1

A STUDY ON INTRINSIC VALUE OF 3 MAJOR STOCKS

ASHOK LEYLAND, MARUTI SUZUKI & BAJAJ AUTO

PROJECT REPORT

Submitted

by

PRAVEENA S

Register No: 622022631028

In partial fulfillment for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

In

Submitted to

DEPARTMENT OF BUSINESS ADMINISTRATION

PAAVAI COLLEGE OF ENGINEERING

NAMAKKAL - 637018

JUNE 2024
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BONAFIDE CERTIFICATE

Certified that this summer training report is the bonafide work of

PRAVEENA S, [Link].622022631028, II MBA, Paavai College Of

Engineering, Pachal, Namakkal, who undergone the training work under
my supervision. Certified further that to the best of my knowledge the
work reported herein does not form part of any other report on the basis of
which a degree or award was conferred on an earlier occasion on this or
any other candidate.

FACULTY GUIDE HEAD OF THE DEPARTMENT

Submitted for the End semester Examinations held on _______________

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INTERNAL EXAMINER EXTERNAL EXAMINER

ACKNOWLEDGEMENT

I Would like to express my gratitude to [Link],

Chairman, [Link], FCA, and [Link].,
Correspondent, Paavai College Of Engineering, Pachal, Namakkal for
giving me an opportunity and facility to complete this project.

I Feel immense pleasure in expressing my deep sense of gratitude to

[Link], M.E., Ph.D., Director Administration, Paavai
Engineering College, Pachal, Namakkal for all the encouragement received
during the MBA course.

I Wish to place my deep sense of gratitude to [Link] Kumar, M.E.,

Ph.D., Principal, Paavai College Of Engineering, Pachal, Namakkal
for all the encouragement received during the MBA course.

I Would like to express my gratitude to [Link] Kumar, M.E., Ph.D.,

Principal, Paavai College Of Engineering, Pachal, Namakkal and all
the faculty members of MBA department.

I Owe my boundless thanks and gratitude towards my faculty guide

[Link]., MBA., Paavai College Of Engineering, Pachal, Namakkal
for her guidance for preparation of this training report.

PRAVEENA S
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TABLE OF CONTENTS

CHAPTER CONTENT [Link]

NO
ABSTRACT v
LIST OF TABLES vi
1 INTRODUCTION
1.1 Introduction of the study 1
1.2 Statement of problem 8
1.3 Scope of the study 8
1.4 Objectives of study 8
1.5 Limitation of the study 9
2 CONCEPT AND REVIEW
2.1 About the industry 10
2.2 Company profile 14
2.3 Review of literature 21
3 RESEARCH METHODOLOGY 23
4 DATA ANALYSIS AND 24
INTERPREDATION
5 RESULTS AND DISCUSSION
5.1 Findings 42
5.2 Suggestions 42
5.3 Conclusion 43
ANNEXURE
BIBLIOGRAPHY
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LIST OF TABLES

[Link] CONTENT [Link]

4.1 EARNING PER SHARE 24
4.2 DISCOUNT RATE 27
4.3 INTRINSICVALUE 28
CALCULATION
4.4 EARNING PER SHARE 30
4.5 DISCOUNT RATE 33
4.6 INTRINSICVALUE 34
CALCULATION
4.7 EARNING PER SHARE 36
4.8 DISCOUNT RATE 39
4.9 INTRINSICVALUE 40
CALCULATION
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CHAPTER-1

1.1 INTRODUCTION OF THE STUDY

In finance, intrinsic value refers to the value of a company, stock, currency or product
determined through fundamental analysis without reference to its market value. It is also
frequently called fundamental value.

What is 'Intrinsic Value'

Intrinsic value is the perceived or calculated value of a company, including tangible and
intangible factors, using fundamental analysis. Also called the true value, the intrinsic value
may or may not be the same as the current market value. Additionally, intrinsic value is also
used in options pricing to indicate the amount that an option is "in the money."
Intrinsic value can be calculated by value investors using fundamental analysis to look at both
qualitative (business model, governance, and target market factors) and quantitative (ratios
and financial statement analysis) aspects of a business. This calculated value is then
compared to the market value to determine whether the business or asset is over- or
undervalued.
The discounted cash flow (DC F) model is one commonly used valuation method used to
determine a company's intrinsic value. The discounted cash flow model uses a company's free
cash flow and weighted average cost of capital (WACC), which accounts for the time value of
money, and then discounts all its future cash flow back to the present day.

According to BENJAMIN
Benjamin consider as a father of value investing .He defines that stock should have to provide
safety net in trouble times.
In 1930’s BENJAMIN GRAHAM discover the value investing which is used in successful
investing. Value investing formula gives safety net to the investors in trouble time. Major 3
important key factors in value investing:
1. INTRINSIC VALUE
2. MARGIN OF SAFETY
3. EARNING POWER
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In general terms it is understand to be that value which is justified by the facts. For example,
the assets, earnings, dividends, definite prospects. Let us say, from market quotation
established by artificial manipulation / distorted psychological excesses. The essential point is
that security analysis does not seek to determine exactly what is the intrinsic value of a given
[Link] needs only establish either that the value is adequate. Or else that the value is
considerably higher or considerably lower than the market price. For such purpose an
approximate measure of intrinsic value maybe sufficient.
Margin of safety
Successful stock investing become a matter of thoughtful analysis not from guess work.
Margin of safety is very important for value investing. We should be in safer side .because
future results of the stock will be volatile .It is available for absorbing the effect of
miscalculation or worse than luck.
Overvalued stocks should be avoided
Undervalued stocks are ready to invest

MARGIN OF SAFETY

Price

Overvalued

Intrinsic value

Undervalued

Time
 8

Formula for calculating intrinsic value of the stock

V = (Eps*(8.5+2g)*4.4)/Y
Eps – Earnings per share
g – Is being an estimate of long term growth
Y – Current yield of AAA corporate bonds
Relative graham value is essential before invest lumps of money in particular company or
asset. RGV is less than 1 in the sense ignore the stock. RGV is greater than 1 stocks are ready
to invest.
RGV = Intrinsic value / Current price
Importance of intrinsic value
The newer approach to secure by analysis attempts to value a common stock
independently of its market price. If the value found is substantially above or below the
current price, the analyst concludes that the issue should be bought or disposed of. This
independent value has a variety of names, the most familiar of which is “intrinsic value”.
– Ben Graham, Security Analysis (1951 Edition)
Graham went on to say this about the definition of intrinsic value:
“A general definition of intrinsic value would be that value which is justified by the
facts—e.g. assets, earnings, dividends, definite prospects. In the usual case, the most
important single factor determining value is now held to be the indicated average future
earning power. Intrinsic value would then be found by first estimating this earning power, and
then multiplying that estimate by an appropriate ‘capitalization factor’”.
Graham was a very eloquent speaker and writer, but Joel Greenblatt I think does a
great job at summarizing the crux of the issue when he says:
“Value investing is figuring out what something is worth and paying a lot less for it.”
When I’ve referenced intrinsic value in the past, I’ve received questions like: yes, but how do
you figure out what something is worth? In other words, how do you determine intrinsic
value?
This post will just have some of my comments that I’ve compiled on the topic of intrinsic
value. For those hoping for a spreadsheet or a formula, you will be disappointed. But
hopefully this post will provide some general ideas you might find helpful with understanding
and grasping the concept of intrinsic value, which at the core is very simple.
 9

