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Steps To Craft An Equity Research Report
Steps To Craft An Equity Research Report
Steps To Craft An Equity Research Report
Creating a crisp and well-structured equity research report is a highly valued skill for roles
in #investmentbanking like equity research so you must know the process inside out.
Brokerage houses (#JPMorgan #Nomura #UBS) or securities firms create ERs for buy-side clients
(hedge funds, banks, HNIs) to provide investment recommendations (buy/sell/hold).
✅ Investment Thesis
✅ Catalysts
1. Fundamental analysis: Check the firm's publicly disclosed information, add macroeconomic
analysis, devise a 5-year cash flow model and earnings forecast model. Once you've reviewed the
operational and financial assumptions, evaluate the management and competitive environment,
buyers, suppliers, substitutes, and use a Porter 5-forces model to understand their competitive
advantage.
2. Company valuation: This will test your technical skills, esp. DCF skills (intrinsic valuation),
relative valuation or sum-of-the-parts valuation method, as required.
3. Recommendation: Cut to the chase right at the beginning and clearly mention your
recommendation—buy, sell, hold. You can also use terms like outperform/underperform/neutral
based on your valuation.
4. Target price: Provide one based on your valuation along with the recommendation
5. Investment rationale: Explain why you think the share price will go up/down?
6. Share price chart: Include a price chart of the stock that will show the last 52-weeks’ share price
movement.
7. Business model: Mention the analysis of the company’s business model and how will it perform
in the next 2-3 years.
8. Key ratio analysis: Include market capitalization, Enterprise Value(EV), EBITDA, EV/EBITDA, and
dividend yield (%)
9. Product profile and segment analysis: Evaluate the target stock's product profile, segments,
and brands with current sales and forecasted revenue figures, cost, market size, the company’s
market share, competition, and performance in domestic and other markets.
10. Intrinsic and relative valuation: Perform DCF analysis and relative valuation (with the target’s
peers based on P/E ratio, P/B ratio, Price to Sales (P/S), ROE and ROCE
11. Risk Analysis: Discuss any downside risks that you see to your valuation (raw material price
hike or economic instability). Do mention any risks related to the firm as it’ll impact profitability.