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IES Management College and

Research Centre

Bandra, Mumbai

May – June 2011

Student’s Declaration

I hereby declare that this report, submitted in partial fulfillment of the

requirement for the award for the Master of Management Studies, to IES

Management College and Research Centre is my original work and not

used anywhere for award of any degree or diploma or fellowship or for

similar titles or prizes.

I further certify that without any objection or condition subject to the

permission of the company where I did my summer project, I grant the

rights to IES Management College and Research Centre to publish any

part of the project if they deem fit in journals/Magazines and newspapers

etc without my permission.

Place : Mumbai

Date : 15 th July, 2011 _______________________

Signature

Name : SaloniThakker

Class : Master of Management Studies

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Semester – II

Roll No. : M-10-60

Certificate

This is to certify that the dissertation submitted in partial fulfillment for the award of

Master of Management Studies of IES Management College and Research Centre is

a result of the bonafide research work carried out by Ms. SaloniThakker under my

supervision and guidance. No part of this report has been submitted for award of any

other degree, diploma, fellowship or other similar titles or prizes. The work has also

not been published in any journals/Magazines.

Date:

Place: Mumbai

Industry guide

Signature of the Industry Guide: ______________

Name of Industry Guide: Ms. Richa Bhardawaj

Company : Corporate Bridge

Designation : Manager Content Development

Internal Faculty guide

Signature of Internal faculty guide:

______________

Name of the internal faculty guide: Prof.

Gazia Sayed

Core Faculty

IES Management College and Research Centre

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Acknowledgement

Written words have an unfortunate tendency to convert genuine

gratitude into stilted formality and no person has ever prayed heartily

without learning something.These acknowledgements are one way where

I can thank the people who have been instrumental in the making of this

project.

Working on the Equity research and analysis, has been a wonderful

learning experience for me and for this very wonderful experience I

would like to thank a lot of people without whose cooperation and

support working on this summer project report would not have been so

pleasurable and interesting.

I am deeply indebted to Ms. Richa Bhardawaj – Manager Content

Development, my industry guide at Corporate Bridge for providing me

with this opportunity to understand the process of doing an equity

research by guiding me right till the end.

I would also like to thank Prof. Gazia Sayed, Core faculty, IES

Management College and Research Centre for helping me throughout my

project, guiding and always motivating me to perform better. Her advice

and patience is appreciated. Without their encouraging support, valuable

suggestions and timely inputs, this project would never have been

possible and I would have been deprived of a vast treasure of knowledge.

Also I would like to thank my family and friends who have been a

constant support all throughout this project

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TABLE OF CONTENTS

1. Executive Summary……………………………………………………… 6

2. Introduction to Equity research ………………………………………..8

2.1) Meaning of Equity Research ……………………………. 8

2.2) Equity Research Analyst ………………………………… 11

2.3) Equity research Report ………………………………....... 13

3. Introduction to Valuation……………………………………….………. 153.1)Meaning of Valuation …………………………………….. 15

3.2)Methods of Valuation ……………………………………… 16

4. Information on Corporate bridge ……………………………………….. 20

5. Introduction of Colgate Palmolive………………………………………… 24

6. Research report …………………………………………………………… 28

7. Conclusion …........………………………………………………………… 53

8.Bibliography ........………………………………………………………… 54

1) Executive summary

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Corporate Bridge Academy (CBA) is a global full-service training firm, providing

instructor-led training and e-learning services to professionals from top investment

banks and financial institutions, colleges and students. They provide training in

various fields like equity research, investment banking, sector analysis, CFA 1, CFA

2 and many more. Corporate bridge also prepares Equity research analysis where

they prepare and sell equity research reports.

Equity Research is the area which deals with the live economy. EquityResearch is a

field that has evolved and transformed the Financial Sectorover the Past few

decades. With the Capital market in doldrums,sentiments and confidence reaching

all-time lows, investors are goingback to fundamental and technical analysis which

seems to have taken aback seat from past few years.

Equity research is studying about a particular sector or industry in detail to use its

historicals that is its past financial statements forecast its future revenues, income,

expenses, cash flows etc. It requires analyst to view various management

discussion ,market scenario ,and all other information related to the area of study .

