EQUITY RESEARCH OVERVIEW WITH EXPECTATIONS

Sl. No. PARAMETERS (IN SEQUENCE)

1 SALES/INCOME/REVENUE GROWTH

2 NET PROFIT GROWTH / EPS

OPERATING PROFIT MARGIN
3
GROWTH
4 RETURN ON EQUITY

5 RETURN ON CAPITAL EMPLOYED

6 DEBT TO EQUITY RATIO

7 CURRENT RATIO

8 QUICK RATIO

9 INTEREST COVERAGE RATIO

11 DIVIDENDS

12 SHAREHOLDING

13 PLEDGED SHARES

14 FII/FPI HOLDING

PRICE TO EARNING RATIO (P/E

15
RATIO)

16 PRICE TO BOOK VALUE (P/B or P/BV)

H OVERVIEW WITH EXPECTATIONS FOR NORMAL COMPANIES
GENERAL EXPECTATIONS

Increase year after year

Increase year after year

Increase year after year

Increase year after year

Increase year after year

Reducing Debt
Above 1.00 and up to 3.00

Above 1.00 and up to 3.00

Above 3.00 is ideal

Consistently paid in the past 5 years

At least 40% held by promoters is ideal

Ideally zero pledge

Higher the better

Compared to Industry P/E the stock P/E

should be lower

Ideally below 1.00

ATIONS FOR NORMAL COMPANIES
IMPORTANCE FOR
MINIMUM EXPECTATIONS TO BUY
BUYING DECISION
At least 12% to 15% (above 15% is good; above
HIGH
20% is excellent)
At least 12% to 15% (above 15% is good; above
HIGH
20% is excellent)
At least 12% to 15% (above 20% is excellent) HIGH
At least 12% to 15% (above 20% is excellent) VERY HIGH
15% and above (above 20% is excellent for a
VERY HIGH
company with debt)
Below 1.00 & Zero Debt is ideal VERY HIGH
Below 1.00 & above 3.00 may not be ideal VERY HIGH
0.75 to 1.00 is also acceptable in case of
MODERATE
manufacturing & capital intensive stocks
At least 2.50 is bare minimum MODERATE
Any dividend payout is okay; if the % is
MODERATE
increasing year after year is also good
Bluechip stocks with below 40% is okay MODERATE
If pledged for business purposes is okay &
MODERATE
reducing pledge % is ideal year after year
At least 5% and increasing consistently in the
MODERATE
recent years
Stock P/E above industry P/E is fine as long as
MODERATE
the company's performance is robust

Above 1.00 is okay but if the stock's P/BV is the

MODERATE
least compared to other peers then fine
 QUICK PEER COMPARISON (as on March 2

PARAMETERS HDFC AMC

P/E RATIO 48
PRICE TO BOOK (P/B) 13.52
ROE (5 yrs) Above 32%
PROFIT GROWTH (5 yrs) 25.00%
DEBT 0

FACE VALUE 5.00

STOCK PRICE Rs.3000.00
MARKET CAP Rs.64000 cr.

Observe the performance difference between three stocks from the same industry/business; the Return o
be easily compared; despite HDFC AMC stock being a high P/E stock it deserves a buy decision; it als
UTI AMC are bad stocks; but HDFC AMC deserves higher allocation in your portfolio (example: out o
AMC by giving higher allocation and 25% to Nippon AMC and 25% to U
 40
MPARISON (as on March 2021)

NIPPON AMC UTI AMC

37 41
8.44 5.12
Around 20% Around 15%
14.00% Around 5%
0 0

10.00 10.00
Rs.400.00 Rs.1150
Rs.25000 cr. Rs.14000 cr.

om the same industry/business; the Return on Equity and profit growth figures can
h P/E stock it deserves a buy decision; it also doesn't mean that Nippon AMC and
allocation in your portfolio (example: out of Rs.100, you can invest 50% in HDFC
on and 25% to Nippon AMC and 25% to UTI AMC)
 RESEARCH OVERVIEW WITH EXPECTATIONS (B
Sl. No. PARAMETERS
1 DEPOSITS BASE

