The industry analysis report sheds light on the economic health of the company, underlining the understanding whether it will be beneficial for the stakeholders to invest in such a company and offering recommendations and/or corrective actions to take in case of any untoward developments in the company.

As an equity research analyst, you might work on industries like Oil and Gas, Metal, Information Technology, Automobile, Financial Services, Infrastructure, Pharmaceuticals and Consumer durables.

In some companies, there is a dedicated industry analyst who will work on the assigned industry and provide the analysis.

However, as an analyst you should be aware of industry dynamics and hence, it is important to know how to do industry analysis.

An industry analysis is a complicated and time consuming process. If any of the dimensions are missed, the whole analysis becomes faulty. Therefore, in this section, I have highlighted all the necessary steps telling you how to do industry analysis. Use these steps and apply it in your analysis.

What are the steps? Here you go:

Read all the available but relevant industry reports and statistics to see whether it makes sense to dig deeper.

Some of the reports you will find already contain in-depth information that the need for new industry analysis is eliminated.

However, it is unwise to depend on existing industry analysis reports as the market is always volatile and industry factors change constantly.

Therefore, pick up a current report and envisage its relevancy in the current market.

An industry has sub-parts. For example, if you look at the chemical industry, you will find sub-industries like Fertilizers, Pesticides, Paints and Varnishes, Organic chemicals.

Therefore, it is important to focus on the relevant industry. Without this, it will be impossible to draw an accurate industry analysis report. So, take up an industry and find out the sub-industries. Select the one which suits the company’s purpose. Moreover, it is worthwhile to look at the different market segments in a particular industry.

As any economist will know, demand and supply are the primary factors governing any market. Hence, it becomes relevant to look into the demand-supply scenario for a particular product or industry by studying its past trends and forecasting future outlook.

You can do comparative analysis with other companyies competing in the same manner to find out the economic health of the company under consideration.

Future demand and supply forecasting helps investors understand the viability of future investments in terms of profits and losses.

This is the most important step of any industry analysis. In this, you need to study the competitive scenario using Porter’s Five Forces Model.

The model acts as the framework of industry analysis. Michael Porter, a famous strategist and author, first came up with this model. In this model, five parameters are analyzed to see the competitive landscape.

They are:

The Porter’s model is extensively used while analyzing any industry.

Any industry analysis report isn’t just about studying the particular industry on a micro-level.

The analyst needs to incorporate influencing factors at the macro-level. These macro-level factors include recent industrial developments, innovation in your industry analysis report, sector valuations and global comparative valuation.

The industry analysis should be specific to a particular industry and thus, it is important to focus and understand the industry dynamics. Your industry analysis should be in-depth and to-the-point.

For example, if you are tracking the aluminum industry, you should know the per capita consumption in the country.

In India, the per capita consumption of aluminum is 1 Kg, in USA, it is 25 to 30 Kgs, in Japan, it is 15 Kgs and in Taiwan, it is 10 Kgs. Apart from the consumption, you should also know the production of aluminum worldwide.

The above six steps are important and you, as an analyst, should follow them.

The analysts in private equity, investments banks, equity research firms, investment research firms need this skill and if you know how to do industry analysis, you are ahead of 80% of the aspirants as this will not only impress your interviewer, but also add immense value to you and the company hiring you.

In the last section, we learned how to do industry analysis and in this, we will see how to write one.

Writing is also a required skill as you need to present all the findings within a written report in a concise and clear manner.

Begin by writing a concise overview of the industry.

Mention historical data and the nature of the industry, including its growth potential.

State the influencing economical factors and most importantly, don’t forget mentioning the purpose of your industry analysis.

The concise overview of the industry should include its competitors and their operations.

You can write this in the next section. Write about similar products and services.

Now, with the overview aside, move on the detailed analytical presentation of the specific industry.

Highlight factors like geographical growth, consumer base, price fluctuations, past performances and income projections.

Use existing financial data and industry understanding to forecast industry growth for the next five or ten years. You can use statistical graph in this section.

The next sections should be about using Porter’s Five Forces model and a detailed write-up about its five factors, its use and repercussions in the industry. Don’t forget mentioning governmental regulations relevant to the industry.

