Hello friends Welcome to Curfew Classes with Pranjal. Most of you wanted that that I teach you fundamental analysis, practically on screen. That's why I'm very excited today. Because today I will practically with the help of screen recording will teach you, how I do fundamental analysis and how can you go to ticker.finology.in ticker is our new stock analysis tool which is for you, so you can visit ticker.finology.in and analyse stocks, just like me. Now keep in mind one thing that a new video will come in every 20 days and the videos will be simple at first. But as the day passes and you start learning then the videos will get a little complex and after 20 days, I believe that you can pretty much analyze stocks by yourself. So as it's the first day,
so we are starting with a simple company Whose products you may use every day in your lives. Hindustan Unilever Limited Now I you tell you very simple terms that how a FMCG company FMCG means, "Fast-Moving Consumer Goods". These companies makes everyday useful items like Sope, Shampoo, Detergent, stuff like that. And Hindustan Unilever is India's biggest FMCG company. As it's the first day, so I will start with the basics so anyone, who doesn't know about investing can also learn investing with the help of these videos. Now we will start in the order as the data is given. First let's talk about, "Market Cap". So what is market cap? See it's very simple. If you want to fully buy a company which is becoming 100% owner of that company then how much money you'll have to give. That what market cap tells us. In Hindustan Unilever's case, it's around Rs-4.5 lakh crore little less than Rs-5 lakh crore, to buy the entirety of Hindustan Unilever. Rs-4.5 lakh crore, which is among India's biggest companies. So that's market cap. How market cap turns out? It's simple to get market capitalization out you just have to get one thing. You have to find the shares price like when recording this video, the share price is Rs-2190 you have to take that and multiply it by the number of shares. So now Hindustan Unilever's total share is 216 crore shares. If you multiply 216 crore shares with Rs-2190 then you will get almost around this amount. So the market cap is, "one shares price x number of shares". So the amount you have to pay to buy off an entire company is what market cap tells us. So with this, we can know the size of that company. And market cap comes in handy in another interesting comparison very useful for me in selecting these stocks I will tell you at the end of the videos, which is a little advanced. Today you have to keep in mind one thing that there 20 classes are like mathematics classes. This means every time you will learn something which will be connected with the previous videos. So it's important to see the videos in line and watch all videos because what is important,
what ration you have to keep in mind what heading do you have to keep in mind what business that company dose it depends on that, so it's important to understand it. Now the next ratio, which is PE ratio. PE means, "Price to Earning" ratio. Now to understand it first, we have to understand something else,
just as I said. In finance investing everything in connected. So to understand PE ratio first, we have to know what's Earning Per Share (EPS). I'll explain Earning Per Share with a simple example. Let's think a shop makes Rs-100 a year now that shop has four partners and every ones share is 1/4 which means everyone has 25% partnership of that shop if the shop has 4 shares,
and each partner has 1 share and in total, that shop makes Rs-100 so the shops net profit is Rs-100 and the total shares are as the number of shares, we can see here in that shop, the number of shares are 4. Total profit is Rs-100, number of shares 4 so per share, the profit of a single person will be Rs-25 and that's earning per share. So in Hindustan Unilever's case earning per share is around Rs-28. I hope, the earnings per share are now clear to you. That, to know the company's total profit divide that with the company’s total shares. So I will divide net profit, by the number of shares and I'll get earning per share. Let's understand it more, if I want to buy Hindustan Unilever's share and I'm getting it, in around Rs-2200. And for that one share,
per year I will earn around Rs-28. So what's PE? Simply PE means to buy one share how many times are you paying
for its one-year earning? So if Hindustan Unilever makes Rs-28 in one year and if you get Hindustan Unilever's share for Rs-28. Then you are giving it a 1 PE. So you’re buying that share for its one-year price. But Hindustan Unilever's share is at Rs-2190 so Rs-2190, which is the price of
this company or is the PE, divide with the EPS 28, which in "E", so "P" divided by "E", will be 70. Which means to buy Hindustan Unilever today for it's one year income, per share income then you are paying 70x that money. So is this 70 PE, more or less should you buy the share or not you ask it to yourself. Would you buy such a shop, for Rs-70 that makes you a profit of Rs-1 per year. If I say to you, that there is a shop which makes Rs-1 a year, and sell you at Rs-70. So will you buy that shop? This is one thing. Second thing is a company like HUL, for years who knows, for the past 30-50 years has increased their profit for every year at what rate? Come let's see. See this profit growth chart in past 1 year, HUL's profit has grown by 15%, in past 3 years, on an average, has grown by 13%, in past 5 years, at the rate of 10%, on an average HUL grows their profit. Bur before that, there is one simple way that we can find out, is HUL expensive or not. So we have seen, that PE is 70. Now let's see, because the PE changes everyday it's dependent on the price, the "P" is price. If the price falls then PE will fall,
price rises then PE rise. So this share, every day rises, falls,
becomes expensive and cheap, Let's check what the usual PE is, for HUL share. Usually what rate does the market give
after 1 year of earning like today is 70x times Let’s check the history, you have to scroll a little you'll find this, 6 months, 1 year, 3 years
