.22 27.94 35.1

Cash EarningRetention Ratio 64.89 70.49 54.13 70.81 71.21

Book Value 16.11 23.01 30.62 37.26 42.47

Ratio Analysis of Gujarat Sidhee Cement:

InvestmentValuation ratios

Mar '05

Mar '06 Mar '07

Sep'08

Mar '10

Face Value 10 10 10 10 10

Dividend Per Share 0 0 0 0 0

Earnings Per Share

-1.39 0.89 3.62 3.37 3.96

Operating ProfitPer Share (Rs) -0.28 2.73 5.23 4.61 6.6

Net Operating

Profit Per Share(Rs) 12.72 20.12 27.52 39.71 44.73

Free Reserves Per Share (Rs) -15.21 -14.06 -10.22 -6.85 -2.89

Bonus in EquityCapital -- -- -- -- --

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ProfitabilityRatios

Operating ProfitMargin (%)

-2.18 13.57 18.98 11.59 14.75

Profit Before

Interest And TaxMargin (%)

-7.29 10.45 16.52 9.84 13.56

Gross ProfitMargin(%)

-6.13 10.6 16.6 9.92 13.62

Cash ProfitMargin(%)

-5.77 7.5 14.75 5.41 9.6

Adjusted CashMargin(%)

-5.73 6.4 14.75 5.41 9.6

Net ProfitMargin(%)

-10.88 4.41 13.08 8.42 8.81

Adjusted Net Profit

Margin(%) -10.84 3.31 13.08 8.42 8.81

Return On CapitalEmployed(%)

-7.39 18.19 34.3 52.14 75.44

Return On NetWorth(%)

24.56 -21.83-

1,825.0106.24 55.5

Adjusted Return onNet Worth(%)

-- -- -- 47.35 53.37

Return on AssetsExcludingRevaluations

-8.37 5.36 -0.2 3.18 7.14

Return on AssetsIncludingRevaluations

-8.37 5.36 -0.2 3.18 7.14

Return on LongTerm Funds(%)

-7.57 18.88 34.76 52.14 75.45

Liquidity AndSolvency Ratios

Current Ratio 2.6 2.07 2.59 1.52 1.51

Quick Ratio 0.62 0.44 0.93 0.46 0.79

Debt Equity Ratio -- -- -- 1.58 0.17

Long Term Debt

Equity Ratio-- -- -- 1.58 0.17

Debt CoverageRatios

Interest Cover -1.65 3.37 5.81 35.74 40.35

Total Debt toOwners Fund

-- -- -- 1.58 0.17

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Financial ChargesCoverage Ratio

-0.44 4.35 6.62 41.3 43.6

Financial ChargesCoverage RatioPost Tax

-0.36 3.37 6.27 34.77 29.62

ManagementEfficiency Ratios

Inventory Turnover Ratio

7.14 11.82 29.64 73.51 44.26

Debtors Turnover Ratio

8.98 20.51 23.34 29.43 22.22

InvestmentsTurnover Ratio

16.16 26.44 29.64 73.51 44.26

Fixed AssetsTurnover Ratio

3.14 4.34 1.84 2.52 2.75

Total Assets

Turnover Ratio 1.05 1.7 2.01 4.85 5.36Asset Turnover Ratio

0.96 1.52 1.84 2.52 2.75

Cash FlowIndicator Ratios

Mar '05

Mar '06

Mar '07Sep'08

Mar '10

Dividend PayoutRatio Net Profit

0 0 0 0 0

Cash EarningRetention Ratio

-- 100 100 100 100

AdjustedCashFlow Times

-- 12.31 3.41 2.32 0.28

Earnings Per Share

-1.39 0.89 3.62 3.37 3.96

Book value per share

-5.73 -4.25 -0.20 3.18 7.14

Altman’s model:A predictive model created by Edward Altman in the 1960s. This model combines five different

financial ratios to determine the likelihood of bankruptcy amongst companies.

Generally speaking, the lower the score, the higher the odds of bankruptcy. Companies with Z-

Scores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Scores

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in between 1.8 and 3 lie in a grey area.

This is a relatively accurate model -- real world application of the Z-Score successfully predicted

72% of corporate bankruptcies two years prior to these companies filing for Chapter 7.

The original Z-score formula was as follows: Z = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 1.0T5

T1 = Working Capital / Total Assets. Measures liquid assets in relation to the size of the

company.

T2 = Retained Earnings / Total Assets. Measures profitability that reflects the company's age and

earning power.

T3 = Earnings Before Interest and Taxes / Total Assets. Measures operating efficiency apart fromtax and leveraging factors. It recognizes operating earnings as being important to long-term

viability.

T4 = Market Value of Equity / Book Value of Total Liabilities. Adds market dimension that can

show up security price fluctuation as a possible red flag.

T5 = Sales/ Total Assets. Standard measure for sales turnover (varies greatly from industry to

industry).

Altman’s model for Gujarat Ambuja Cement:

Jun '05 Dec '06 Dec '07 Dec '08 Dec '09

T1(0

.07)(0

.06)(0

.05)(0

.02)(0

.09)

T2 0.08 0.24 0.25 0.18 0.13

T3 0.18 0.45 0.56 0.33 0.27

T4 0.12 0.02 0.02 0.01 0.02

T5 0.92 1.61 1.30 1.19 1.17

Z Score 1.63 3.36 3.44 2.53 2.14Avg ZScore

2.62

The Z value of the company is has decreased in the year 08’ and 09’ which puts it in the

grey zone.