Lastly, give long-term and short-term valuations impacting the industry such as any foreseeable problems impacting the business in a negative fashion and potential corrective measures. Wind up the industry analysis report with a very three or four line summarization.

Have you ever thought of learning the skill of industry analysis and want to know how to write an industry report?

Share your thoughts and experience here.

Considering oneself to be in the shoes of an Investor, for instance, it is obvious to face the dilemma of choosing the right stock that are easy to predict and forecast so it can meet your investment objectives and generate good contribution. The question arises as to how would you make the choice from among thousands of companies?

The quickest ways being relying on the consensus view initially and studying the past trends of the company. Consensus estimates of leading analysts are readily available on major financial blogs and websites.

Many would argue that these are the best ways to choose the right stock for forecasting while many would be against it.

My opinion says that relying on the past or the people are not the worst decisions especially for an investor seeking forecast closer to the current time period (this year or the next year).

It may not be suitable for longer period estimates because past analysis involves various adjustments against sales and hence growth rates calculated might vary from period to period.

Also, the choice of method to calculate the growth rate can influence the calculations, for example, geometric average, arithmetic average or complex techniques like time-series model.

Similarly, consensus though is better informed if there are more number of analysts in the market, however, a large number of analysts influencing the consensus can also lead to the ‘Risk of Herding’.

Analysts usually base their forecasts on the guidance from the company’s management, and the management follows the practice of under-estimating so as to beat the consensus and witness a rise in stock price, than to miss estimates and witness a price decline. So in a way following the consensus is not a wise decision for longer period forecasts.

Moving away from the consensus or the past trends, another investment barometer would be to use metrics and reasonably calculate the probable earnings for long-term forecasting. For this, it is required to gather factual data and applying analytical tools based upon your earning driven rationale. Also, as an analyst, you should understand that forecasts act as a guide and can only fall within a reasonable range of precision. Hence, it is advised to always calculate optimistic, moderate as well as pessimistic estimates.

Well, coming back to the point of predicting the earnings. I would like to give you a real-life example of two Indian-listed companies, Titan Industries, and Unitech Ltd.

What is the earnings figure we are considering here? It is Earnings Per Share or EPS.

Let’s look at the following table and see which company’s EPS is easy to predict.

Which one do you think is easy to predict?

Company Earnings Estimates

You are right!  It is Titan Industries which is giving strong EPS and that too in upward trend. No doubt, the share price reached Rs. 4000 in 2010 from Rs.40 in 2001 (100times growth).

What propelled this growth? Many factors. More on this, later.

The point I want to make here is, go for companies that are easy to predict and then do the forecasting. There is no dearth of such companies in the market and as a security analyst, your job is to find such gems.

Having seen how one should go for companies with steadily growing EPS, it is important to know that you can conjugate the concept of Stock Charts with P/E Ratios to estimate the earnings of a company.

A Stock Chart shows the graphical mapping of stock prices over a defined period, say for a quarter or a year.

Let us assume a stock of which you want to know the estimated earnings for the last quarter (Q4). The stock chart depicts stock prices of Rs.400, Rs.450, and Rs.600 for Q1, Q2 and Q3 respectively and it seems that the price is moving to Rs.750 in Q4.

Past data shows the following Price Earnings:

Averaging out the P/E of last three-quarters.

Average P/E = (40 + 32.5 + 17.5) times / 3

= 30(times).

The maximum limit (since prices are showing an increasing trend) for Earnings per share in Q4 will be:

EPS in Q4    = Estimated stock price in Q4 / Average Price Earnings

=  Rs.750 / 30(times)

=  Rs.25

Professors in the field of forecasting company earnings often have conflicting views regarding whether or not the company’s operating details impact its future ability to earn. In support of

In support of sustainable growth, I would highlight how Reinvestment and quality of re-investment result in the future growth of earnings.

Expected growth in Earnings per share can be viewed as a function of the following:

Re-investment Rate * Projected Return on Equity

(Re-investment Rate means the proportion of after-tax operating income that is retained and re-invested into new assets for future growth.)

Assuming a Re-investment Rate of 25% and projected Return on Equity of 30%, one can expect growth in EPS of 7.5%.

This way of estimating earnings based upon growth rate not only highlights that growth is not costless, but also defines the difference between growth that creates value vs. Growth that destroys value.