Equity Research helps the investor to know about the value, risk &volatility of the

covered security, and thus assist investors to decidewhether to buy, hold, sell, sell

short, or simply avoid the security inquestion.

Equity research reports are prepared by research analysts and then sold to various

institutions like mutual fund investors or many other investment banks ,these reports

are also published on various websites by companies and help investors decide on

what to do with a particular stock.

2) INTRODUCTION EQUITY RESEARCH

2 .1 Meaning of equity research

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Definition of equity:” In the context of a futures trading account , it is the value of the

securities in the account, assuming that the account is liquidated at the going price .

In the context of a brokerage account , it is the net value of the account, i.e. the value

of securities in the account less any margin requirements .”

Definition of equity research:”Equity research gives insight into companies to help

investors make educated stock picks. This topic covers the latest information on

equity research and investing.”

Equity Research is aimed at identifying the opportunities for wealth creation and

anequity analyst tries to identify undervalued or overvalued stocks through both his/

her expertise and by use of available research tools. An appropriate valuation of securities is imperative for arriving at the right investment decisions.

Investment brings back high returns and value. It is crucial and critical for any

organization or business to invest for growth. You might be confident of your

investment plans but there is always a doubt about the company in which you are

investing. Equity Research is the answer to avoid any kind of investment risk.

Equity Research focuses on company-specific research and analysis. Industry andsector- teams analyze companies in the stock markets of the region to develop

investment ideas. These sector teams also work with macro, quantitative and

derivatives research teams to identify investment ideas

Equity research is conducted through studying a composite of financial records , news

stories and interviews with company insiders

Role and importance of equity research

The role of research is to provide information to the market. Information is the

lifeblood of efficient and transparent markets. An efficient market relies on

information: a lack of information creates inefficiencies that result in stocks being

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misrepresented (over or under valued). Analysts use their expertise and spend a lot

of time analyzing a stock, its industry and peer group to provide earnings and

valuation estimates. Research is valuable because it fills information gaps so that

each individual investor does not need to analyze every stock. Research is

particularly important for smaller companies that often have fewer analysts covering

their securities in comparison to their larger peers.

The availability of equity research can have a significant impact on a company’s

visibility and investor’s understanding of its performance. Increased analyst

coverage has been found to have a positive influence on liquidity and market

capitalization and ultimately reduce the cost of capital for companies which

otherwise might achieve lower valuations. A good indicator of the value of equityresearch is the amount institutional investors and hedge funds are willing to pay for

it.

Types of equity / securities research

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Securities research is a discipline within the financial services industry. Securities

research professionals are known most generally as "analysts," "research analysts,"

or "securities analysts". Securities analysts are commonly divided between the two

basic kinds of securities: equity analysts (researching stocks and their issuers) and

fixed income analysts (researching bond issuers). Securities analysts are usually

further subdivided by industry specialization (or sectors) -- among the industries.

Fixed income analysts are also often subdivided by asset class—among the fixed

income asset classes.

Differentiating equity research

Securities research falls into two broad categories:

○ Provided by investment banks -- Offer research as part of a broad set of

financial services including broking and corporate finance.

○ Provided by independent equity research boutiques -- This research has

largely sprung into existence as a result of scandals such as Enron, Lernout

& Hauspie and Worldcom.

Equity research companies in India

1.Almondz

2. Emkay Research

3. India Infoline

5. Motilal Oswal

8. DSP Merrill Lynch

9. JP Morgan Equity

10. CLSA

11. Morgan Stanley

12. IL&FS Investsmart

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14. HDFC Securities

15. SSKI

16. ENAM Edelweiss Research17. ICICI Securities

18. Pranav Securities

19. Share khan

20. KJMC

2 .2 E quity research analyst

An individual who carries out equity research is called an equity research analyst.A

financial analyst, securities analyst, research analyst, equity analyst, or investment

analyst is a person who performs financial analysis for external or internal clients as

a core part of the job. Equity Research analysts follow stocks and make

recommendations on whether to buy, sell, or hold those securities using various

analysis.

Equity research analysts conduct financial statement analysis and build financial

models to derive a company's proper valuation. Ideally, research analysts must be as

objective as possible, however different market, economic, and political influences

can adversely affect equity research.