Dividend Discount model (DDM) Understand the definition

The dividend discount model (DDM) considers the dollar value of dividends paid to
shareholders. This model also factors in a projected growth rate of the dividend. Dividends
are discounted to their present value using a discount rate. If the dividend discount model
values the stock at a higher price than the current market value, the stock’s price is considered
to be undervalued.
The DDM formula is (Dividend per share)/ (Discount rate – Dividend growth rate)

Residual income valuation (RIV)

Residual income valuation (RIV) which is also known as residual income method or residual
income model (RIM) is an approach to or method of equity valuation which properly
accounts for the cost of equity capital. The word ‘residual’ refers to any opportunity costs in
excess which is measured as compared to the book value of the shareholders’ equity and the
income that a firm generates after accounting for the true cost of capital is then the residual
income. This approach is largely similar to the MVA/EVA based approach having similar
advantages and logic.
Concept of residual income valuation
The basic idea behind this approach is that a rate of return is required by investors from their
resources which are under the management of the firm, provide compensation for their
opportunity cost and account for the level of risk. This rate of return is considered the cost of
equity and a formal equity cost has to be subtracted from net income. Again, for creating
shareholder value, management should be capable of generating returns which is at least
equal to this cost. Therefore, even if the income statement of a company report a profit, it can
be actually unprofitable economically. Thus, it is possible that a value may be negative in this
case, even though it is positive when traditional discounted cash flow approach is applied.
Calculating residual income
Usually, for calculating cost of capital, CAPM is used. However, there are other approaches
like APT which are also used. The formula for calculating residual income is as follow:
Equity Charge = Equity Capital x Cost of Equity
Residual Income = Net Income – Equity Charge
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Formula for valuation

In residual income approach, a company’s stock value can be calculated as sum total of its
book value and its expected future residual income’s present value which is discounted at cost
of equity, r. the general formula is:

This formula is used when it is assumed that the company will achieve maturity or constant
growth. Here, for calculating the corresponding terminal value, mainly perpetual growth
model is used. The terminal value when it is assumed long run constant growth g from year m
is:

Therefore, the residual income valuation is:

Discounted cash flow (DCF)

Discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an
investment opportunity. DCF analyses use future free cash flow projections and discounts
them, using a required annual rate, to arrive at present value estimates.
A present value estimate is then used to evaluate the potential for investment. If the value
arrived at through DCF analysis is higher than the current cost of the investment, the
opportunity may be a good one.
Calculated as:
DCF = [CF1 / (1+r)1] + [CF2 / (1+r)2] + ... + [CFn / (1+r)n]
CF = Cash Flow r= discount rate (WACC)
DCF is also known as the Discounted Cash Flows Model.
Limitations of Discounted Cash Flow Model
Discounted cash flow models are powerful, but they are only as good as their inputs. As the
axiom goes, "garbage in, garbage out." Small changes in inputs can result in large changes in
the estimated value of a company, and every assumption has the potential to erode the
estimate's accuracy.
 11

Earnings Per Share - EPS

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator of a company's profitability.
EPS is calculated as:
EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares
How to Calculate 'Earnings per Share - EPS'
To calculate the EPS of a company, the balance sheet and income statement should be used to
find the total number of shares outstanding, dividends on preferred stock (if any), and the net
income or profit value. When calculating, it is more accurate to use a weighted average
number of shares outstanding over the reporting term, because the number of shares
outstanding can change over time. Any stock dividends or splits that occur must be reflected
in the calculation of the weighted average number of shares outstanding. However, data
sources sometimes simplify the calculation by using the number of shares outstanding at the
end of a period.

Inflation Rate
A measure of how fast a currency loses its value. That isthe inflation rate measures how fast
prices for goods andservices rise over time, or how much less one unit of currency buys now
compared to one unit of currency at agiven time in the past. The inflation rate may increase d
ueto massive printing of money, which increases supply inthe economy and thus reduces dem
and. Equally, it mayoccur because certain important commodities becomerarer and thus more
expensive.
Central banks attempt tocontrol the inflation rate by increasing and decreasing the money
supply. The inflation rate is important to fixed-income
securities, as the returns on these securities maynot keep up with inflation, and thus result in a
net loss for the investor.

Outstanding shares
Outstanding shares refer to a company's stock currently held by all its shareholders, including
share blocks held by institutional investors and restricted shares owned by the company's
officers and insiders. Outstanding shares are shown on a company's balance sheet under the
heading “Capital Stock.”
 12

Dividend
A dividend is a distribution of a portion of a company's earnings, decided by the board of
directors, paid to a class of its shareholders. Dividends can be issued as cash payments, as
shares of stock, or other property.

Realized income
Realized income is a shareholders earning which is different from all other income such as
net operating income and [Link] is usually calculated from earning per share and no of
outstanding shares.
Realized income = EPS × outstanding shares.
EPS growth rate:
EPS growth (earning per share growth) illustrates the growth of earning per share over time.
EPS growth rates help investors identify stocks that are increasing or decreasing profitability.
Formula:
EPS growth = (EPS this year) / (EPS last year) – 1
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1.2 STATEMENT OF PROBLEM

Investing in stock market is feasible and very comfortable comparing with other
investment instruments such as Real estate, [Link], Bank fixed deposit and etc. Stock
market has produced decent return rather than other investment options in short term. So
Investors have been showing keen interest by investing in companies anticipating higher
returns and capital gain.
But the problem is only few investors attain their objective remaining
under stress. Because of complication in analysis of company’s fundamental and technical
aspects. Considering this factor the study intends to analyze the company’s future
performance by calculating the intrinsic value of the stock. This will help the investors to
avoid the overvalued stock and invest in right companies.

1.3 SCOPE OF THE STUDY

 The primary purpose of the study is to calculate the intrinsic value of the stock.
 This study will help to find whether the stock is undervalued or overvalued.
 This study is dedicated mainly towards understanding the significance of value
investing.
 It will also increase the accuracy in calculation rather than assumption.
 This study will help the investor for their technical analysis.