The very simple way to predict a company earnings apart from financial fundamentals like EPS, Current Ration, Growth ratio, etc. we can also look forwards to other areas through which we can predict the earning of the company that could be the external business factor that effects the earnings of the company indirectly.

Local government support in building infrastructure – the more is the focus of the government in promoting the industry and building the infrastructure you are to be rest assured that it is going to give a good earning to the company since the cost of manufacturing will be reduced because of the support of infrastructure facilities like electricity, water, ports, highways, dams, etc. With the reduction in cost of production, your earnings are sure to go high.

Future tenders or contracts received by the company – Another important aspect of predicting a company earnings is by analyzing the tenders and contracts which the company is due to execute in future, through which one can predict the earnings of the company, further if there is any foreign exchange contract then the fluctuation in currency can also be analyzed to predict the earnings of the company.

Analyzing the investment of companies in other company – Many a time companies tend to park few of their funds with other companies, you can analyze and find out the financial and growth of those companies to predict the earnings in the form of capital gain for the investee company.  

To conclude, what ever be the process chosen to estimate the earnings of the company it is futuristic and the probability of achieving the future earning prediction cannot be 100%, analyst always try to figure out how to reduce the gap and try to reach the 100% probability and keep on finding / developing new ways to predict the earnings. But one thing is for sure since the future is not ascertained neither can be the earnings of the company we can always forecast based on the past happenings and future possibilities.

The Chief Statistician of India T.C.A. Anant has admitted that there are “some discrepancies” in the recently released GDP data on Friday and has said that the government is making efforts to minimise them.



Going by figures, the government of India suggests that GDP has grown at 7.9% in the last quarter and it is also the fastest growing economy in the world.

The true story is that discrepancies have soared to Rs 2.14 lakh crore. We recently published an article that says discrepancies cover 51% of the GDP. If discrepancies are removed from the GDP, then the actual GDP would come down to a mere 3.9%. In the previous fiscal, discrepancies amounted to (-) Rs 35,284 crore.

So what are ‘discrepancies’?

GDP is calculated by two methods – a. Income method b. Expenditure method, ideally calculation by both methods should be the same, however, there are always some statistical differences amounting to 0.1 – 1 % and these numbers could be more in the case of developing country. Discrepancies even by a few percentage points is a red flag, to have discrepancies as 51% of GDP is beyond imagination and explanation.

Mr. Anant said that discrepancy occurs because the government compile expenditure estimates along with production figure, which is based on some rule of thumbs, the allocation does not completely explain expenditure side accurately and thus the difference between the two estimates becomes discrepancy, as reported by Deccan Chronicle.

Even if we take this into consideration, few recently published facts completely go against such high rate of GDP.

The factory output measured in terms of Industrial Production (IIP) has shrunk by 0.8 per cent in April this year, the first decline in three months.Capital goods output, which is a barometer of investment, declined sharply by 24.9 per cent in April.The Business Expectations Index (BEI), which is a useful metric for the confidence of companies, has fallen to its lowest level in the last two years.The agricultural sector which also is a key factor for country’s GDP saw a growth of merely 1.2%.

At a time like this, how can the GDP of the country accelerate?

Apart from educational Loan another instrument of help to the financially back warded students is scholarship. There are numerous scheme of scholarships sponsored by government as well as private sector enterprises and trusts & charitable associations. Many students found it very difficult to get the technical and administrative support for these schemes.

Government of India – Ministry of finance has proposed in his budget speech of 2015-16, to set up a completely IT based administrative authority to look after all these needs. This has been names as Pradhan Mantri Vidya Lakshmi Karyakram (PMVLK).

Solving the difficulties faced by the students in obtaining educational loans and scholarships is the main purpose of this program. This program enables the students to get themselves registered and avail the services in very user friendly interface. We will ensure that no student misses out on higher education for lack of funds. The IT based mechanism under the Pradhan Mantri Vidya Lakshmi Karyakram is expected to provide to students a single window electronic platform for Scholarships and Educational Loans , said Mr finance minister.

Students can easily access the following information and services:

First of all Students have to register in this portal to avail the services of this program. After completion of user registration one can easily download common educational loan application form which has been approved by the Indian banks Association. This form helps in applying for student loans of multiple banks.