TYPES OF ANALYSTS

Securities analysts are generally one of three types:

○ Sell-side analysts -- who work for a broker-dealer and indirectly for

broker-dealer's trading customers

○ Buy-side analysts -- who work for institutional investors, such as

hedge funds, mutual funds, pension funds, proprietary trading

operations of banks and brokers, endowments , and insurance

companies),

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○ Independent analysts -- who work for firms which sell research to

sell-side and/or buy-side firms, but who do not themselves engage in

securities transactions.

TYPES OF ANALYSIS

There are three major types of analysis that an analyst uses which are mentioned as

under :-

Fundamental analysis

○ A method of evaluating a security by attempting to measure its

intrinsic value by examining related economic, financial and other

qualitative and quantitative factors.

○ Attempt to study everything that can affect the security's value,

including macroeconomic factors (like the overall economy and

industry conditions) and individually specific factors (like the

financial condition and management of companies).

○ Most sell-side analysts perform fundamental analysis. They try to

determine a specific asset value. (Overbought/Oversold)

Technical Analysis (“Chartists”)○ A method of evaluating securities by analyzing statistics generated

by market activity, such as past prices and volume.○ Do not attempt to measure a security's intrinsic value, but instead

use charts and other tools to identify patterns that can suggest future

activity.

Quantitative Analysis (“Quants”)○ A method that seeks to understand behavior by using complex

mathematical and statistical modeling, measurement and research.

By assigning a numerical value to variables, quantitative analysts try

to replicate .

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In the broadest terms, securities analysts seek to develop, and thereafter

communicate to investors, insights regarding the value, risk, and volatility of a

covered security, and thus assist investors to decide whether to buy, hold, sell, sell

short , or simply avoid the security in question or derivative securities

2 .3 EQUITY RESEARCH REPORT

What is an Equity Research Report?

Equity research report also called as Securities research report is a report

written by a brokerage or research firms for its clients in order to help their

investors to make investment decisions in a share/stock. An equity research

report includes an analysis of the company, industry and provides sufficient

information based on which an investor can take a decision.

Equity research report – What an equity research report has?

Many of us think about how to write an equity research report. An equity

research report usually has the following information -

a) Company Overview

b) Key Highlights

c) Industry Snap Shot

d) News Analysis

e) Financial Analysis

f) Risk Factors

g) Valuation Methodology

h) Investment rationale

Normally most of the equity research reports have this information; however

there is no hard and fast rule in which an equity research report should be

written. The content varies from companies to companies. Finally the report

provides a target price based on complete analysis.

Equity research report – Disclaimer

1. Every equity research report has disclaimers some are as follows —

a) Every equity research report wholly reflects views and personal

opinion of the equity research analyst as on the date of

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publication;

b) Equity research analyst does not have interest in the shares of

the company.

c) Remuneration of the equity research analyst is not linked

directly to any specific research recommendations contained in

the report.

Equity research report — How reliable are they?

An equity research analyst writes equity research report based on the

information available. Available information means all the information

available to public or through databases like Factiva, Lexis Nexis,

OneSource, Newspaper websites, Industry body website etc. The

analysis/view of the equity research analyst depends on his/her way of

analysis and the optimal usage of available information. Every report is

written based on many assumptions and current scenario. Expertise of the

equity research analyst and the research house is the most important criteria

before relying on a research report.

You cannot rely completely on an equity research report for an

investment decision, however these reports offers good piece of advice andanalysis which is definitely helpful.

Equity research report – Should I buy stocks?

Buying stocks based on the recommendations provided by the equity

research report is not recommended in the initial days of investment. My

suggestion is subscribe to an equity research report and keep a track on how

many times the stock price recommended by the stock analyst reached the

targeted price. Based on the track record, you can make a decision to buystocks based on recommendations. As I mentioned earlier, a stock price

target is given based on assumptions and information, if any assumption

proves wrong, the stock will not reach the targeted price

3) INTRODUCTION TO VALUATION

3 .1 Meaning of Valuation13 | P a g e

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In finance, valuation is the process of estimating what something is worth. Items

that are usually valued are a financial asset or liability . Valuations can be done on

assets (for example, investments in marketable securities such as stocks , options,

business enterprises, or intangible assets such as patents and trademarks ) or on

liabilities (e.g., bonds issued by a company). Valuations are needed for many reasons

such as investment analysis, capital budgeting, merger and acquisition transactions,

financial reporting , taxable events to determine the proper tax liability, and in

litigation .