1.4 OBJECTIVES OF THE STUDY

The major objectives of this study are:
1. To find out the intrinsic value of the 3 major stocks.
2. To determine whether stock is undervalued or overvalued 3. To increase the
rate of return and reduce the risk level in investing
4. To increase the feasibility to find out the intrinsic value.
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1.5 LIMITATION OF THE STUDY

The limitations of the study are

 This research is based on the company analysis only.
 Uncertainty in economic factors will affect the growth rate of the company.
 This study concentrate only on technical part of the analysis. Not fundamentals of the
company.
 This study is not compactable for less than 5year company. Because 5 years EPS is
mandatory for the calculation of intrinsic value.
 The research is limited with in three companies.
 Various formulas are available for the calculation of intrinsic value. Each formulae
will produce different result.
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CHAPTER-2
CONCEPT AND REVIEW 2.1 ABOUT THE INDUSTRY

Introduction
A Profile Stock market is one of the vigorous and active sectors in the financial system,
making important contribution to the country’s economic development. It operates through a
complex of institutions, instruments and mechanisms whereby funds are efficiently pooled,
distributed and transferred to the economy of the country Besides efficiently mobilizing
financial resources for investment, providing liquidity for the investors, monitoring and
disciplining company management are the other important functions of die stock markets
Because of that an efficient stock market is considered indispensable for the rapid economic
development of a country It is regarded as the economic barometer of a country indicating the
nature and level of economic activity at any point of time. In general, the financial market
divided into two parts, Money market and capital market. Securities market is an important,
organized capital market where transaction of capital is facilitated by means of direct
financing using securities as a commodity. Securities market can be divided into a primary
market and secondary market

PRIMARY MARKET
The primary market is an intermittent and discrete market where the initially listed shares are
traded first time, changing hands from the listed company to the investors. It refers to the
process through which the companies, the issuers of stocks, acquire capital by offering their
stocks to investors who supply the capital. In other words primary market is that part of the
capital markets that deals with the issuance of new securities. Companies, governments or
public sector institutions can obtain funding through the sale of a new stock or bond issue.
This is typically done through a syndicate of securities dealers. The process of selling new
issues to investors is called underwriting. In the case of a new stock issue, this sale is called
an initial public offering (IPO). Dealers earn a commission that is built into the price of the
security offering.

SECONDARY MARKET
The secondary market is an on-going market, which is equipped and organized with a place,
facilities and other resources required for trading securities after their initial offering. It refers
to a specific place where securities transaction among many and unspecified persons is
 16

carried out through intermediation of the securities firms, i.e., a licensed broker, and the
exchanges, a specialized trading organization, in accordance with the rules and regulations
established by the exchanges.
A bit about history of stock exchange they say it was under a tree that it all started in
[Link] Stock Exchange (BSE) was the major exchange in India till [Link]
Stock Exchange (NSE) started operations in 1994.
NSE was floated by major banks and financial institutions. It came as a result of Harshad
Mehta scam of 1992. Contrary to popular belief the scam was more of a banking scam than a
stock market scam. The old methods of trading in BSE were people assembling on what as
called a ring in the BSE building. They had a unique sign language to communicate apart
from all the shouting. Investors weren't allowed access and the system was opaque and
misused by brokers.
The shares were in physical form and prone to duplication and fraud.
NSE was the first to introduce electronic screen based trading. BSE was forced to follow suit.
The present day trading platform is transparent and gives investors prices on a real time basis.
With the introduction of depository and mandatory dematerialization of shares chances of
fraud reduced further. The trading screen gives you top 5 buy and sell quotes on every scrip.
A typical trading day starts at 10 ending at 3.30. Monday to Friday. BSE has 30 stocks which
make up the Sensex .NSE has 50 stocks in its index called Nifty. FII s Banks, financial
institutions mutual funds are biggest players in the market. Then there are the retail investors
and speculators. The last ones are the ones who follow the market morning to evening;
Market can be very addictive like blogging though stakes are higher in the former.
The BSE and NSE
Most of the trading in the Indian stock market takes place on its two stock exchanges: the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been
in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading
in 1994. However, both exchanges follow the same trading mechanism, trading hours,
settlement process, etc. At the last count, the BSE had about 4,700 listed firms, whereas the
rival NSE had about 1,200. Out of all the listed firms on the BSE, only about 500 firms
constitute more than 90% of its market capitalization; the rest of the crowd consists of highly
illiquid shares.
Almost all the significant firms of India are listed on both the exchanges. NSE enjoys a
dominant share in spot trading, with about 70% of the market share, as of 2009, and almost a
complete monopoly in derivatives trading, with about a 98% share in this market, also as of
 17

2009. Both exchanges compete for the order flow that leads to reduced costs, market
efficiency and innovation. The presence of arbitrageurs keeps the prices on the two stock
exchanges within a very tight range.
ORIGIN OF INDIAN STOCK MARKET
The origin of the stock market in India goes back to the end of the eighteenth century when
long-term negotiable securities were first issued. However, for all practical purposes, the real
beginning occurred in the middle of the nineteenth century after the enactment of the
companies Act in 1850, which introduced the features of limited liability and generated
investor interest in corporate securities.
An important early event in the development of the stock market in India was the formation
of the native share and stock brokers 'Association at Bombay in 1875, the precursor of the
present day Bombay Stock Exchange. This was followed by the formation of
associations/exchanges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). In
addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to
recede into oblivion during depressing times subsequently.
Stock exchanges are intricacy inter-woven in the fabric of a nation's economic life. Without a
stock exchange, the saving of the community- the sinews of economic progress and
productive efficiency- would remain underutilized. The task of mobilization and allocation of
savings could be attempted in the old days by a much less specialized institution than the
stock exchanges. But as business and industry expanded and the economy assumed more
complex nature, the need for 'permanent finance' arose. Entrepreneurs needed money for
long term whereas investors demanded liquidity – the facility to convert their investment into
cash at any given time. The answer was a ready market for investments and this was how the
stock exchange came into being.
Stock exchange means anybody of individuals, whether incorporated or not, constituted for the
purpose of regulating or controlling the business of buying, selling or dealing in securities.
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are
the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges.
However, the BSE and NSE have established themselves as the two leading exchanges and
account for about 80 per cent of the equity volume traded in India. The NSE and BSE are equal
in size in terms of daily traded volume. The average daily turnover at the exchanges has
increased from Rs 851 crore in 1997-98 to Rs 1,284 crore in 1998-99 and further to Rs 2,273
crore in 1999-2000 (April - August 1999). NSE has around 1500 shares listed with a total
market capitalization of around Rs 9, 21,500 crore.
 18

The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9, 68,000
crore. Most key stocks are traded on both the exchanges and hence the investor could buy
them on either exchange. Both exchanges have a different settlement cycle, which allows
investors to shift their positions on the bourses. The primary index of BSE is BSE Sensex
comprising 30 stocks. NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks.
The BSE Sensex is the older and more widely followed index.
Both these indices are calculated on the basis of market capitalization and contain the heavily
traded shares from key sectors. The markets are closed on Saturdays and Sundays. Both the
exchanges have switched over from the open outcry trading system to a fully automated
computerized mode of trading known as BOLT (BSE on Line Trading) and NEAT (National
Exchange Automated Trading) System.
It facilitates more efficient processing, automatic order matching, faster execution of trades
and transparency; the scrip's traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F'
and 'Z' groups. The 'A' group shares represent those, which are in the carry forward system
(Badla). The 'F' group represents the debt market (fixed income securities) segment. The 'Z'
group scrip's are the blacklisted companies. The 'C' group covers the odd lot securities in 'A',
'B1' & 'B2' groups and Rights renunciations. The key regulator governing Stock Exchanges,
Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in
Indian secondary and primary market is the Securities and Exchange Board of India (SEBI)
Ltd.
 19

2.2 COMPANY PROFILE

Ashok Leyland is an Indian automobile company headquartered in Chennai, India. It is

owned by the Hinduja GroupFounded in 1948, it is the 2nd largest commercial vehicle
manufacturer in India, 4th largest manufacturer of buses in the world and 12th largest
manufacturer of trucks globally. Operating nine plants, Ashok Leyland also makes spare parts
and engines for industrial and marine applications. It sold around 1,40,000 vehicles (M&HCV
+ LCV) in FY 2016. It is the second largest commercial vehicle company in India in the
medium and heavy commercial vehicle (M&HCV) segment, with a market share of 32.1%
(FY 2016). With passenger transportation options ranging from 10 seaters to 74 seaters
(M&HCV = LCV), Ashok Leyland is a market leader in the bus segment. In the trucks
segment Ashok Leyland primarily concentrates on the 16 to 25-ton range. However, Ashok
Leyland has a presence in the entire truck range, from 7.5 to 49 tons.

