Vs. 1 Which Stock to Decide on? - Samarth Patwardhan - Sachin Mylavarapu A Financial Analysis

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A FINANCIAL A FINANCIAL

COMPARISONCOMPARISON

Vs.

Which Stock to Decide on?

- Samarth Patwardhan - Sachin Mylavarapu

A Financial AnalysisA Financial Analysis

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AgendaAgenda

Company Overview Products and Services Recent Developments Financial Analysis Future Plans Conclusion

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Company Company OverviewOverview

Intel Corporation Incorporated as NM Electronics on July18th 1968 Introduced first ever Microprocessor in 1971 Went public on October 13th 1971 Sector – Technology, Industry – Semiconductor broad line(b = 2.1) Today – World leader in the manufacturing of microprocessors

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CompanyCompany OverviewOverview

Hitachi Corporation 1910 – Started as an Electrical Workshop IPO – 1949 – Tokyo Stock Exchange, April’1982 – New York Stock Exchange Sector – Consumer Goods, Industry – Electronic Equipment (b = 1.04) Today, Hitachi has a broad range of products to offer in the market

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Products and Products and ServicesServices

Intel Corporation Classified in four main categories Wide range of products From wireless networking solutions to programmable hardware Focus – Freedom of computing and reduction of infrastructure costs

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Products and Products and ServicesServices

Hitachi Corporation Much more diversified spectrum Power and Industrial Systems, logistics services Information and telecommunication systems, electronic devices Media products, financial services Focus - Creating e-business infrastructures that are tailored to specific individual needs

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Recent Recent DevelopmentsDevelopments

Intel corporation In the last 2 years, seven acquisitions to broaden its product portfolio Target the network and Communications markets Shifted more than half of their R&D expenditure to server-related chipsets, microprocessors and platforms

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Recent Recent DevelopmentsDevelopments

Hitachi Corporation First half of Fiscal’ 01 – 2% drop in Sales Hit by a 90% price collapse for DRAM chips October’01 – decision to spin off two if its groups Recent reform measures include alliances, JV’s, acquisitions etc.

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Financial AnalysisFinancial Analysis

Growth Liquidity Gain Market Value Risk Factors Future Stock Performance

The 7 – Point Criteria

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OverviewOverview

0%

5%

10%

15%

20%

25%

30%

35%

Assets as a Percentage of Total Assets

Intel

Hitachi

Excess Inventory

More Accounts receivable

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0%

10%

20%

30%

40%

50%

60%

A/P

Accru

als

STD LTDOth

er

Comm

on st

ock R/E

Liabilities and Equity as a Percentage of Total Assets

Intel

Hitachi

OverviewOverview

Mode of Financing

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Asset Growth

015000

30000450006000075000

90000105000

1997 1998 1999 2000

Time Span

US

D (

In M

illio

ns)

Intel

Hitachi

Growth In Net Revenues

0

15000

30000

45000

60000

75000

1997 1998 1999 2000

Time Span

US

D (

In M

illio

ns)

Intel

Hitachi

GrowthGrowth

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Earnings per Share

-1

-0.5

0

0.5

1

1.5

2

1997 1998 1999 2000

Time span

US

D Intel

Hitachi

Change in Net Income

-3600

-1800

0

1800

3600

5400

7200

9000

10800

12600

1997 1998 1999 2000

Time Span

US

D (

In M

illi

on

s)

Intel

Hitachi

GrowthGrowth

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Current Ratio

0

0.5

1

1.5

2

2.5

3

1997 1998 1999 2000

Time Span

Val

ue

Intel

Hitachi

Quick Ratio

0

0.5

1

1.5

2

2.5

1997 1998 1999 2000

Time Span

Val

ue Intel

Hitachi

LiquidityLiquidity

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Asset Asset UtilizationUtilization

0

0.5

1

1.5

2

Val

ue

1997 1998 1999 2000

Time Span

Total Asset Turnover Ratio Intel

Hitachi

GainGain

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Total Debt/Equity

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1997 1998 1999 2000

Time Span

Val

ue Intel

Hitachi

Hitachi – Uses Debt

Intel – Less use of Debt

Use of leverage

GainGain

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Profit Margin

Profit Margin

-10

0

10

20

30

40

1997 1998 1999 2000

Time Span

Valu

e

Intel

HItachi

GainGain

Cost of sales.Money tied up in A/R and inventory

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Return on Equity

-20

0

20

40

1997 1998 1999 2000

Time Span

Per

cen

tag

e

Intel

Hitachi

ROE HIT IND INTC IND

1-Year 3.6% -7.45%

3.6% -3.56%

3-Year -2.9% 3.5% 18.1%

14.3%

5-Year -1% 4.2% 23.3%

17.3%

The Bottom Line

GainGain

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Return on Assets

-10

0

10

20

30

1997 1998 1999 2000

Time Span

Per

cen

tag

e

Intel

Hitachi

ROA HIT IND INTC IND

1-Year 0.9% -6.49%

2.9% 2.77%

3-Year -0.8% 1.5% 13.9%

9.6%

5-Year -0.3% 1.6% 17% 11.4%

GainGain

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Price/Earnings Price/Earnings

0

200

400

600

800

1997 1998 1999 2000

Time Span

Valu

e

Intel

Hitachi

Market ValueMarket Value

HIT IND INTC IND

P/E 36.4

89.87

165.5

147.26

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Future PlansFuture Plans

Intel corporation Market share for processors – increase from 20% to 69% by ‘03 Fiber optics industry Hyper-Threading technology CEO – “In the future, all computers will communicate and all communication devices will compute.”

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Future PlansFuture Plans

Hitachi Corporation April’2001 - The Corporate Innovation Innovative (CII) Reduce material purchasing costs by 20% Inventory and A/R by 25% Aim at doubling the sales from Fiscal 2000 to Fiscal 2002

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3 – Month Performance

StockStock PerformancePerformance

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Semester Start – 4th May, 1600 hrs


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1 – Year Performance


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5 – Year Performance


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SummarySummaryParameters

HIT INTC

Growth 3 3Liquidity 2 3Gain 3 4Market Value

2 4

Risk Factors 3 3Future 4 4Stock Performance

3 3

Average 2.85 3.42

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What to Do?What to Do?

Look beyond numbers See as an opportunity to

buy low If you already have it,

hold it Good for long term

investment

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Risk is the Name of the Risk is the Name of the Game!Game!

Are You Willing to Take it?

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Documents

Vs. 1 Which Stock to Decide on? - Samarth Patwardhan - Sachin Mylavarapu A Financial Analysis