NCCMP - . Company Analysis - Part 1

8/13/2019 NCCMP - . Company Analysis - Part 1

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Session 05


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NSE Certified Capital Market Professional

(NCCMP)


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Growth in

national

output

Growth in

industry

sales.

Growth in

company

sales.

Net Profit

Margin

Companys

marketshare

Input-output

relations

&Consumption

patterns

Company Analysis Industry Analysis Economy Analysis

g


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Fundamental Analysis

Part 1


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Years0 1 2 3 4 5 6 7 8 9 10

A GNP projections a0 a1 a2 a3 a4 a5 a6 a7 a8 a9 a10

B Business cycle / Growth rate cycle

C Macro-economic policy changes

D Population projections

E Demographic profile

F Income distribution

G Industry life cycle

H Technological changes

I Industry related policy changes

J Industry sales estimates j0 j1 j2 j3 j4 j5 j6 j7 j8 j9 j10

K Quality of management

L Quality of technology

M Market share of the company

N Company sales estimates n0 n1 n2 n3 n4 n5 n6 n7 n8 n9 n10

O Net profit margin

P Net profit p0 p1 p2 p3 p4 p5 p6 p7 p8 p9 p10

Q Number of equity shares

Q EPS q0 q1 q2 q3 q4 q5 q6 q7 q8 q9 q10

Adjust Ofor

1. Increasing costs of scarce/non-renewable

resources.

2. Increasing cost of energy.

3. Increasing costs of environmentalconservation.

E-I-C Analysis Working Sheet


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J Industry sales estimates

Market share

Market structure & Barriers to entry


Quality of plant & Process technology

L Locational advantage

Quality of labour & Industrial relations

Cost structure

M Marketing set up

Effective rate of protection

Financial ratios

N Company sales estimates

O Net profit margin

P Net profitQ Number of equity shares

Q EPSCompan

yspecificvaria

bles

1

2

Session 06

Session 05


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These determine the market leadership and

therefore, the pricing power that the company enjoys.But these change over time, and the company may have

to incur costs to conserve them in the nature of costs

of product differentiation, advertising, marketing and

technological development.


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Market share of the company


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Market share of the company will

determine, what part of the total industry sales

become company sales.

But the market share, or more correctly

the market structure / the position of thecompany in the market - whether it is a large

dominant firm, a #2 large firm, one small firm

among many, a niche player, a marginal player,

also determines the profit margin that it can

enjoy. Higher the domination of the market,

higher is the margin that the firm can enjoy.


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Relationship between market share

and profitability


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Economies of scale

The most obvious rationale for the high rate of

return enjoyed by large-share businesses is that theyhave achieved economies of scale in procurement,

manufacturing, marketing, and other cost components.

A business with a 40% share of a given market is

simply twice as big as one with 20% share of the samemarket.

Market power

Large-scale firms earn higher profits than theirsmaller competitors, as a result of their greater market

power : their size permits them to bargain more

effectively, administer prices, and, thereby, realize

significantly higher prices for a particular product.


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Quality of management cannot be defined

and measured accurately; but it can be perceived

very clearly.


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Professional Management v/s Family Management


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Quality of Management


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Corporate pitfalls

Professional management v/s Family

management

Succession planning

Financial integrity

Political collusion / lobbying


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The lack of succession planning at some of the biggest

public companies poses a serious threat to corporate health

especially as companies struggle toward a recovery," says

Stephen A. Miles, Vice Chairman at leadership advisory firm

Heidrick & Struggles and a global expert on succession planning.

"Not having a truly operational succession plan can have

devastating consequences for companies from tanking stockprices to serious regulatory and reputational impact.

This governance lapse stems primarily from a lack of

focus : boards of directors just arent spending the time that is

required to adequately prepare for a succession scenario.


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25/29F

inan

cialIntegr

ity


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Nira Radia tapes
http://virsanghvi--42-188819-0-24-20090522-130319.mp3/


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J Industry sales estimates

Market share

Market structure & Barriers to entry


Quality of plant & Process technology

L Locational advantage

Quality of labour & Industrial relations

Cost structure

M Marketing set up

Effective rate of protection

Financial ratios

N Company sales estimates

O Net profit margin

P Net profitQ Number of equity shares

Q

EPS

Compan

yspecificvaria

bles

1

2

Session 06

NCCMP - . Company Analysis - Part 1

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Transcript of NCCMP - . Company Analysis - Part 1