Based on their requirement students can search various loans and select it & fill the form and apply to the banks the status of which can be checked in the portal after some days. Student can contact the banks for any queries and grievances related to loans.

Right now there are 23 Banks offering 44 loan schemes registered in this portal. Students can avail educational loans from these banks by following the above said procedure.

timesofindia.indiatimes.com | May 18



MUMBAI/NEW DELHI: Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India's largest pharmaceutical companies.
Several of India's generics producers, led by the country's second-largest player Dr Reddy's Laboratories Ltd, bet heavily on Venezuela as they sought emerging market alternatives to slower-growing economies such as the United States.

But the unravelling of Venezuela's socialist economy amid a fall in oil prices has triggered triple-digit inflation and a full-blown political and financial crisis. Unable to pay its bills, the country is facing severe shortages of even basic supplies such as food, water and medicines.

Dr Reddy's wrote off $65 million in the March quarter, which it said was almost all the money it was owed from Venezuela. Rival Glenmark Pharmaceuticals Inc, another major investor, says it is due $45 million.

"The situation in Venezuela is very precarious ... the government knows it needs to do something about the medicine shortage, that's why it is willing to discuss such a deal," one Indian official told Reuters.

"At this point, even if our companies get back 5 or 10 percent of the payment they are owed, they would be satisfied."

Venezuela's Health Ministry did not immediately respond to a request for comment.

Like pharmaceutical companies globally - which used to enjoy a preferential exchange rate in Venezuela - Indian producers have been left badly stung by the collapse of the Bolivar currency.

PAYMENT PLAN

The Indian officials, who could not be named as they are not allowed to speak to the media, said the trade ministry had proposed a payment mechanism that would allow Venezuela to repay some of the amount owed with oil.

The proposal, seen by Reuters, would use the State Bank of India to mediate the transfer. The plan is now awaiting approval on the Indian side from the finance ministry and the central bank, which regulates such payments.

India, one of the world's biggest oil importers along with the United States and China, had similarly elaborate barter deals with Iran, swapping rice and wheat for oil.

The officials said Venezuela had been receptive to the plan "in principle", but not made any concrete commitments yet.

Indian officials said a "high level" meeting with Venezuela was due in the coming months to discuss the proposed deal.

"The finance ministry has assured us that the government is fully committed to it, but it will take time," said P.V. Appaji, Director General of the Pharmaceutical Export Promotion Council of India, a body under the country's commerce ministry.

India's exports to Venezuela between April 2015 and February 2016 almost halved year-on-year to $125.5 million, compared with a year earlier. Most of that was pharmaceutical products.

SOCIAL UNREST

The amount owed to Indian companies is modest on a global scale - Novartis AG, Bayer AG and Sanofi SA took heavier hits when they agreed to take bonds from state-owned oil company PDVSA in lieu of cash, sold at a deep discount.

But Venezuela is India's largest trade partner in Latin America and one of its key suppliers of oil.

A deal could also revive sales, albeit at a reduced level, at a time when Venezuela is desperately short of medical supplies, lacking as much as 80 percent of what it needs to treat its population, according to a Venezuelan industry body.

Of course, many other providers in the oil, food and trade sector are pressuring Venezuela to pay its debts at a time when the cash-strapped government is facing growing social unrest. The OPEC country's oil production is also expected to fall this year due to a lack of resources, a power crunch and maintenance problems, likely leaving it with less crude for export.

Both Dr Reddy's and Glenmark have now stopped shipping to Venezuela. But, neither have said they would pull out yet, as they continue to bet on the market's future potential.

Per capita consumption of medicines in Venezuela is high, and its healthcare market was growing at a rate of about 20 percent a year until 2014, when the economic crisis began.

Dr Reddy's Chief Operating Officer Abhijit Mukherjee said last week that Dr Reddy's remained "very focused" on Venezuela, where it has signed deals with two government organisations. "Only condition to the contract is that we will dispatch (products) only when we get either the LC (licensing certificate) or some advance," he said. Glenmark said it was evaluating its operations in Venezuela on a month-by-month basis. "We are extremely encouraged that the Indian government is taking constructive steps to recover our money that is stuck in our own Venezuela subsidiary," said Chairman and Managing Director Glenn Saldanha in an emailed statement.