Valuation of financial assets is done using one or more of these types of models:

1. Absolute value models that determine the present value of an asset's expected

future cash flows. These kinds of models take two general forms: multi-

period models such as discounted cash flow models or single-period models

such as the Gordon model. These models rely on mathematics rather than

price observation.

2. Relative value models determine value based on the observation of market

prices of similar assets.

3. Option pricing models are used for certain types of financial assets (e.g.,

warrants, put options , call options , employee stock options , investments with

embedded options such as a callable bond ) and are a complex present value

model. The most common option pricing models are the Black-Scholes -

Merton models and lattice models.

Common terms for the value of an asset or liability are fair market value , fair value,

and intrinsic value . The meanings of these terms differ. For instance, when an

analyst believes a stock's intrinsic value is greater (less) than its market price, an

analyst makes a "buy" ("sell") recommendation and vice versa.

3 .2 Valuation Methods

Discounted cash flows method

This method estimates the value of an asset based on its expected future cash

flows, which are discounted to the present (i.e., the present value). This

concept of discounting future money is commonly known as the time value

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of money. The size of the discount is based on an opportunity cost of capital

and it is expressed as a percentage. This percentage is calledthe discount

rate.

For a valuation using the discounted cash flow method, one first estimates the

future cash flows from the investment and then estimates a reasonable

discount rate after considering the riskiness of those cash flows and interest

rates in the capital markets. Next, one makes a calculation to compute the

present value of the future cash flows

Guideline companies method

This method determines the value of a firm by observing the prices of similar

companies (guideline companies) that sold in the market. Those sales could

be shares of stock or sales of entire firms. The observed prices serve as

valuation benchmarks. From the prices, one calculates price multiples such as

the price-to-earnings or price-to-book value ratios. Next, one or more price

multiples are used to value the firm. For example, the average price-to-

earnings multiple of the guideline companies is applied to the subject firm's

earnings to estimate its value.

Many price multiples can be calculated. Most are based on a financial

statement element such as a firm's earnings (price-to-earnings) or book value

(price-to-book value) but multiples can be based on other factors such as

price-per-subscriber.

Income Approach

The income approach to business valuation values a company by estimating

some measure of its earning power in the future and converting that measure

to a present value based on an investor’s required rate of return on the

investment considering the risk of the investment.

The measure of earning power most frequently used is “net cash flow”,

which represents the amount that an owner could take out of the business

over time without jeopardizing it as a going concern.

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Net asset value method

The third common method of estimating the value of a company looks to the

assets and liabilities of the business. At a minimum, a solvent company could

shut down operations, sell off the assets, and pay the creditors. Any cash that

would remain establishes a floor value for the company. This method is

known as the net asset value or cost method. Normally, the discounted cash

flows of a well-performing exceed this floor value. However, some

companies are "worth more dead than alive", such as weakly performing

companies that own many tangible assets. This method can also be used to

value heterogeneous portfolios of investments, as well as non-profit

companies for which discounted cash flow analysis is not relevant. Thevaluation premise normally used is that of an orderly liquidation of the assets,

although some valuation scenarios (e.g. purchase price allocation) imply an

"in-use" valuation such as depreciated replacement cost new.

In the equity analysis research report for valuation of the company the methods used

are as follows

○ Income approach we calculated various ratios of the company like

solvency ratios, turnover ratios leverage ratios and then made certain

assumption either on y-o-y basis or as a percentage of sales method and

found out the expected sources of revenue and expenses.

○ Discounted cash flow method wherein we assumed the terminal growth

rate and then found the beta value and calculated the cost of equity and

cost of capital and WACC and thus found out the share price○ Guideline company’s approach where we used the relative valuation we

selected 4 competitors namely HUL, Godrej Consumer, Dabur and

Marico from the same sector FMCG and similar products and compared

them on the basis of its market capitalization, Gross profit, Expenses,

Equity value ,Enterprise value and many more this gave a clear picture

about the company’s performance in accordance to its peers.