and 5 years more data. You'll find 8 years more data, in 5 years one it's tells you, at what PE, HUL runs. So like at 2013, it was around 27 PE 2015 and 2017, it was at 40 PE. From 2018, it started growing and in the past 8 years, as much HUL is, it has never been this expensive or at this high PE. So a primary guess is that now HUL is expensive. And to think that, because the PE is highest in 5 years,
that's why it's expensive It's not right. Market can give more PE, or it can increase if the company shows more growth. It can happen, that in the past 5 years,
that companies growth was slow now in the last 1-2 years, the growth is fast meaning the company is making a fast profit. So if the companies make a profit fast, then the rate, which the market gives will also increase. So at first look, HUL seems expensive because, before it was on 40-50 PE,
but now is at 70 PE, Now let's see, is HUL increasing their profit like before, let's see. So this is the sales and profit growth chart now see, in last 1 year,
HUL has increased their profit by 15%, in last 3 years, they increased it by 13%, in last 5 years, they increased their profit by 9%. So in past 3 years, their performance improved, in past 1 years, their performance improved more. So that's one reason, that the market is giving it more PE,
then they used to. Suppose a little profit has increased because of that, is it justified that
the PE has gone from 50 to 70 should you buy this share at 70 PE? Its calculation is a little difficult, we'll learn tomorrow, but today, one thing is important to learn. You have learned, from today's PE to historical PE, you should compare it, and compare the historical PE, with its profit growth history. We have learned this far. So now imagine, there's such a company whose profit has rapidly increased, in past 5 years increased more in 3 years and more in last 1 year. This means every year, there
profit and performance have improved besides from that, their valuation chart shows their PE is decreasing. This means the company, which was running on 50 PE, first, the profit growth was 10% and now it's 20% but first it's PE was 50 and now it's PE is 30-40. So we can tell, just looking at the PE ratio that company will be a good company. Keep in mind, just looking at the PE ratio,
and the things which I have taught today you should not blindly invest in shares. Invest then, when you have researched it, and completed the 20 day course. Today, it's just the simplistic examples. So, I've searched for a company like that, for you. I'm showing this for simplifying the use and comparing of the PE ratio. Colgate, this is also a well-known company. Its PE ratio is around 39, nowadays. Now let's see its historical PE. Its historical PE is 40, little less here, then 45, around 50, here also. So it's usually been between 40-50, now it's 39, which means, it's going around its historical PE,
or a little cheap. Why this? Is Colgate performing badly? Come let's see. 1 year profit growth 15%, 3 years 10%, and 5 years 7%. Which means this also, compare to 5 year, better in 3 year and last year much better performance. So if we see this fewer data, then there's no reason that it got 39 PE, instead of 45-50 PE. So in this case, my interest will grow, I won't invest, but my interest will grow, that this company looks good, I can check it out because, it's cheaper than its historical valuation, and compare to its historical performance,
Its performance is becoming better. So like this, by using PE ratio, we can filter such companies which I can further research and will pay attention to. So what you have learned today,
can be used to filter companies where to pay attention to and
where not to pay attention. It's not a investing recommendation. Now pay attention, I've said at the video's starting that market cap, I told you but how, just by looking at the market cap I can get a slight idea, of where to invest and where not. Every people have limited money if I say, you have Rs-5,00,000 crore, so, what would you buy with that Rs-5,00,000 crore? Do you want to buy HUL, which is almost around Rs-4,50,000 crore, or you'll buy INFOSYS, which we all know, let's see its market cap. Infosys's market cap is little up to Rs-2,50,000 crore, if you want, you can buy Infosys, and still you would have Rs-2,30,000 crore left. So, how would you want to spend your Rs-5,00,000 crore? Do you want to buy HDFC Bank? HDFC Bank is almost equal to HUL, in market cap. If you have Rs-5,00,000 crore, will you buy the whole HUL? Or all of HDFC. Do you like to buy Soap, Ketchup, Noodle making company, or you will buy, the country's largest, well-managed Bank. So like this, when you, industry by industry company by company, will think like I have this money, what can I buy with this money? Like when we went to eat at school our family members gave us Rs-50 or 100, so there were many stalls outside so we would think, should we eat chips or chocolate? eat Bhel or something else, just like that you have to think about the market cap, with this money, should I buy HUL or Airline company, or IT company or should I buy Bank. So with that, your intuition will give you an idea where can you put your valuable money. Because your money is always limited, and you find it's best use intuitively if you compare market cap like this, across industries. So let's hope you find this introductive video simple,
and understood it. If you find this video difficult, so comment about it that what you found difficult and didn't understand, and I'll make sure to clear those doubts, tomorrow. And like this, if you want to learn detailed investing year on, then you can join the Academy of Value Investing where me and my team, year round text lessons, quizzes, videos, downloadable materials company research reports, excel sheet, every other way will teach you value investing and become an expert investor. You'll find the Academy of Value Investing link in the
above card and in this video's description. With that if you want to know, in this market fall, which stock we bought and what stocks we are recommending
in our model portfolio, you can join our model portfolio service Idea Back. You'll also get the link in videos description. If you liked today's video, then don't forget to share it and also create your ticker account so you also can start research like this and can practice everything that we learned. see you tomorrow evening, at 7 pm, In Curfew Classes with Pranjal, Bye Bye.