Ashok Leyland's UK subsidiary Optare has shut down its bus factory in Blackburn,
Lancashire. This subsidiary's traditional home in Leeds has also been vacated in favour of a
purpose built plant at Sherburn-in-Elmet. Ashok Motors was founded in 1948 by
Raghunandan Saran, He is an Indian freedom fighter from Punjab. After Independence, he
was persuaded by India's first Prime Minister Nehru to invest in a modern industrial venture.
Ashok Motors was incorporated in 1948 as a company to assemble and manufacture Austin
cars from England, and the company was named after the founder's only son, Ashok Saran.
The company had its headquarters in Rajaji Saalai, Chennai (then Madras) with the plant in
Ennore, a small fishing hamlet in the North of Chennai. The company was engaged in the
assembly and distribution of Austin A40 passenger cars in India. Raghunandan Saran died in
an air crash. He had previously been negotiating with Leyland Motors of England for
assembly of commercial vehicles as he envisioned commercial vehicle were more in need at
that time than were passenger cars. The company later under Madras State Government and
other shareholders finalised for an investment and technology partner, and thus Leyland
Motors joined in 1954 with equity participation, changing the name of the company to Ashok
Leyland. Ashok Leyland then started manufacturing commercial vehicles.
 20

Under Leyland's management with British expatriate and Indian executives the company
grew in strength to become one of India's foremost commercial vehicle manufacturers.
The collaboration ended sometime in 1975 but the holding of British Leyland, now a major
British Auto Conglomerate as a result of several mergers, agreed to assist in technology,
which continued until the 1980s. After 1975, changes in management structures saw the
company launch various vehicles in the Indian market, with many of these models continuing
to this day with numerous upgrades over the years. In 1987, the overseas holding by Land
Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture
between the Hinduja Group, the Non-Resident Indian transnational group and IVECO, part of
the Fiat Group. In 2007, the Hinduja Group also bought out IVECO's indirect stake in Ashok
Leyland. The promoter shareholding now stands at 51%. Today the company is the flagship
of the Hinduja Group, a British-based and Indian originated trans-national conglomerate after
Hindujas bought Iveco's remaining ownership stakes.

Type : Public
Traded as : BSE
NSE
Industry : Automotive commercial Founded
: September 7,1948.
Headquarters : Chennai, Tamilnadu , India
Served : World wide
Parent : Hinduja group
Subsidiaries : Albonair GmbH
Global TVS Bus Body Builders Limited
Hinduja Leyland Finance
Hinduja Tech Lanka Ashok Leyland
 21

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an automobile
manufacturer in India. It is a 56.21% owned subsidiary of the Japanese car and motorcycle
manufacturer Suzuki Motor Corporation. As of January 2017, it had a market share of 51% of
the Indian passenger car market. Maruti Suzuki manufactures and sells popular cars such as
the Ciaz, Ertiga, Wagon R, Alto, Swift, Celerio, Swift Dzire, Baleno and Baleno RS, Omni,
Alto 800, Eeco, IgnisS Cross. The company is headquartered at New [Link] May 2015, the
company produced its fifteenth millionth vehicle in India, a Swift Dzire
Maruti was established in February 1981 with production starting in 1983 with the
Maruti_800, based on the Suzuki Alto kei car. As of May 2007, the Government of India,
through Ministry of Disinvestment, sold its complete share to Indian financial institutions and
no longer has any stake in Maruti Udyog.

Under the Maruti name

In 1970, a private limited company named Surya Ram Maruti technical services private
limited (MTSPL) was launched on 16 November 1970. The stated purpose of this company
was to provide technical know-how for the design, manufacture and assembly of "a wholly
indigenous motor car". In June 1971, a company called Maruti limited was incorporated
under the Companies Act. Maruti Limited went into liquidation in 1977. Maruti Udyog Ltd
was incorporated through the efforts of V. Krishnamurthy.

Affiliation with Suzuki

In 1982, a licence & Joint Venture Agreement (JVA) was signed between Maruti Udyog Ltd,
and Suzuki of Japan. At first, Maruti Suzuki was mainly an importer of cars. In India's closed
market, Maruti received the right to import 40,000 fully built-up Suzuki in the first two years,
and even after that the early goal was to use only 33% indigenous parts.
 22

This upset the local manufacturers considerably. There were also some concerns that the
Indian market was too small to absorb the comparatively large production planned by Maruti
Suzuki, with the government even considering adjusting the petrol tax and lowering the
excise duty in order to boost sales. Finally, in 1983, the Maruti 800 was released. This 796 cc
hatchback was based on the SS80 Suzuki Alto and was India’s first affordable car. Initial
product plan was 40% saloons, and 60% Maruti Van. Local production commenced in
December 1983. In 1984, the Maruti Van with the same three-cylinder engine as the 800 was
released and the installed capacity of the plant in Gurgaon reached 40,000 units.

In 1985, the Suzuki SJ410-based Gypsy, a 970 cc 4WD off-road vehicle, was launched. In
1986, the original 800 was replaced by an all-new model of the 796 cc hatchback Suzuki Alto
and the 100,000th vehicle was produced by the company. In 1987, the company started
exporting to the West, when a lot of 500 cars were sent to Hungary. By 1988, the capacity of
the Gurgaon plant was increased to 100,000 units per annum

Relationship between the Government of India, under the United Front (India) coalition and
Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian
media until Suzuki Motor Corporation gained the controlling stake. This highly profitable
joint venture that had a near monopolistic trade in the Indian automobile market and the
nature of the partnership built up till then was the underlying reason for most issues. The
success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987, and to
50% in 1992, and further to 56.21% as of 2013. In 1982, both the venture partners entered
into an agreement to nominate their candidate for the post of Managing Director and every
Managing Director would have a tenure of five years.
Maruti Suzuki has three manufacturing facilities in India. All manufacturing facilities have a
combined production capacity of 1,700,000 vehicles annually. The Gurgaon manufacturing
facility has three fully integrated manufacturing plants and is spread over 300 acres (1.2
km2).The Gurgaon facilities also manufacture 240,000 K-Series engines annually. The
Gurgao n Facilities manufactures the Alto 800, WagonR, Ertiga, S-Cross, Vitara Brezza, Ignis
and Eeco.
The Manesar manufacturing plant was inaugurated in February 2007 and is spread over 600
acres (2.4 km2).Initially it had a production capacity of 100,000 vehicles annually but this was
increased to 300,000 vehicles annually in October 2008. The production capacity was further
increased by 250,000 vehicles taking total production capacity to 800,000 vehicles annually.
 23