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4 ) INTRODUCTION TO THE COMPANY

Headquartered in Mumbai and formed by graduates from leading institutes

(IITs, IIMs & AIM), Corporate Bridge Academy (CBA) is a global full-

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service training firm, providing instructor-led training and e-learning services

to professionals from top investment banks and financial institutions, colleges

and students. With unparalleled experience (CLSA India, KPMG, YES Bank,

JPMorgan, SBI Capital Markets, CRISIL etc) and comprehensive capabilities

(MBA, CFA, FRM, CAs) across all industries and business functions,

combined with entrepreneurial spirit, we commit to deliver a world class

professional training services that endure and improves efficiency.

"Corporate Bridge" as the name suggest, helps in bridging the gap between the

aspiring entrant and the corporate. In today's economic outlook era, India has

seen perceptible improvement due to the measures taken to restore the global

financial system in the aftermath of the financial crisis. Over here, CorporateBridge Academy plays an important role in educating the aspirants about the

financial aspects.

Corporate Bridge Academy deals with various financial courses viz. Equity

Research, Investment banking, Private Equity, Fundamental Analysis,

Investment Research, Credit Research etc. Corporate Bridge Academy also

prepares students for CFA Level I & II and FRM Level I & II. The main goals

of these courses are to enable students and professionals to enhance their financial analysis skills through practical examples and exercise.

TRAINING PROGRAMS BY CORPORATE BRIDGE

Corporate Bridge Academy conducts training program in various ways which

is given as under

1. Workshops and seminars:

Corporate Bridge's Instructor Led training bridges the gap between

academics and the real world to equip students and professionals with

the practical financial skill set that they will need on the job. Students

learn various financial concepts in Excel from scratch using intuitive,

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step-by-step instruction and model templates the way it is actually

performed at investment banks.

2. Online training

Corporate Bridge provides Intuitive, Self-Paced and Comprehensive

Online Finance training for MBA's and Professionals pursuing careers

inInvestment Banking, Private Equity, Corporate Finance, Asset

Management, Equity Research, Hedge Funds

3. Corporate training

Corporate Bridge is a global full-service financial training firm,

providing instructor-led training and e-learning courses to investment banks, financial institutions, Fortune 100+ companies, and other firms

across India.

4. University training

Corporate Bridge provides real-world, hands-on finance and

investment banking seminars at some of the most prestigious

academic institutions and corporations across India.

Corporate Bridge Academy's training programs have attracted working professionals from top notch firms like J. P. Morgan, Citigroup, RBS, LIC,

Religare securities, Reliance capital, Nomura, SSJ Securities, J M Financial,

ICICI Securities, DBOI, HDFC Securities, CRISIL, Grid Stone, ICICI PRU,

Mitsubishi, BSE, NSE, India Bulls Securities Capgemini, Corporation Bank,

Cognizant, Central Bank Of India, India Infoline Ltd, Edelweiss, HDFC Bank,

IDBI Bank, Tata Capital, Reliance Money, CNBC, TCS, E&Y, Birla Sunlife

etc. to name a few. We have also conducted in-house training for firms like

CLSA India,Capvent India etc. Candidates of Corporate Bridge Academy

have been preferred by firms like ICICI Direct, Share Khan, Adventity,

Accenture, CARE Ratings, KR Choksey, SMC etc. for employment.

Corporate Bridge Academy has also conducted training programs and

seminars at some of the most prestigious academic institutions and

corporations in the world, including IIM Lucknow, IIM Indore, IIT Delhi, IIT

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Kanpur, MDI Gurgaon, FMS Delhi, NITIE, NMIMS, BSE, Indian Institute of

Capital Markets etc.

CLIENTS OF CORPORATE BRIDGE

CORPORATES

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COLGATE PALMOLIVE

Introduction

Colgate-Palmolive Company an American diversified multinational corporation

focused on the production, distribution and provision of household, health care and

personal products, such as soaps , detergents , and oral hygiene products (including

toothpaste and toothbrushes ). Under its " Hill's " brand, it is also a manufacturer of

veterinary products. The company's corporate offices are on Park Avenue in

Midtown Manhattan, New York City.