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Altman’s model for Sidhee cement:

Mar '05 Mar '06 Mar '07 Sep '08 Mar '10

T1

(0

.11)

(0

.13)

0.03

(0

.22)

0.04

T2(0

.11) 0.08 0.26 0.41 0.47

T3(0

.07) 0.19 0.35 0.74 0.76

T4 0.07 0.10 0.09 0.12

0.13

T5 1.18 1.87 2.21 5.43 5.80

Z Score 0.69 2.51 3.82 8.25 9.10

Avg ZScore

4.87

The Z value except for first two years has been above three which shows the healthy condition of

the company.

Calculation of Beta:

Ambuja Cement:

Return onEquity

Return onMarket

Dec '0643.0659088

2 48.11966833

Dec '07 37.9533387 34.87282237

Dec '08

24.72036287

-16.05861458

Dec '09

18.82914571 6.470557135

Beta 0.336

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The beta of the Ambuja Cement is 0.336. This shows that the return of the Ambuja cement and

the return of market move in same direction. Also it is volatile. If the market return increases by

10%, the return on security decreases by 21.88%. The intercept is -49.80%. This is the expected

return of Ambuja Cement is -49.80% when the market return is zero.

Sidhee Cement:

Return onEquity Return on Market

Mar '063.73371839

5 44.622857

Mar '0717.9186201

7 46.72602

Sep '0820.0435461

3 31.61177

Mar '1030.7795626

7 -15.98784

Beta -0.308

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The beta of the Sidhee Cement is -0.308. This shows that the return of the Sidhee cement and the

return of market move in opposite direction. Also it is volatile. If the market return increases by

10%, the return on security decreases by 17.42%. The intercept is 50.009. This is the expected

return of Sidhee Cement is 50% when the market return is zero.

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Capital Asset Pricing Model (CAPM):

A model that describes the relationship between risk and expected return and that is used in the

pricing of securities.

The general idea behind CAPM is that investors need to be compensated in two ways: time value

of money and risk. The time value of money is represented by the risk-free (rf) rate in the

formula and compensates the investors for placing money in any investment over a period of

time. The other half of the formula represents risk and calculates the amount of compensation the

investor needs for taking on additional risk. This is calculated by taking a risk measure

(beta) that compares the returns of the asset to the market over a period of time and to the market

premium (Rm-rf).

The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free

security plus a risk premium. If this expected return does not meet or beat the required return,

then the investment should not be undertaken. The security market line plots the results of the

CAPM for all different risks (betas).

Using the CAPM model and the following assumptions, we can compute the expected return of a

stock in this CAPM example: if the risk-free rate is 3%, the beta (risk measure) of the stock is 2

and the expected market return over the period is 10%, the stock is expected to return 17% (3%

+2(10%-3%)).

AmbujaCement

SidheeCement

Rm 18.35 18.35

Rf 8 8

Beta 0.336 -0.308

Ri 11.4776 4.8122

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Free cash flow & free cash flow to equity:A measure of financial performance calculated as operating cash flow minus capital

expenditures. Free cash flow (FCF) represents the cash that a company is able to generate

after laying out the money required to maintain or expand its asset base. Free cash flow is

important because it allows a company to pursue opportunities that enhance shareholder value.

Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce

debt.

It is important to note that negative free cash flow is not bad in itself. If free cash flow is

negative, it could be a sign that a company is making large investments. If these investments earn

a high return, the strategy has the potential to pay off in the long run.

Free cash flow to equity is a measure of how much cash can be paid to the equity shareholders

of the company after all expenses, reinvestment and debt repayment.

Calculated as: FCFE = Net Income - Net Capital Expenditure - Change in Net Working

Capital + New Debt - Debt Repayment

FCFE is often used by analysts in an attempt to determine the value of a company.

Ambuja Cement

Jun '05 Dec '06 Dec '07 Dec '08 Dec '09 12 mths 18 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 518.54 1841.6 2712.35 1969.84 1803.3

Net Cash FromOperating Activities 548.15 1796.18 1558.67 966.22 2129.15

capital expenditure(177.5

5)(795.3

9)(800.2

5)(1,661.44)

(1,347.54)

Free Cash Flow889.1

42,842.39

3,470.77

1,274.62

2,584.91

FCF Equity

Jun '05 889.14 59.725

Dec '06

2842.39 142.9

Dec '073470.7

7 149

Dec '08

1274.62 70.825

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Dec '092584.9

1102.52

5

Sidhee Cement

Mar '05 Mar '06 Mar '07 Sep '08 Mar '10

12 mths 12 mths 12 mths 18 mths 18 mths

PROFIT BEFORE TAX 24.72 59.18NET CASHFLOW FROM OPT.ACTIVITIES 44.85 62.29

CAPITAL EXPENDITURES -33.01 -4.63

FREE CASH FLOW 36.56 116.84

FCF Equity

Mar '05

Mar '06 36.56 16.6

Mar '07116.8

4 16.95

Sep '08

Mar '10

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Market value to book value ratio of Ambuja Cements Ltd:

A ratio used to find the value of a company by comparing the book value of a firm to its market

value. Book value is calculated by looking at the firm's historical cost, or accounting value.

Market value is determined in the stock market through its market capitalization.

The market to book ratio attempts to identify undervalued or overvalued securities by taking the

book value and dividing it by market value.

Dec '06 Dec '07 Dec '08 Dec '09Book Value/shares 16.11 23.02 30.62 37.26 42.47

Market Value 59.73 142.90 149.00 70.83 102.53

Market value to book value ratio of Sidhee cements Ltd:

March05'

March06'

March07'

Sep08'

March10'

Book Value -5.65662 -4.07456

-0.19846

3.175328

7.1368821

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MarketValue 12.1 16.6 16.95 14.75 16.15

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Documents

Report of GP