The Manesar Plant produces the Alto 800, Alto K10, Swift, Ciaz, Baleno, Baleno RS and
Celerio. On 25 June 2012, Haryana State Industries and Infrastructure Development
Corporation demanded Maruti Suzuki to pay an additional Rs 235 crore for enhanced land
acquisition for its Haryana plant expansion. The agency reminded Maruti that failure to pay
the amount would lead to further proceedings and vacating the enhanced land acquisition.
The launch of the Dzire happened in the month of May 2017 and the variant is said to have
good mileage.
The Gujarat manufacturing plant became operational in February 2017. The plant current
capacity is about 250,000 units per year. But with new investments Maruti Suzuki has plan to
take it to 450,000 units per year.
In 2012, the company decided to merge Suzuki Powertrain India Limited (SPIL) with
itself .SPIL was started as a JV by Suzuki Motor Corp. along with Maruti Suzuki. It has the
facilities available for manufacturing diesel engines and transmissions. The demand for
transmissions for all Maruti Suzuki cars is met by the production from SPIL
 24

BAJAJ AUTO LIMITED

Bajaj Auto Limited is a global two-wheeler and three-wheeler Indian manufacturing

company. manufactures and sells motorcycles, scooters and auto rickshaws. Bajaj Auto is a
part of the
Bajaj Group. It was founded by Jamnalal Bajaj in Rajasthan in the 1940s. It is based in Pune,
Mumbai, with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in
Uttarakhand. The oldest plant at Akurdi (Pune) now houses the R&D centre 'Ahead'. Bajaj
Auto is the world's sixth-largest manufacturer of motorcycles and the second-largest in
[Link] is the world's largest three-wheeler manufacturer. On May 2015, its market
capitalisation was
₹640 billion (US$8.9 billion), making it India's 23rd largest publicly traded company b y
market value. The Forbes Global 2000 list for the year 2012 ranked Bajaj Auto at 1,416.

Bajaj Auto came into existence on 29 November 1944 as M/s Bachraj Trading Corporation
Private Limited. It started off by selling imported two- and three-wheelers in India. In 1959, it
obtained a license from the Government of India to manufacture two-wheelers and
threewheelers and obtained Licence from Piaggio to manufacture Vespa Brand Scooters in
India and started making Vespa 150 scooters. It became a public limited company in 1960. In
1970, it rolled out its 100,000th vehicle. In 1977, it sold 100,000 vehicles in a financial year.
In 1985, it started producing at Waluj near Aurangabad. In 1986, it sold 500,000 vehicles in a
financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold one
million vehicles inayear. with the launch of motorcycles in 1986, the company has changed
its image from a scooter manufacturer to a two-wheeler manufacturer.
 25

In 2017 it was announced that Bajaj Auto and Triumph Motorcycles Ltd would form an
alliance to build mid-capacity motorcycles. According to the authors of Globality: Competing
with Everyone from Everywhere for Everything, Bajaj has operations in 50 countries creating
a line of bikes targeted to the preferences of entry-level buyers.

Bajaj RE (auto-rickshaw)

Bajaj manufactures and sells motorcycles, scooters, auto-rickshaws and most recently, cars.

Bajaj Auto is India's largest exporter of motorcycles and three-wheelers. [1] Bajaj Auto's

exports accounted for approx. 35% of its total sales. 47% of its exports are made to Africa.

Boxer motorcycle is the largest selling single brand in Africa. Motorcycles manufactured

by Bajaj Auto Company

Bajaj is the first Indian two-wheeler manufacturer to deliver 4-stroke commuter motorcycles
with sporty performance for the Indian market, which was otherwise dominated mostly by
mileage-based products from Hero Honda and TVS Motors. Bajaj achieved this with the
150cc and 180cc Pulsar, giving Indians the first taste of performance biking. This was also
accompanied by innovative marketing techniques - by featuring its flagship product Pulsar
220 DTS-i in Pulsar MTV Stuntmania, India's first stunt biking reality show

Motorcycles in production include the Platina, Discover, Pulsar, Avenger, Dominar and CT
100. In FY 2012-13, it sold approximately 3.76 million motorcycles which accounted for
31% of the market share in India. Of these, approximately 2.46 million motorcycles (66%)
were sold in India and remaining 34% were exported. Three wheeler

It is the world's largest manufacturer of 3-wheelers and accounts for almost 84% of India's
three-wheeler exports. During the FY 2012-13, it sold approx. 480,000 three-wheelers which
was 57% of the total market share in India. Out of these 480,000 three-wheelers, 53% were
exported and remaining 47% were sold in India.

In 2010, Bajaj Auto announced cooperation with Renault and Nissan Motor to develop a
US$2,500 car, aiming at a fuel efficiency of 30 kilometers per liter (85 mpg-imp; 71 mpg-US)
(3.3 L/100 km), or twice an average small car, and carbon dioxide emissions of 100 g/km
 26

On 3 January 2012, Bajaj auto unveiled the Bajaj RE60, a mini car for intra-city urban
transportation. The target customer group will be Bajaj's three-wheeler customers. According
to its Managing Director Rajiv Bajaj, the RE60 powered by a new 200 cc rear mounted petrol
engine will have a top speed of 70 kilometers per hour (43 mph), a mileage of 35 kilometers
per liter (99 mpg; 82 mpg) and carbon dioxide emissions of 60 g/kms

2.3 REVIEW OF LITERATURE

Review of literature is an integral part of any research studies which includes other
researcher points and findings. The main aim of including review of literature to any research
process which give suitable and guidance to accomplish the new research process. Any
review of literature includes objectives, research methodology and findings
Review of literature chapter of any studies is the collection of various studies done by
various researcher in the same topic or related topic in every studies each and every
researcher are followed different method for accomplish his objectives. Each studies are
giving more and suitable ideas for accomplish the new researcher objectives.

JOE LAN is a former financial analyst for AAII in him article ‘’Calculating Intrinsic Value
with the Dividend Growth Model’’ states that intrinsic value of the stock is calculated by the
CONSTANT GROWTH MODEL and MULTISTAGE CONSTANT GROWTH MODEL.
Both the models are calculated by the help of dividend which is given by the company. The
paper goes on to explain the importance of calculating intrinsic value from the constant
dividend. The paper makes comparative study on both Constant Growth Model and
Multistage Constant Growth Model.
-
M Haritha, Ravi V and Dr.O Ravisankar in their article titled ‘’ Intrinsic Value A Base to
Pick Scrip’’ find that importance of intrinsic value which is calculated from the dividend
payout ratio. This paper clearly explain how to calculate the intrinsic value of the stock from
dividend and EPS.

X Duwal, Rakesh (2016) in their paper titled’’ Intrinsic Value Calculations for Long Term
Investment: Company x .The first approach was established by Benjamin Graham and is used
to calculate intrinsic value and provide some statistical guidelines for investing in a company.
 27

The second approach is the discounted cash flow method and specifically the method
established by Aswath Damodaran will be used to calculate the intrinsic value. The method
founded by Benjamin Graham is called the undervalued intrinsic value calculation method.