Origin

In 1806, William Colgate , himself a soap and candle maker, opened up a starch,

soap and candle factory on Dutch Street in New York City under the name of

"William Colgate & Company". William Colgate in 1833 suffered a severe heart

attack stopping his business from selling. But after a couple of years of recovery he

continued with his business. In the 1840s, the firm began selling individual cakes of

soap in uniform weights. In 1857, William Colgate died and the company was

reorganized as "Colgate & Company" under the management of Samuel Colgate, his

son, who did not want to continue the business but thought it would be the right

thing to do. In 1872, Colgate introduced Cashmere Bouquet, a perfumed soap. In

1873, the firm introduced its first toothpaste, aromatic toothpaste sold in jars. His

company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream, in 1896.

In 1896, Colgate hired Martin Ittner and under his direction founded one of the first

applied research labs. By 1908 they initiated mass selling of toothpaste in tubes.

Since 1976, Colgate has worked in close partnership with the Indian Dental

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Association (IDA) to spread the message of oral hygiene to children across the

country under its ‘Bright Smiles, Bright Futures’ Schools Dental Education

Program. This program has successfully reached more than 83 million school

children covering around 1,73,000 schools in 250 towns across the country since its

launch. The program focuses on children so that the message of good oral hygiene is

carried home to families and the community at large.

The journey towards growth

he small soap and candle business that William Colgate began in New York City

early in the 19th century is now, more than 200 years later, a truly global company

under the name of COLGATE PALMOLIVE serving hundreds of millions of

consumers worldwide.Today, Colgate has numerous subsidiary organizations

spanning 200 countries, but it is publicly listed in only two, the United States and

India .

The Company has grown to Rs.2200crore plus organization with an outstanding

record of enhancing value for its strong shareholder base. The company dominatesthe Rs.4100crore Indian toothpaste markets by commanding more than 50% of the

market share. It spread across 4.5 million retails outlets out of which 1.5 million are

direct outlets.

The Company is having four wholly owned subsidiaries namely Colgate-Palmolive

(Nepal),Multimint Leasing & Finance and Jigs Investments and Passion Trading &

Investment Company.

In 2003, Colgate was ranked India’s Most Trusted Brand across all categories byBrand Equity’s Most Trusted Brand Survey conducted in conjunction with Neilsen

– a position it held in succession for four consecutive years from 2003 to 2007 and

has been the only brand in the top three coveted position in all the 8 surveys

conducted since 2001. Prior to this, Colgate was also rated as the #1 brand by the

A&M – MODE Annual Survey for India’s Top Brands for eight out of nine years

during the period 1992 to 2001

In 2004, as an additional effort to create awareness for good oral hygiene ‘Oral

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Health Month’ (OHM), was introduced. Since its launch, OHM is conducted each

year during September / October, where free dental checkups are conducted by

Colgate in partnership with IDA across the country. Conducted in designated towns

and cities to establish and promote the importance of good oral hygiene, OHM is

Colgate’s mass consumer contact program.

In November 2007, it acquired a 75% equity interest in Advanced Oral Care

Products, Professional Oral Care Products and SS Oral Hygiene Products. The

company is regularly coming up with new products and has been a consistent

financial performer.

In 2009, Colgate-Palmolive (India) was adjudged as the Best Value Creator (Mid

Cap Category) in the 2009 Outlook Money NDTV Profits Awards.

Colgate-Palmolive has long been in fierce competition with Procter & Gamble , the

world's largest soap and detergent maker. P&G introduced its Tide laundry detergent

shortly after World War II, and thousands of consumers turned from Colgate's soaps

to the new product. Colgate lost its number one place in the toothpaste market whenP&G started putting fluoride in its toothpaste. But that didn't stop Colgate.

Product portfolio of colgate• Oral care-Under this segment the company offers product like toothpastes,

toothbrush, tooth powder & tooth whitening products.• Personal care -In this segment it offer products skin care, hair care, body wash

& shaving creams• Household care-Under this segment it has launched brand AXIOM-a dish

washing paste.

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It has also introduced new products namely Colgate dental floss,ORAGARD-B a

mouth ulcer cream etc.

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