2 RESERVES

3 NET INTEREST MARGIN (NIM)

5 GROSS NPA
6 NET NPA
CAPITAL ADEQUACY RATIO
7
(CAR)
8 CASA RATIO
4 RETURN ON ASSETS (ROA)
CREDIT DEPOSIT RATIO (CD
9
RATIO)
10 PRICE TO EARNING (P/E RATIO)

10 PRICE TO BOOK VALUE (P/BV)

11 FII/FPI HOLDING
H OVERVIEW WITH EXPECTATIONS (BANKING STOCKS)
EXPECTATIONS
Higher the better

At least higher than the NPA figures

Higher the better (comparing to other peer
banks)
Lower the better
Lower the better
8% and above; higher the better
Higher the better
Higher the better
Above 90% or 100% is not good
Lower the better compared to industry P/E
with good financial numbers
Below 1.00 is ideal
Higher is better
ATIONS (BANKING STOCKS)
MINIMUM EXPECTATIONS IMPORTANCE
Compare with other peer banks & also size of
HIGH
the bank to check the deposits
At least higher than the NPA figures HIGH

At least 2.50% HIGH

Decreasing year on year should be watched HIGH
Decreasing year on year should be watched HIGH
At least 8%; below 8% can be danger HIGH
Above 40% is a good sign HIGH
NOT VERY
Higher the better
IMPORTANT
NOT VERY
Above 60% up to 90% is a good sign
IMPORTANT
NOT VERY
Lower compared to peer banks is ideal
IMPORTANT
NOT VERY
Least is better
IMPORTANT
NOT VERY
Increasing year after year is a good sign
IMPORTANT
 EQUITY RESEARCH OVERVIEW WITH EXPECTATIONS FOR NORMAL COMPANIES

Sl. No. PARAMETERS (IN SEQUENCE) GENERAL EXPECTATIONS

SALES/INCOME/REVENUE
1 GROWTH Increase year after year

2 NET PROFIT GROWTH / EPS Increase year after year

OPERATING PROFIT MARGIN

3 Increase year after year
GROWTH
4 RETURN ON EQUITY Increase year after year

5 RETURN ON CAPITAL EMPLOYED Increase year after year

6 DEBT TO EQUITY RATIO Reducing Debt

7 CURRENT RATIO Above 1.00 and up to 3.00

8 QUICK RATIO Above 1.00 and up to 3.00

9 INTEREST COVERAGE RATIO Above 3.00 is ideal

11 DIVIDENDS Consistently paid in the past 5

years

12 SHAREHOLDING At least 40% held by promoters is

ideal

13 PLEDGED SHARES Ideally zero pledge

14 FII/FPI HOLDING Higher the better

PRICE TO EARNING RATIO (P/E Compared to Industry P/E the

15 RATIO) stock P/E should be lower

PRICE TO BOOK VALUE (P/B or

16 P/BV) Ideally below 1.00
ONS FOR NORMAL COMPANIES
IMPORTANCE
MINIMUM EXPECTATIONS TO FOR BUYING
BUY DECISION
At least 12% to 15% (above 15% is
good; above 20% is excellent) HIGH

At least 12% to 15% (above 15% is HIGH

good; above 20% is excellent)
At least 12% to 15% (above 20% is
HIGH
excellent)
At least 12% to 15% (above 20% is VERY HIGH
excellent)
15% and above (above 20% is
excellent for a company with VERY HIGH
debt)
Below 1.00 & Zero Debt is ideal VERY HIGH
Below 1.00 & above 3.00 may VERY HIGH
not be ideal
0.75 to 1.00 is also acceptable
in case of manufacturing & MODERATE
capital intensive stocks
At least 2.50 is bare minimum MODERATE
Any dividend payout is okay; if
the % is increasing year after MODERATE
year is also good
Bluechip stocks with below 40% MODERATE
is okay
If pledged for business
purposes is okay & reducing MODERATE
pledge % is ideal year after year
At least 5% and increasing
consistently in the recent years MODERATE

Stock P/E above industry P/E is

fine as long as the company's MODERATE
performance is robust

Above 1.00 is okay but if the

stock's P/BV is the least
compared to other peers then MODERATE
fine