Ben Graham, Security Analysis (1951 Edition), The newer approach to secure by analysis
attempts to value a common stock independently of its market price. If the value found is
substantially above or below the current price, the analyst concludes that the issue should be
bought or disposed of. This independent value has a variety of names, the most familiar of
which is “intrinsic value”.

Ranjit Tiwari ,Intrinsic value estimates and its accuracy : Evidence from Indian
manufacturing industry in his study, the purpose of this study is to empirically examine the
comparative accuracy of income oriented. This study has revealed the value estimation and
improve value accuracy.

Rappaport (1986) popularized shareholder value approach by writing a book “Creating

shareholder value”. Rappaport explains in detail how the shareholder value creation differ
from the traditional measures like ROE , ROI and demonstrate the superiority of the
shareholder value approach over the traditional approach.
 28

CHAPTER-3 RESEARCH METHODOLOGY

The main purpose of the research is to give guidelines to the investor for selecting the stock.
Secondary data only used for the purpose of the study. The secondary data for this study are
collected from newspaper, books, magazines, the internet, and other documents. Plan of
Analysis: The data collected will be edited, classified, tabulated and Statistical tools like
Average, Tables and other research tools are used to analyze the data.

DATA COLLECTION
Secondary data which is collected from various books, magazines and websites.

TOOLS USED IN THE STUDY

Intrinsic value of the stock = Total present value of earnings

Outstanding shares
EARNING PER SHARE GROWTH RATE

EPSGR = (Present year earning / previous year earning)^1/4 -1 * 100

PRESENT EARNING

PE = last year earning ×

1+EPSGR/100
 29

CHAPTER-4
DATA ANALYSIS AND INTERPRETATION

CALCULATION FOR ASHOK LEYLAND

Formula:
Intrinsic value of the stock = total present value of earnings

Outstanding shares
Ingredients
5 years Eps (earnings per share)
Eps growth rate
Discount rate
5 years Realized income
Intrinsic value calculation for ASHOK LEYLAND automobile company
Beta – 0.82
PE ratio – 20.88
Avg eps -6.00
Current dividend yield – 1.78%
Return on equity – 23.99%
Shares outstanding – 2.85 B

TABLE NO: 4.1

EARNING PER SHARE
Year Eps
2014 0.11
2015 1.18
2016 1.37
2017 4.30
2018 5.34
 30

Realized income calculation:

For 2014,
Realized income = EPS * outstanding shares
= 0.11*285 = 31.35
For 2015,
Realized income = EPS * outstanding shares
= 1.18 * 285 = 336.3
For 2016,
Realized income = EPS * outstanding shares
= 1.37 * 285 = 390.45
For 2017,
Realized income = EPS * outstanding shares
= 4.30 * 285 = 1225.5
For 2018,
Realized income = EPS * outstanding shares
= 5.34 * 285 = 1521.9
1521.9 cr is the shareholder earnings in [Link] is calculated from the EPS and outstanding
shares. From the realized income only we can calculate the EPSGR.
EPS GROWTH RATE

EPGR = (1521.9/1225.5)^1/4 -1 × 100

= 5.56%
EPS growth rate of ASHOK LEYLAND is 5.56%
5.56 % is the current EPSGR. It will reveal the growth potential of the company. From the
EPSGR, we can calculate projected earnings.

Projected earning for next 10 years

2019 projected earning = last year earning × 1+EPSGR/100

= 1521 × (1 + 5.56/100)
= 1606.51
 31

2020 projected earning = last year earning × 1+EPSGR/100

= 1606.51 × 1.055
= 1694.86
2021 projected earning = last year earning × 1+EPSGR/100

= 1694.86 × 1.055
= 1788.08
2022 projected earning = last year earning × 1+EPSGR/100

= 1788.08 × 1.055
= 1886.42
2023 projected earning = last year earning ×
1+EPSGR/100

= 1886.42 × 1.055
= 1990.17
2024 projected earning = last year earning ×
1+EPSGR/100

= 1990.17 × 1.055
=2099.63
2025 projected earning = last year earning ×
1+EPSGR/100
= 2099.63 × 1.055
= 2215.11
2026 projected earning = last year earning ×
1+EPSGR/100
= 2215.11 × 1.055
= 2336.94
2027 projected earning = last year earning ×
1+EPSGR/100
= 2336.94 × 1.055
= 2465.48
2028 projected earning = last year earning × 1+EPSGR/100
 32

= 2465.48 × 1.055
= 2601.08

INFERENCE

 2601.08 is the shareholder income in 2028. It gives the overall picture about the
company growth in future.
 As compare with the present shareholder income, it is not big number. because
EPSGR is pretty low.
 Projection of future earnings of the stock will lead to find out the true value of the
stock.
 These values are important for the calculation of intrinsic value.

TABLE NO: 4.2

DISCOUNT RATE
Year Inflation rate
2019 0.952
2020 0.907
2021 0.863
2022 0.822
2023 0.782
2024 0.745
2025 0.710
2026 0.676
2027 0.644
2028 0.613

In India maximum of 5% inflation rate is applicable for all the industry. Choosing of
maximum rate will lead to reduce the risk level for the investor. Reducing inflation rate from
the projected earnings will give the actual earnings of present itself. Table no 4.2 gives the
inflation rate for next 10 years.
 33

TABLE NO: 4.3

INTRINSIC VALUE CALCULATION
Year Projected earnings Discount rate Present value of
earning

2019 1606.51 0.952 1529.39

2020 1694.86 0.907 1537.23
2021 1788.08 0.863 1543.11
2022 1886.42 0.822 1550.63
2023 1990.17 0.782 1556.31
2024 2099.63 0.745 1564.22
2025 2215.11 0.710 1572.72
2026 2336.94 0.676 1579.77
2027 2465.48 0.644 1587.76
2028 2601.08 0.613 1594.46

Formula for intrinsic value:

Intrinsic value = Total present value of earning

Outstanding shares
= 15615.6 ÷ 285

Intrinsic value of Ashok Leyland stock = 54.79

 34

INTERPRETATION OF ASHOK LEYLAND

OVERVALUED

54.79 intrinsic value

Current value Price

112.50
 35

Time
Current value of the stock is 112.50
Intrinsic value of the stock is 54.79
According to BENJAMIN GRAHAM
RGV = Intrinsic value

Current value
= 54.79/112.50
RGV = 0.48
Intrinsic value of the stock is low compare to current value of the stock
For the margin of safety, stock is overvalued RGV
value is less than 1.
Fundamental state of this stock is looking good. As per the technical value analysis of this
stock shows slightly overvalued.
Risk level of the stock is pretty high in current level. Investor may avoid the stock for while.
CALCULATION FOR MARUTI SUZUKI

Formula:
Intrinsic value of the stock = Total present value of earnings

Outstanding shares
Ingredients
5 years Eps (earnings per share)
Eps growth rate
Discount rate
5 years Realized income
Intrinsic value calculation for MARUTI SUZUKI automobile company
Beta – 1.17
PE ratio – 34.55
Avg EPS -178.21
Current dividend yield – 0.86%
Return on equity – 23.99%
Shares outstanding – 302.08 M
 36

TABLE NO: 4.4

EARNING PER SHARE
Year EPS
2014 92.13
2015 122.85
2016 177.58
2017 242.91
2018 255.62

Realized income:
For 2014,
Realized income = EPS * outstanding shares
= 92.13 * 30.208 = 2783.06
For 2015,
Realized income = EPS * outstanding shares
= 122.85 * 30.208 = 3711.05
For 2016,
Realized income = EPS * outstanding shares
= 177.58 * 30.208 = 5364.33
For 2017,
Realized income = EPS * outstanding shares
= 242.92 * 30.208 = 7277.40
For 2018,
Realized income = EPS * outstanding shares
= 255.62 * 30.208 = 7721.76
 37

7721.76 cr is the shareholder earnings in [Link] is calculated from the EPS and outstanding
shares. From the realized income only we can calculate the EPSGR.

