Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis – II - Question Paper

ques. Paper
Security Analysis – II (212) : January 2006

part D : Case Study (50 Marks)

This part consists of ques. with serial number one - 6.

ans all ques..

Marks are indicated against every ques..

Do not spend more than 80 - 90 minutes on part D.

Case Study

learn the case carefully and ans the subsequent questions:

1. explain the factors that affect Dabur India Ltd. and its competitors regarding the demand and supply of its products, also discuss a logical framework for analyzing and forecasting revenue for the identical.

(10 marks) < ans >

2. Perform the 4 factor ROE analysis for Dabur India Ltd. for the last 5 years, and comment on the identical.

(8 marks) < ans >

3. a. obtain the P/E ratio for Dabur India Ltd., considering the projected EPS as on 31st March 2006, and the market price as on 31st March 2005. Growth rate for projecting EPS as on 31st March 2006 will be based on the simple avg. growth rate of the last 5 years.

b. What growth rate is consistent with the market price of the company as on 31st March 2005 according to free cash flow model assuming growth rate increase in 1st 5 years and then it linearly comes down in the next five years to stabilize at 5%. The needed rate of return by equity shareholders is 12%.

(4 + one 0 = 14 marks) < ans >

4. Based on the info provided in Annexure1, determine the suitability of the Dabur India Ltd., stock for investment if an individual investor wants the proportion of unsystematic risk in his investment not to exceed 60%.

(7 marks) < ans >

5. Valuing a company with inconsistent schedule of earning, or worse with no earning at all, requires a delicate balancing act on part of analyst. In such instances traditional methods of valuations befall to helplessness. With respect to this discuss the importance of Price to Sales ratio as an option for Price to Earning ratio for valuing a company.

(6 marks) < ans >

6. Comment on whether the stock should be bought, sold or held at points A, B, C, D, and E based on the share price charts provided in Annexure II.

(5 marks) < ans >

FMCG Sector

Fast Moving Consumer Goods (FMCG) sector is the 4th largest sector in the economy with a total market size of around Rs 60,000 crores. This industry comprises of consumer non durable products and provides the day-to-day need of the inhabitants. The FMCG sector is an essential component of the India’s GDP and plays a significant role in the employment generation. Around 5% of factory employment is through this sector. This sector also creates employment for more than 3 million people, who are in small towns and rural areas. The 2005-06 Union Budget also have few things to offer to this sector and thus prospects have come under sharp focus.

Earning:   Approval pending.