EPS GROWTH RATE

EPGR = (7721.76/2783.06)^1/4 -1 × 100

= 29.06%
29.06 % is the current EPSGR. It will reveal the growth potential of the company. From the
EPSGR, we can calculate projected earnings.

EPS growth rate of MARUTI SUZUKI is 29.06%

Projected earning for next 10 years

2019 projected earning = last year earning × 1+EPSGR/100

= 7721.76 × (1 + 29.06/100)
= 9961.07
2020 projected earning = last year earning × 1+EPSGR/100

= 9961.07 × 1.2906
= 12849.78
2021 projected earning = last year earning × 1+EPSGR/100

= 12849.78 × 1.2906
= 16576.21
2022 projected earning = last year earning × 1+EPSGR/100

= 16576.21 × 1.2906
= 21383.32
2023 projected earning = last year earning × 1+EPSGR/100
= 21383.32 × 1.2906
=27584.4
 38

2024 projected earning = last year earning × 1+EPSGR/100

= 27584.4 × 1.2906
= 35583.98
2025 projected earning = last year earning × 1+EPSGR/100
= 35583.98 × 1.2906
= 45903.3
2026 projected earning = last year earning × 1+EPSGR/100
= 45903.3 × 1.2906
= 59215.30
2027 projected earning = last year earning × 1+EPSGR/100

= 59215.30 × 1.2906
= 76387.7
2028 projected earning = last year earning × 1+EPSGR/100

= 76387.7 × 1.2906
= 98540.19
INFERENCE
 98540.19 is the shareholder income in 2028. It gives the overall picture about the
company growth in future.
 As compare with the present shareholder income, it is big number. because EPSGR is
pretty high.
 Projection of future earnings of the stock will lead to find out the true value of the
stock.
 These values are important for the calculation of intrinsic value.

TABLE NO: 4.5

DISCOUNT RATE
Year Inflation rate
2019 0.952
2020 0.907
2021 0.863
2022 0.822
 39

2023 0.782
2024 0.745
2025 0.710
2026 0.676
2027 0.644
2028 0.613

In India maximum of 5% inflation rate is applicable for all the industry. Choosing of
maximum rate will lead to reduce the risk level for the investor. Reducing inflation rate from
the projected earnings will give the actual earnings of present itself. Table no 4.2 gives the
inflation rate for next 10 years.

TABLE NO: 4.6

INTRINSIC VALUE CALCULATION TABLE
Year Projected earnings Discount rate Present value of
earning

2019 9961.07 0.952 9482.93

2020 12849.78 0.907 11654.75
2021 16576.21 0.863 14305.26
2022 21383.32 0.822 17577.08
2023 27584.4 0.782 21571.00
2024 35583.98 0.745 26510.00
2025 45903.3 0.710 32591.30
2026 59215.30 0.676 40029.50
2027 76387.7 0.644 49193.67
2028 98540.19 0.613 60405.13
 40

Formula for intrinsic value:

Intrinsic value = total present value of earning

Outstanding shares

= 283320.6 ÷ 30.208

Intrinsic value of Maruti Suzuki stock = 9378.99

INTERPRETATION OF MARUTI SUZUKI

Price
9378.99 Intrinsic value

Undervalued

6756.45
Current value
 41

Time
Current value of the stock is 6756.45
Intrinsic value of the stock is 9378.99
According to BENJAMIN GRAHAM
RGV = Intrinsic value
Current value
= 9378.99/6756.45
RGV = 1.38
Intrinsic value of the stock is high compare to current value of the stock
For the margin of safety, stock is undervalued RGV
value is more than 1.
Fundamental state of this stock is looking good .As per the technical value analysis of this
stock shows undervalued. Risk level of the stock is pretty low in current level. Investor are
ready to accumulate this stock.

CALCULATION FOR BAJAJ AUTO

Formula:
Intrinsic value of the stock = Total present value of earnings

Outstanding shares
Ingredients
5 years Eps (earnings per share)
Eps growth rate
Discount rate
5 years Realized income
Intrinsic value calculation for BAJAJ automobile company
Beta – 1.04
PE ratio – 20.88
Avg eps – 147.2
Current dividend yield – 1.78%
Return on equity – 23.99%
Shares outstanding – 289.37 m
 42

TABLE NO: 4.7

EARNING PER SHARE
Year EPS
2014 112.08
2015 97.24
2016 135.80
2017 132.27
2018 140.59

Realized income:
For 2014,
Realized income = EPS * outstanding shares
= 112.08 * 28.937 = 3243.25
For 2015,
Realized income = EPS * outstanding shares
= 97.24 * 28.937 = 2813.83
For 2016,
Realized income = EPS * outstanding shares
= 135.80 * 28.937 = 3929.64
For 2017,
Realized income = EPS * outstanding shares
= 132.27 * 28.937 = 3827.49
For 2018,
Realized income = EPS * outstanding shares
= 140.59 * 28.937 = 4068.25
 43

4068.25 cr is the shareholder earnings in [Link] is calculated from the EPS and outstanding
shares. From the realized income only we can calculate the EPSGR.

EPS GROWTH RATE

EPGR = (4068.25/3243.25)^1/4 -1 × 100

= 5.83%
29.06 % is the current EPSGR. It will reveal the growth potential of the company. From the
EPSGR, we can calculate projected earnings.
EPS growth rate of BAJAJ AUTO is 5.83%

Projected earning for next 10 years

2019 projected earning = last year earning × 1+EPSGR/100

= 4068.25 × (1 + 5.83/100)
= 4035.42
2020 projected earning = last year earning × 1+EPSGR/100
= 4035.42 × 1.0583
= 4556.43
2021 projected earning = last year earning × 1+EPSGR/100
= 4556.43 × 1.0583
= 4822.07
2022 projected earning = last year earning × 1+EPSGR/100

= 4822.07 × 1.0583
= 5103.20
2023 projected earning = last year earning ×
1+EPSGR/100

= 5103.20 × 1.0583
= 5400.71
 44

2024 projected earning = last year earning ×

1+EPSGR/100

= 5400.71 × 1.0583
=5715.58
2025 projected earning = last year earning × 1+EPSGR/100

= 5715.58 × 1.0583
= 6048.79
2026 projected earning = last year earning ×
1+EPSGR/100

= 6048.79 × 1.0583
= 6401.44
2027 projected earning = last year earning ×
1+EPSGR/100

= 6401.44 × 1.0583
= 6774.64
2028 projected earning = last year earning ×
1+EPSGR/100
= 6774.64 × 1.0583
= 7169.61
INFERENCE
 7169.61 is the shareholder income in 2028. It gives the overall picture about the
company growth in future.
 As compare with the present shareholder income, it is big number. because EPSGR is
pretty high.
 Projection of future earnings of the stock will lead to find out the true value of the
stock.
 These values are important for the calculation of intrinsic value.

TABLE NO: 4.8

DISCOUNT RATE
 45

Year Inflation rate

2019 0.952
2020 0.907
2021 0.863
2022 0.822
2023 0.782
2024 0.745
2025 0.710
2026 0.676
2027 0.644
2028 0.613

In India maximum of 5% inflation rate is applicable for all the industry. Choosing of
maximum rate will lead to reduce the risk level for the investor. Reducing inflation rate from
the projected earnings will give the actual earnings of present itself. Table no 4.2 gives the
inflation rate for next 10 years.

TABLE NO: 4.9

INTRINSIC VALUE CALCULATION

Year Projected earnings Discount rate Present value of

earning

2019 4305.42 0.952 4098.75

2020 4556.43 0.907 4132.68
2021 4822.07 0.863 4161.44
2022 5103.20 0.822 4194.83
2023 5400.71 0.782 4223.35
2024 5715.58 0.745 4258.10
 46

2025 6048.79 0.710 4294.64

2026 6401.44 0.676 4327.37
2027 6774.64 0.644 4362.86
2028 7169.61 0.613 4394.97

Formula for intrinsic value:

Intrinsic value = Total present value of earning

Outstanding shares

= 42448.99 ÷ 28.937

Intrinsic value of Bajaj auto stock = 1446.94

 47

INTERPRETATION OF BAJAJ AUTO

OVERVALUED

Price
Current value 2524.00

1446.94 intrinsic value

 48

Current value of the stock is 2524

Intrinsic value of the stocks 1446.94
According to BENJAMIN GRAHAM
RGV = Intrinsic value

Current value
= 1446.94/2524
RGV = 0.57
Intrinsic value of the stock is low compare to current value of the stock
For the margin of safety, stock is overvalued RGV
value is less than 1.
Fundamental state of this stock is looking good. As per the technical value analysis of this
stock shows slightly overvalued.
Risk level of the stock is pretty high in current level. Investor may avoid the stock for while.
CHAPTER-5 RESULT AND DISCUSSION 5.1 FINDINGS
 Fundamentals of this three stocks are good.
 Stock price is purely depends on demand and supply
 2 out of 3 company stock is overvalued
 EPSGR of Ashok Leyland is 5.56%
 EPSGR of Maruti Suzuki is 29.06%
 EPSGR of Bajaj auto is 5.83%
 Relative Graham value of Ashok Leyland is 0.48. It represents that stock is
overvalued
 Relative Graham value of Maruti Suzuki is 1.38. It represents that stock is
undervalued
 Relative Graham value of Bajaj Auto is 0.57. It represents that stock is overvalued
 49

5.2 SUGGESTIONS
 As one of the concern in market is volatility and uncertainty in macro and micro
economics. We cannot control the stock price movements. But we can safeguard the
capital through proper analysis.
 Investors should be aware of market conditions and the reality of the market. Proper
analysis will lead to increase the success ratio.
 For the success, two dimensional analyse is essential such as fundamentals and
technical analysis.
 As per the technical analysis, Investors should have to avoid poor performance
companies.
 Stock price is driving towards demand and supply. So find out the true value of the
stock is essential for the safe investments.  Investors should avoid overvalued stocks.

5.3 CONCLUSION

 Every investor will look ahead to be with the triumphant scripts which can give better
income. Liberal methods are accessible for selecting the stock with respect to risk and
returns. Intrinsic value analysis will also supportive to look at the stock performance
and choosing the stock. Especially the investment seeker can choose intrinsic value as
a base for analyzing the stock
 Finding the intrinsic value is not an easy thing. Because of uncertainty in market.
Investor should be aware of fluctuation in the market.
 Protecting capital is the primary objective in value investing. For this study will help
the investor to identify the right stock.
 Investment decision should be made from right analysis. This study will add the value
to your analysis method.
 50

APPENDICES

A STUDY OF ADVERTISEMENT EFFECTIVENESS TOWARDS AMIRTHAA MILK

PRODUCTS IN NAMMAKKAL

NAME:

1. GENDER:

A. Male B. female

2. Age

A.18-20 B.20-25 C.25-30 D. Above 30

3. Income

A. less than 10000 B.10000-30000 C. 30000-50000 D. Above 51000

4. Size of the family

A.2 B.3 C.4 D. Above 5

5. How did the advertisement describe the product?

A .Good B. Bad C. Better D. Worst

6. Based on the advertisement of Amirtha milk product would you buy it?

A. Yes B. No C. May be D. May not be

7. Do you think the advertisement of Amirtha milk product is different from others in the market?

A. Same B. Different C. Quiet similar D. Something different

8. Which phrase will you use to describe the ad to your friend?

A. Attractive B. Boring C. Creative D. Realistic

9. How well do you remember this ad?

A. Remember B. Do not Remember C .Remember ad but not product D.
Remember product but not ad
 51

10. How many times have you seen advertisement of Amirtha milk product?

A. One B. Two C. Three D. Four

11. How do you prefer to see the advertisement of Amirtha milk product?

A. TV B. News paper C. website D. other

12. Do you have any ethical issues in advertising?

A. A lot B. Not at all C. Some what D. Not much

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S.N STATEMENT STRONGLY AGREE NEUTR STRONGLY DIS

O AGREE AL DISAGREE AGREE

13 Do you think whether the

advertisement improve the brand
image

14 Do you find anything hard on

seeing the advertisement

15 Do you like to rate the

advertisement of Amirtha milk
products

16 Do you agree with way of jingles

used

17 Was the ad fun to watch

18 Whether you are watching the ad

only for information

19 Do you like to change anything

on seeing the advertisement

20 Do you belive in the

advertisement of Amirtha milk
products

21 Are you satisfied with the

language used

22 Will you urge to use the product

23 Will you respond to the ad

24 Do you have good opinion

towards the ad
 53

5.4 REFERENCE

 starch model put forward in 1920s mooted the idea that an effective advertising  Baviskarr B.s Dairy
 co-operatives and rural development in Gujarat.
 Shiv Prasad(2009), Quality assurance in milk production at organized dairy farms Indian farming
 Arpita Gupta (2011); in a study on “Identifying factors behind advertising market share”
 ” (Wilmshurst and Mckay, 1999). Hall (2002), while discussing various models of consumer

response to advertising s

5.5 Web Sites

 [Link]
 [Link]
industry-nddb
 [Link]
 [Link]
 [Link]